SECOND DIVISION

[G.R. No. 152878. May 5, 2003]

RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs.

MAGWIN MARKETING CORPORATION, NELSON TIU, BENITO
SY and ANDERSON UY, respondents.

DECISION
BELLOSILLO, J.:

WE ARE PERTURBED that this case should drag this Court in the banal attempts
to decipher the hazy and confused intent of the trial court in proceeding with what
would have been a simple, straightforward and hardly arguable collection
case. Whether the dismissal without prejudice for failure to prosecute was
unconditionally reconsidered, reversed and set aside to reinstate the civil case and
have it ready for pre-trial are matters which should have been clarified and resolved
in the first instance by the court a quo. Unfortunately, this feckless imprecision of the
trial court became the soup stock of the parties and their lawyers to further delay the
case below when they could have otherwise put things in proper order efficiently and
effectively.
On 4 March 1999 petitioner Rizal Commercial Banking Corporation (RCBC) filed
a complaint for recovery of a sum of money with prayer for a writ of preliminary
attachment against respondents Magwin Marketing Corporation, Nelson Tiu, Benito
Sy and Anderson Uy.[1] On 26 April 1999, the trial court issued a writ of
attachment. [2] On 4 June 1999 the writ was returned partially satisfied since only a
parcel of land purportedly owned by defendant Benito Sy was attached. [3] In the
meantime, summons was served on each of the defendants, respondents herein, who
filed their respective answers, except for defendant Gabriel Cheng who was dropped
without prejudice as party-defendant as his whereabouts could not be located.[4] On 21
September 1999 petitioner moved for an alias writ of attachment which on 18 January
2000 the court a quo denied.[5]
Petitioner did not cause the case to be set for pre-trial.[6] For about six (6) months
thereafter, discussions between petitioner and respondents Magwin Marketing
Corporation, Nelson Tiu, Benito Sy and Anderson Uy, as parties in Civil Case No. 99-
518, were undertaken to restructure the indebtedness of respondent Magwin
Marketing Corporation.[7]On 9 May 2000 petitioner approved a debt payment scheme
for the corporation which on 15 May 2000 was communicated to the latter by means
of a letter dated 10 May 2000 for the conformity of its officers, i.e., respondent Nelson
Tiu as President/General Manager of Magwin Marketing Corporation and respondent
Benito Sy as Director thereof.[8] Only respondent Nelson Tiu affixed his signature on
the letter to signify his agreement to the terms and conditions of the restructuring. [9]
On 20 July 2000 the RTC of Makati City, on its own initiative, issued
an Order dismissing without prejudice Civil Case No. 99-518 for failure of petitioner as
plaintiff therein to prosecute its action for an unreasonable length of time x x x. [10] On
31 July 2000 petitioner moved for reconsideration of the Order by informing the trial
court of respondents unremitting desire to settle the case amicably through a loan
restructuring program.[11] On 22 August 2000 petitioner notified the trial court of the
acquiescence thereto of respondent Nelson Tiu as an officer of Magwin Marketing
Corporation and defendant in the civil case.[12]
On 8 September 2000 the court a quo issued an Order reconsidering the
dismissal without prejudice of Civil Case No. 99-518

Acting on plaintiffs Motion for Reconsideration of the Order dated 20 July 2000
dismissing this case for failure to prosecute, it appearing that there was already
conformity to the restructuring of defendants indebtedness with plaintiff by
defendant Nelson Tiu, President of defendant corporation per Manifestation and
Motion filed by plaintiff on 22 August 2000, there being probability of settlement
among the parties, as prayed for, the Order dated 20 July 2000 is hereby set aside.

Plaintiff is directed to submit the compromise agreement within 15 days from

receipt hereof. Failure on the part of plaintiff to submit the said agreement shall
cause the imposition of payment of the required docket fees for re-filing of this
case.[13]

On 27 July 2000 petitioner filed in Civil Case No. 99-518 a Manifestation and
Motion to Set Case for Pre-Trial Conference alleging that [t]o date, only defendant
Nelson Tiu had affixed his signature on the May 10, 2000 letter which informed the
defendants that plaintiff [herein petitioner] already approved defendant Magwin
Marketing Corporations request for restructuring of its loan obligations to plaintiff but
subject to the terms and conditions specified in said letter.[14] This motion was followed
on 5 October 2000 by petitioners Supplemental Motion to Plaintiffs Manifestation and
Motion to Set Case for Pre-Trial Conference affirming that petitioner could not submit
a compromise agreement because only defendant Nelson Tiu had affixed his
signature on the May 10, 2000 letter x x x.[15]Respondent Anderson Uy opposed the
foregoing submissions of petitioner while respondents Magwin Marketing Corporation,
Nelson Tiu and Benito Sy neither contested nor supported them. [16]
The trial court, in an undated Order (although a date was later inserted in
the Order), denied petitioners motion to calendar Civil Case No. 99-518 for pre-trial
stating that -

Acting on plaintiffs [herein petitioner] Manifestation and Motion to Set Case for
Pre-Trial Conference, the Opposition filed by defendant Uy and the subsequent
Supplemental Motion filed by plaintiff; defendant Uys Opposition, and plaintiffs
Reply; for failure of the plaintiff to submit a compromise agreement pursuant to
the Order dated 8 September 2000 plaintiffs motion to set case for pre-trial
conference is hereby denied. [17]

On 15 November 2000 petitioner filed its Notice of Appeal from the 8 September
2000 Order of the trial court as well as its undated Order in Civil Case No. 99-518. On
16 November 2000 the trial court issued two (2) Orders, one of which inserted the date
6 November 2000 in the undated Order rejecting petitioners motion for pre-trial in the
civil case, and the other denying due course to the Notice of Appeal on the ground
that the Orders dated 8 September 2000 and 6 November 2000 are interlocutory
orders and therefore, no appeal may be taken x x x.[18]
On 7 December 2000 petitioner elevated the Orders dated 8 September 2000, 6
November 2000 and 16 November 2000 of the trial court to the Court of Appeals in a
petition for certiorari under Rule 65 of the Rules of Civil Procedure.[19] In the main,
petitioner argued that the court a quo had no authority to compel the parties in Civil
Case No. 99-518 to enter into an amicable settlement nor to deny the holding of a pre-
trial conference on the ground that no compromise agreement was turned over to the
court a quo.[20]
On 28 September 2001 the appellate court promulgated its Decision dismissing
the petition for lack of merit and affirming the assailed Orders of the trial court[21] holding
that -

x x x although the language of the September 8, 2000 Order may not be clear, yet,
a careful reading of the same would clearly show that the setting aside of the Order
dated July 20, 2000 which dismissed petitioners complaint x x x for failure to
prosecute its action for an unreasonable length of time is dependent on the
following conditions, to wit: a) The submission of the compromise agreement by
petitioner within fifteen (15) days from notice; and b) Failure of petitioner to
submit the said compromise agreement shall cause the imposition of the payment
of the required docket fees for the re-filing of the case; so much so that the non-
compliance by petitioner of condition no. 1 would make condition no. 2 effective,
especially that petitioners manifestation and motion to set case for pre-trial
conference and supplemental motion x x x [were] denied by the respondent judge
in his Order dated November 6, 2000, which in effect means that the Order dated
July 20, 2000 was ultimately not set aside considering that a party need not pay
docket fees for the re-filing of a case if the original case has been revived and
reinstated.[22]

On 2 April 2002 reconsideration of the Decision was denied; hence, this petition.
In the instant case, petitioner maintains that the trial court cannot coerce the
parties in Civil Case No. 99-518 to execute a compromise agreement and penalize
their failure to do so by refusing to go forward with the pre-trial conference. To hold
otherwise, so petitioner avers, would violate Art. 2029 of the Civil Code which provides
that [t]he court shall endeavor to persuade the litigants in a civil case to agree upon
some fair compromise, and this Courts ruling in Goldloop Properties, Inc. v. Court of
Appeals[23] where it was held that the trial court cannot dismiss a complaint for failure
of the parties to submit a compromise agreement.
On the other hand, respondent Anderson Uy filed his comment after several
extensions asserting that there are no special and important reasons for undertaking
this review. He also alleges that petitioners attack is limited to the Order dated 8
September 2000 as to whether it is conditional as the Court of Appeals so found and
the applicability to this case of the ruling in Goldloop Properties, Inc. v. Court of
Appeals. Respondent Uy claims that the Order reconsidering the dismissal of Civil
Case No. 99-518 without prejudice is on its face contingent upon the submission of
the compromise agreement which in the first place was the principal reason of
petitioner to justify the withdrawal of the Order declaring his failure to prosecute the
civil case. He further contends that the trial court did not force the parties in the civil
case to execute a compromise agreement, the truth being that it dismissed the
complaint therein for petitioners dereliction.
Finally, respondent Uy contests the relevance of Goldloop Properties, Inc. v. Court
of Appeals, and refers to its incongruence with the instant case, i.e., that the complaint
of petitioner was dismissed for failure to prosecute and not for its reckless disregard
to present an amicable settlement as was the situation in Goldloop Properties, Inc.,
and that the dismissal was without prejudice, in contrast with the dismissal with
prejudice ordered in the cited case. For their part, respondents Magwin Marketing
Corporation, Nelson Tiu and Benito Sy waived their right to file a comment on the
instant petition and submitted the same for resolution of this Court. [24]
The petition of Rizal Commercial Banking Corporation is meritorious. It directs our
attention to questions of substance decided by the courts a quo plainly in a way not in
accord with applicable precedents as well as the accepted and usual course of judicial
proceedings; it offers special and important reasons that demand the exercise of our
power of supervision and review. Furthermore, petitioners objections to the
proceedings below encompass not only the Order of 8 September 2000 but include
the cognate Orders of the trial court of 6 and 16 November 2000. This is evident from
the prayer of the instant petition which seeks to reverse and set aside the Decision of
the appellate court and to direct the trial court to proceed with the pre-trial conference
in Civil Case No. 99-518. Evidently, the substantive issue involved herein is whether
the proceedings in the civil case should progress, a question which at bottom embroils
all the Orders affirmed by the Court of Appeals.
On the task at hand, we see no reason why RTC-Br. 135 of Makati City should
stop short of hearing the civil case on the merits. There is no substantial policy worth
pursuing by requiring petitioner to pay again the docket fees when it has already
discharged this obligation simultaneously with the filing of the complaint for collection
of a sum of money.The procedure for dismissed cases when re-filed is the same as
though it was initially lodged, i.e., the filing of answer, reply, answer to counter-claim,
including other foot-dragging maneuvers, except for the rigmarole of raffling cases
which is dispensed with since the re-filed complaint is automatically assigned to the
branch to which the original case pertained.[25] A complaint that is re-filed leads to the
re-enactment of past proceedings with the concomitant full attention of the same trial
court exercising an immaculate slew of jurisdiction and control over the case that was
previously dismissed,[26] which in the context of the instant case is a waste of judicial
time, capital and energy.
What judicial benefit do we derive from starting the civil case all over again,
especially where three (3) of the four (4) defendants, i.e., Magwin Marketing
Corporation, Nelson Tiu and Benito Sy, have not contested petitioners plea before this
Court and the courts a quo to advance to pre-trial conference? Indeed, to continue
hereafter with the resolution of petitioners complaint without the usual procedure for
the re-filing thereof, we will save the court a quoinvaluable time and other resources
far outweighing the docket fees that petitioner would be forfeiting should we rule
otherwise.
 Going over the specifics of this petition and the arguments of respondent
Anderson Uy, we rule that the Order of 8 September 2000 did not reserve conditions
on the reconsideration and reversal of the Order dismissing without prejudice Civil
Case No. 99-518. This is quite evident from its text which does not use words to signal
an intent to impose riders on the dispositive portion -

Acting on plaintiffs Motion for Reconsideration of the Order dated 20 July 2000
dismissing this case for failure to prosecute, it appearing that there was already
conformity to the restructuring of defendants indebtedness with plaintiff by
defendant Nelson Tiu, President of defendant corporation per Manifestation and
Motion filed by plaintiff on 22 August 2000, there being probability of settlement
among the parties, as prayed for, the Order dated 20 July 2000 is hereby set aside.

Plaintiff is directed to submit the compromise agreement within 15 days from

receipt hereof. Failure on the part of plaintiff to submit the said agreement shall
cause the imposition of payment of the required docket fees for re-filing of this
case.[27]

Contrary to respondent Uys asseverations, the impact of the second paragraph

upon the first is simply to illustrate what the trial court would do after setting aside the
dismissal without prejudice: submission of the compromise agreement for the
consideration of the trial court. Nothing in the second paragraph do we read that the
reconsideration is subject to two (2) qualifications. Certainly far from it, for in Goldloop
Properties, Inc. v. Court of Appeals[28] a similar directive, i.e., [t]he parties are given a
period of fifteen (15) days from today within which to submit a Compromise
Agreement, was held to mean that should the parties fail in their negotiations the
proceedings would continue from where they left off. Goldloop Properties, Inc. further
said that its order, or a specie of it, did not constitute an agreement or even an
expectation of the parties that should they fail to settle their differences within the
stipulated number of days their case would be dismissed.
The addition of the second sentence in the second paragraph does not change
the absolute nullification of the dismissal without prejudice decreed in the first
paragraph. The sentence [f]ailure on the part of plaintiff to submit the said agreement
shall cause the imposition of payment of the required docket fees for re-filing of this
case is not a directive to pay docket fees but only a statement of the event that may
result in its imposition. The reason for this is that the trial court could not have possibly
made such payment obligatory in the same civil case, i.e., Civil Case No. 99-518, since
docket fees are defrayed only after the dismissal becomes final and executory and
when the civil case is re-filed.
It must be emphasized however that once the dismissal attains the attribute of
finality, the trial court cannot impose legal fees anew because a final and executory
dismissal although without prejudice divests the trial court of jurisdiction over the civil
case as well as any residual power to order anything relative to the dismissed case; it
would have to wait until the complaint is docketed once again.[29] On the other hand, if
we are to concede that the trial court retains jurisdiction over Civil Case No. 99-518
for it to issue the assailed Orders, a continuation of the hearing thereon would not
trigger a disbursement for docket fees on the part of petitioner as this would obviously
imply the setting aside of the order of dismissal and the reinstatement of the complaint.
 Indubitably, it is speculative to reckon the effectivity of the Order of dismissal
without prejudice to the presentation of the compromise agreement. If we are to admit
that the efficacy of the invalidation of the Order of dismissal is dependent upon this
condition, then we must inquire: from what date do we count the fifteen (15)-day
reglementary period within which the alleged revival of the order of dismissal began to
run? Did it commence from the lapse of the fifteen (15) days provided for in
the Order of 8 September 2000? Or do we count it from the 6 November
2000 Order when the trial court denied the holding of a pre-trial conference? Or must
it be upon petitioners receipt of the 16 November 2000 Order denying due course to
its Notice of Appeal? The court a quo could not have instituted an Orderthat marked
the proceedings before it with a shadow of instability and chaos rather than a
semblance of constancy and firmness.
The subsequent actions of the trial court also belie an intention to revive
the Order of dismissal without prejudice in the event that petitioner fails to submit a
compromise agreement. The Orders of 6 and 16 November 2000 plainly manifest that
it was retaining jurisdiction over the civil case, a fact which would not have been
possible had the dismissal without prejudice been resuscitated. Surely, the court a
quo could not have denied on 6 November 2000 petitioners motion to calendar Civil
Case No. 99-518 for pre-trial if the dismissal had been restored to life in the
meantime. By then the dismissal without prejudice would have already become final
and executory so as to effectively remove the civil case from the docket of the trial
court.
The same is true with the Order of 16 November 2000 denying due course to
petitioners Notice of Appeal. There would have been no basis for such exercise of
discretion because the jurisdiction of the court a quo over the civil case would have
been discharged and terminated by the presumed dismissal thereof. Moreover, we
note the ground for denying due course to the appeal: the Orders dated 8 September
2000 and 6 November 2000 are interlocutory orders and therefore, no appeal may be
taken from x x x.[30] This declaration strongly suggests that something more was to be
accomplished in the civil case, thus negating the claim that the Order of dismissal
without prejudice was resurrected upon the parties failure to yield a compromise
agreement. A final order issued by a court has been defined as one which disposes of
the subject matter in its entirety or terminates a particular proceeding or action, leaving
nothing else to be done but to enforce by execution what has been determined by the
court, while an interlocutory order is one which does not dispose of a case completely
but leaves something more to be decided upon.[31]
Besides the semantic and consequential improbabilities of respondent Uys
argument, our ruling in Goldloop Properties, Inc., is decisive of the instant
case. In Goldloop Properties, Inc., we reversed the action of the trial court in
dismissing the complaint for failure of the plaintiff to prosecute its case, which was in
turn based on its inability to forge a compromise with the other parties within fifteen
(15) days from notice of the order to do so and held -

Since there is nothing in the Rules that imposes the sanction of dismissal for failing
to submit a compromise agreement, then it is obvious that the dismissal of the
complaint on the basis thereof amounts no less to a gross procedural infirmity
assailable by certiorari. For such submission could at most be directory and could
not result in throwing out the case for failure to effect a compromise. While a
compromise is encouraged, very strongly in fact, failure to consummate one does
not warrant any procedural sanction, much less an authority to jettison a civil
complaint worth P4,000,000.00 x x x Plainly, submission of a compromise
agreement is never mandatory, nor is it required by any rule. [32]

As also explained therein, the proper course of action that should have been taken
by the court a quo, upon manifestation of the parties of their willingness to discuss a
settlement, was to suspend the proceedings and allow them reasonable time to come
to terms (a) If willingness to discuss a possible compromise is expressed by one or
both parties; or (b) If it appears that one of the parties, before the commencement of
the action or proceeding, offered to discuss a possible compromise but the other party
refused the offer, pursuant to Art. 2030 of the Civil Code. If despite efforts exerted by
the trial court and the parties the negotiations still fail, only then should the action
continue as if no suspension had taken place.[33]
Ostensibly, while the rules allow the trial court to suspend its proceedings
consistent with the policy to encourage the use of alternative mechanisms of dispute
resolution, in the instant case, the trial court only gave the parties fifteen (15) days to
conclude a deal. This was, to say the least, a passive and paltry attempt of the court a
quo in its task of persuading litigants to agree upon a reasonable concession.[34] Hence,
if only to inspire confidence in the pursuit of a middle ground between petitioner and
respondents, we must not interpret the trial courts Orders as dismissing the action on
its own motion because the parties, specifically petitioner, were anxious to litigate their
case as exhibited in their several manifestations and motions.
We reject respondent Uys contention that Goldloop Properties, Inc. v. Court of
Appeals is irrelevant to the case at bar on the dubious reasoning that the complaint of
petitioner was dismissed for failure to prosecute and not for the non-submission of a
compromise agreement which was the bone of contention in that case, and that the
dismissal imposed in the instant case was without prejudice, in contrast to the
dismissal with prejudice decreed in the cited case.To begin with, whether the dismissal
is with or without prejudice if grievously erroneous is detrimental to the cause of the
affected party; Goldloop Properties, Inc. does not tolerate a wrongful dismissal just
because it was without prejudice. More importantly, the facts in Goldloop Properties,
Inc. involve, as in the instant case, a dismissal for failure to prosecute on the ground
of the parties inability to come up with a compromise agreement within fifteen (15)
days from notice of the courts order therein. All told, the parallelism between them is
unmistakable.
Even if we are to accept on face value respondents understanding of Goldloop
Properties, Inc. as solely about the failure to submit a compromise agreement, it is
apparent that the present case confronts a similar problem. Perhaps initially the issue
was one of failure to prosecute, as can be observed from the Order dated 20 July
2000, although later reversed and set aside. But thereafter, in the Order of 6
November 2000, the trial court refused to proceed to pre-trial owing to the failure of
the plaintiff to submit a compromise agreement pursuant to the Order dated 8
September 2000. When the civil case was stalled on account of the trial courts refusal
to call the parties to a pre-trial conference, the reason or basis therefor was the
absence of a negotiated settlement - a circumstance that takes the case at bar within
the plain ambit of Goldloop Properties, Inc. In any event, given that the instant case
merely revolves around the search for a reasonable interpretation of the
several Orders of the trial court, i.e., as to whether the dismissal without prejudice was
revived upon petitioners helplessness to perfect an out-of-court arrangement, with
more reason must we employ the ruling in Goldloop Properties, Inc. to resolve the
parties differences of opinion.
We also find nothing in the record to support respondent Uys conclusion that
petitioner has been mercilessly delaying the prosecution of Civil Case No. 99-518 to
warrant its dismissal. A complaint may be dismissed due to plaintiffs fault: (a) if he fails
to appear during a scheduled trial, especially on the date for the presentation of his
evidence in chief, or when so required at the pre-trial; (b) if he neglects to prosecute
his action for an unreasonable length of time; or (c) if he does not comply with the
rules or any order of the court. None of these was obtaining in the civil case.
While there was a lull of about six (6) months in the prosecution of Civil Case No.
99-518, it must be remembered that respondents themselves contributed largely to
this delay. They repeatedly asked petitioner to consider re-structuring the debt of
respondent Magwin Marketing Corporation to which petitioner graciously
acceded. Petitioner approved a new debt payment scheme that was sought by
respondents, which it then communicated to respondent Corporation through a letter
for the conformity of the latters officers, i.e., respondent Nelson Tiu as
President/General Manager and respondent Benito Sy as Director
thereof. Regrettably, only respondent Nelson Tiu affixed his signature on the letter to
signify his concurrence with the terms and conditions of the arrangement. The
momentary lag in the civil case was aggravated when respondent Benito Sy for
unknown and unexplained reasons paid no heed to the adjustments in the
indebtedness although curiously he has not opposed before this Court or the courts a
quo petitioners desire to go ahead with the pre-trial conference.
Admittedly, delay took place in this case but it was not an interruption that should
have entailed the dismissal of the complaint even if such was designated as without
prejudice. To constitute a sufficient ground for dismissal, the inattention of plaintiff to
pursue his cause must not only be prolonged but also be unnecessary and dilatory
resulting in the trifling of judicial processes. In the instant case, the adjournment was
not only fleeting as it lasted less than six (6) months but was also done in good faith
to accommodate respondents incessant pleas to negotiate. Although the dismissal of
a case for failure to prosecute is a matter addressed to the sound discretion of the
court, that judgment however must not be abused. The availability of this recourse
must be determined according to the procedural history of each case, the situation at
the time of the dismissal, and the diligence of plaintiff to proceed therein.[35] Stress must
also be laid upon the official directive that courts must endeavor to convince parties in
a civil case to consummate a fair settlement,[36] and to mitigate damages to be paid by
the losing party who has shown a sincere desire for such give-and-take.[37] All things
considered, we see no compelling circumstances to uphold the dismissal of petitioners
complaint regardless of its characterization as being without prejudice.
In fine, petitioner cannot be said to have lost interest in fighting the civil case to
the end. A court may dismiss a case on the ground of non prosequitur but the real test
of the judicious exercise of such power is whether under the circumstances plaintiff is
chargeable with want of fitting assiduousness in not acting on his complaint with
reasonable promptitude. Unless a partys conduct is so indifferent, irresponsible,
contumacious or slothful as to provide substantial grounds for dismissal, i.e.,
equivalent to default or non-appearance in the case, the courts should consider lesser
sanctions which would still amount to achieving the desired end. [38] In the absence of a
pattern or scheme to delay the disposition of the case or of a wanton failure to observe
the mandatory requirement of the rules on the part of the plaintiff, as in the case at
bar, courts should decide to dispense rather than wield their authority to dismiss. [39]
Clearly, another creative remedy was available to the court a quo to attain a
speedy disposition of Civil Case No. 99-518 without sacrificing the course of
justice. Since the failure of petitioner to submit a compromise agreement was the
refusal of just one of herein respondents, i.e., Benito Sy, to sign his name on
the conforme of the loan restructure documents, and the common concern of the
courts a quo was dispatch in the proceedings, the holding of a pre-trial conference
was the best-suited solution to the problem as this stage in a civil action is where
issues are simplified and the dispute quickly and genuinely reconciled. By means of
pre-trial, the trial court is fully empowered to sway the litigants to agree upon some fair
compromise.
Dismissing the civil case and compelling petitioner to re-file its complaint is a
dangerous, costly and circuitous route that may end up aggravating, not resolving, the
disagreement. This case management strategy is frighteningly deceptive because it
does so at the expense of petitioner whose cause of action, perhaps, may have
already been admitted by its adverse parties as shown by three (3) of four (4)
defendants not willing to contest petitioners allegations, and more critically, since this
approach promotes the useless and thankless duplication of hard work already
undertaken by the trial court. As we have aptly observed, [i]nconsiderate dismissals,
even if without prejudice, do not constitute a panacea nor a solution to the congestion
of court dockets. While they lend a deceptive aura of efficiency to records of individual
judges, they merely postpone the ultimate reckoning between the parties. In the
absence of clear lack of merit or intention to delay, justice is better served by a brief
continuance, trial on the merits, and final disposition of the cases before the court.[40]
WHEREFORE, the Petition for Review is GRANTED. The Decision dated 28
September 2001 and Resolution dated 2 April 2002 of the Court of Appeals in CA-
G.R. SP No. 62102 are REVERSED and SET ASIDE.
The Orders dated 8 September 2000, 6 November 2000 and 16 November 2000
of the Regional Trial Court, Branch 135, of Makati City, docketed as Civil Case No.
99-518, are also REVERSED and SET ASIDE insofar as these Orders are interpreted
to impose upon and collect anew from petitioner RIZAL COMMERCIAL BANKING
CORPORATION docket or legal fees for its complaint, or to dismiss without prejudice
Civil Case No. 99-518, or to preclude the trial court from calling the parties therein to
pre-trial conference, or from proceeding thereafter with dispatch to resolve the civil
case.
Civil Case No. 99-518 is deemed REINSTATED in, as it was never taken out from,
the dockets of the Regional Trial Court, Branch 135, of Makati City. The trial court is
ORDERED to exercise its jurisdiction over Civil Case No. 99-518, to CONDUCT the
pre-trial conference therein with dispatch, and to UNDERTAKE thereafter such other
proceedings as may be relevant, without petitioner being charged anew docket or
other legal fees in connection with its reinstatement. Costs against respondents.
SO ORDERED.
Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur.
[1]
Docketed as Civil Case No. 99-518, Rizal Commercial Banking Corporation v. Magwin Marketing
Corporation, et al., which was raffled to RTC-Br. 135, Makati City; Rollo, p. 4.
[2]
CA Record, p. 234.
[3]
Id. at 237.
[4]
Id. at 7.
[5]
Id. at 237.
[6]
Id. at 234.
[7]
Rollo, p. 6; CA Record, p. 136.
[8]
Id. at 6; id. at 42-43.
[9]
Rollo, p. 7.
[10]
Ibid.
[11]
CA Record, p. 242.
[12]
Rollo, p. 7.
[13]
Order issued by Judge Francisco B. Ibay; CA Record, p. 24.
[14]
Rollo, p. 8.
[15]
Ibid.
[16]
Id. at 9.
[17]
Order issued by Judge Francisco B. Ibay; CA Record, p. 25.
[18]
CA Record, pp. 32- 33.
[19]
Docketed as CA-G.R. SP No. 62102, Rizal Commercial Banking Corporation v. Hon. Judge
Francisco B. Ibay, et al.
[20]
Id. at 11-13.
[21]
Decision penned by Associate Justice Mercedes Gozo-Dadole and concurred in by then Presiding
Justice (now Associate Justice of this Court) Ma. Alicia Austria-Martinez and Associate Justice
Jose L. Sabio Jr.; Rollo, pp. 26-35.
[22]
Id. at 34.
[23]
G.R. No. 99431, 11 August 1992, 212 SCRA 498.
[24]
Resolution dated 18 September 2002; Rollo, p. 43.
[25]
The 2002 Revised Manual for Clerks of Courts, Vol. I, p. 223.
[26]
Baares II v. Balising, G.R. No. 132624, 13 March 2000, 328 SCRA 36.
[27]
Issued by Judge Francisco B. Ibay; CA Record, p. 24.
[28]
See Note 22 at 506.
[29]
Ortigas & Company Limited Partnership v. Velasco, G.R. No. 109645, 25 July 1994, 234 SCRA 455;
Aquizap v. Basilio, No. L-21293, 29 December 1967, 21 SCRA 1434.
[30]
CA Record, pp. 32-33.
[31]
See Note 26.
[32]
See Note 22 at 506.
[33]
Ibid.
[34]
Civil Code, art. 2029; see SC Adm. Order No. 21-01; see also A.M. No. 99-6-01-SC.
[35]
Calalang v. Court of Appeals, G.R. No. 103185, 22 January 1993, 217 SCRA 462.
[36]
See Note 34.
[37]
Civil Code, art. 2031.
[38]
Bank of the Philippine Islands v. Court of Appeals, G.R. No. 117385, 11 February 1999, 303 SCRA
19.
[39]
Ibid.
[40]
Macasa v. Herrera, 101 Phil. 44, 48 (1957).

FIRST DIVISION

[G.R. No. 141897. September 24, 2001]

METRO CONSTRUCTION, INC., petitioner, vs. CHATHAM

PROPERTIES, INC., respondent.

DECISION
DAVIDE, JR., C.J.:

The core issue in this case is whether under existing law and rules the Court of Appeals
can also review findings of facts of the Construction Industry Arbitration Commission (CIAC).
Respondent Chatham Properties, Inc. (CHATHAM) and petitioner Metro Construction,
Inc. (MCI) entered into a contract for the construction of a multi-storey building known as the
Chatham House located at the corner of Herrera and Valero Streets, Salcedo Village, Makati
City, Metro Manila. In April 1998, MCI sought to collect from CHATHAM a sum of money
for unpaid progress billings and other charges and instituted a request for adjudication of its
claims with the CIAC. The case was docketed as CIAC Case No. 10-98. The arbitral tribunal
was composed of Joven B. Joaquin as Chairman, and Beda G. Fajardo and Loreto C. Aquino
as members.
The preliminary conference before the CIAC started in June 1998 and was concluded a
month after with the signing of the Terms of Reference (TOR) of the Case.[1] The hearings
immediately started with the presentation of MCIs witnesses, namely: Ms. Ma. Suzette S.
Nucum, Chief Accountant; Ms. Isabela Redito, Office Engineer; Mr. John Romulo, Field
Manager; and Dr. John Y. Lai, President. CHATHAMs witnesses were: Engr. Ruperto
Kapunan III, Managing Director of RK Development and Construction Co., Inc. (RKDCCI),
which was the Construction Manager firm hired by CHATHAM to oversee the construction
work of the Chatham House; Engr. Alex Bautista, Area Manager of RKDCCI; Mr. Avelino M.
Mercado, CHATHAMs Project Manager; and Engr. Jose T. Infante.
In the meantime, the TOR was amended and finalized on 19 August 1998.[2]
The facts, as admitted by the parties before the CIAC and incorporated in the original
TOR, are as follows:
1. On 21 April 1994, the parties formally entered into a xxx contract for the construction of
the Chatham House xxx for the contract price of P50,000,000.00 inclusive of value-added
tax, subject to adjustments in accordance with Article 9 of the contract. Construction of
the project, however, commenced on 15 April 1994 upon the release by CHATHAM of
the downpayment.
2. On 12 July 1994, a Supplemental Contract was executed by and between the parties
whereby CHATHAM authorized MCI to procure in behalf of the former materials,
equipment, tools, fixtures, refurbishing, furniture, and accessories necessary for the
completion of the project.
3. Under Section 1.04 of the Supplemental Contract, the total amount of procurement and
transportation cost[s] and expenses which may be reimbursed by MCI from CHATHAM
shall not exceed the amount of P75,000,000.00.
4. In the course of the construction, Change Orders No. 1, 4, 8A, 11, 12 and 13 were
implemented, payment of which were recommended by xxx RKDCCI and approved by
one of CHATHAMs Project Managers, Romulo F. Sugay.
5. On 15 September 1995, CHATHAM through its Project Manager, Romulo F. Sugay,
agreed to give P20,000 per floor for five (5) floors, or a total of P100,000.00
as bonus/incentive pay to MCIs construction workers for the completion of each floor on
schedule. CHATHAM reimbursed MCI the amount of P60,000.00 corresponding to
bonuses advanced to its workers by the latter for the 14th, 16th, and 17th floors.
6. CHATHAMs payments to MCI totaled P104,875,792.37, representing payments for
portions of MCIs progress billings and xxx additional charges.
The parties then stipulated on the following issues, again, as set forth in the TOR:
1. Is MCI entitled to its claims for unpaid progress billings amounting to P21,062,339.76?
2. Were the approved Change Orders 1, 4, 8a, 11, 12 and 13 fully paid by CHATHAM? If
not, is MCI entitled to its claim for the unpaid balance?
3. Is CHATHAM liable for Change Orders 7a, 7b, 10, 14, 15, 16, 17, 19 and 20?
4. Were the CHB works from the 8th to the 31st floors part of the original contract or in the
nature of extra/additional works? Is CHATHAM liable for the same? If so, how much?
5. Is MCI entitled to an additional reimbursement of P40,000.00 for bonuses granted to
workers as an incentive for the early completion of each floor?
6. Were the deductions in the amount of P1,393,458.84 made by CHATHAM in MCIs
progress billing reasonable?
7. Is MCIs claim of P1,646,502.00 for labor escalation valid?
8. Is MCI entitled to payment of attendance fee? To what extent and how much?
9. Did MCI fail to complete and/or deliver the project within the approved completion period?
If so, is MCI liable for liquidated damages and how much?
 10. Whether or not CHATHAM is entitled to claim x x actual damages? If so, to what extent
and how much?
11. Whether or not CHATHAM is entitled to x x x additional counterclaims as follows:

11.1 Core testing expenses and penalty for concrete strength failure
P3,630,587.38

11.2. Expenses to rectify structural steel works for the foundation

P1,331,139.74.

11.3. Cost of additional materials (concrete & rebars) supplied by CPI

P5,761,457.91

12. Are the parties entitled to their respective claims for attorneys fees and cost of litigation?
If so, how much?[3]
In the resolution of these issues, the CIAC discovered significant data, which were not
evident or explicit in the documents and records but otherwise revealed or elicited during the
hearings, which the CIAC deemed material and relevant to the complete adjudication of the
case. In its decision of 19 October 1998,[4] the CIAC made the following findings and
conclusions:

It was established during the hearing that the contract was awarded to MCI through
negotiation as no bidding was conducted. xxx It was also revealed that two
agreements were entered into, one is labeled Construction Contract for the total
fixed amount of P50,000,000.00 and the other a Supplemental Contract for an
amount not to exceed P75,000,000.00. The latter is supposed to cover the
procurement of materials for the project. The Construction Contract provides for
monthly progress billings and payments based on actual accomplishments of the
various phases of work. The Supplemental Contract provides for reimbursement of
[the] total amount of procurement and transportation costs and expenses, upon
MCIs presentation of suppliers invoices/receipts.

However, from testimonies of witnesses from both parties, it was revealed that the
two distinct manner(s) of payment to MCI was set aside. The earlier attempt by
CHATHAM to prove that MCI was remiss in submitting suppliers invoices and/or
receipts in support of its billings against the Supplemental Contract was in fact
later on abandoned when CHATHAMs witness Mercado admitted that the matter
of adherence to the payment provision of the Supplemental Contract is a non-
issue. This was borne out by the fact that progress billings and payments under
both contracts were made on the basis of percentage of project completion.

Both documentary and testimonial evidence prove that, effectively, the

construction contract and supplemental contract is but one agreement for a lump
sum contract amount of P125,000,000.00.

xxx
There was also the admitted fact that the contract was negotiated and awarded in
the absence of a complete construction plan. In any case, in support of the total
contract amount of P125 MILLION, is a Cost Breakdown (Exh. 17-L), where the
estimated quantities of owner furnished materials (OFM) are indicated. It is
however, understood that these quantities are estimates, based on (an) incomplete
set of construction plans. It is likewise understood that except for the OFM, all the
other costs in the Cost Breakdown form the basis for the lump-sum agreement
under the contract, subject to adjustment only if there are any significant changes
in the contract plans.

RKDCCI in its letter to MCI dated 15 Feb. 1995 (Exh. 4), informed MCI that it
was confirming the agreement allegedly accepted by Dr. Lai that the Building
Committee will take over the management of the construction operations (of the
project) albeit under certain conditions. Specifically, the take over was for an
interim period and will extend only after concreting of up to basement level 5 or up
to 30 May 1995 whichever is later. The letter also stated that the Building
Committee xxx will be responsible for management and direction including
management of MCI engineers at the site, sequencing of work, additional labor,
additional equipment and management of the yard and staging area. The letter,
however, emphasized that the intent is not a take over of the contract or take over
of the entire work and in fact, it was mentioned that MCI will still be responsible
for earth anchoring and steel fabrication work.

CHATHAM claims that the interim take-over was necessitated by MCIs delay in
the progress of its work, due allegedly to MCIs lack of manpower and
equipment. During the hearings of this case, this claim of MCIs lack of manpower,
necessary equipment, qualified engineers and inefficient construction management
was testified to by both Mr. Mercado [of CHATHAM] and Engr. Kapunan of
RKDCCI. CHATHAMs witnesses, however, testified that in spite of these alleged
deficiencies, MCI was nevertheless allowed to continue to take full control of the
operations. When asked why termination of the contract was not resorted to if
truly, MCI was not performing its contracted obligations, witnesses Mercado and
Kapunan cited special relations between the owner of MCI (Dr. John Lai) and the
president of CHATHAM (Mr. Lamberto UnOcampo) as the reason.

On the other hand, Dr. Lai contends that, as explained in his letter to CHATHAM
dated 17 February 1995, (Exh. 4-A) MCIs work was on schedule. During the
hearings, Dr. Lai also insisted that beginning 15 February 1995, MCI was relieved
of full control of the construction operations, that it was relegated to (be) a mere
supplier of labor, materials and equipment, and that the alleged interim takeover
actually extended through the completion of the project. Dr. Lai cited
CHATHAMs purchases of materials, fielding labor force and sub-contracting
works allegedly for the project without his knowledge and consent as proof that
CHATHAM had taken full control of the project.
To the above allegation of MCI that CHATHAM went ahead and procured
materials, hired labor and entered into sub-contract agreements with the intention
of eventually charging the costs thereof to MCI, witness Mercado countered, that
CHATHAM has the right to do this under the provisions of Article 27 of the
contract, dealing with Recision, Cancellation, Termination of Contract.

By way of responding to the various counterclaims of CHATHAM, MCI referred

to a letter of [the former] addressed to MCI dated 18 January 1997 (Exhibit E-1)
the first paragraph of which reads as follows:

After evaluating all the documents issued and received from both Chatham
Properties Inc. and Metro Construction, Inc., the Building Committee of Chatham
Properties, Inc. evaluated them. The Building Committee finds the total receivable
of Metro Construction is in the amount of EIGHT MILLION PESOS
(P8,000,000.00) only.

When queried by the Tribunal if the said amount already took into account the
costs and expenses (Chatham) claims to have incurred for the account of MCI, Mr.
Mercado answered in the affirmative. When queried further how the amount was
arrived at, Mr. Mercado replied that it was the sum the Building Committee
figured it was willing to pay MCI simply to close the issue.

Mr. Mercado even added that while MCI is not actually entitled to this amount, it
was out of friendship that CHATHAM offered this sum to MCI as final settlement
under the contract.

It is with the above attendant circumstances that this Tribunal will be guided in the
resolution of issues brought before it for adjudication. From what this Tribunal
finds as peculiar circumstances surrounding the contracting and implementation of
the CHATHAM House Project, it arrived at the following fundamental
conclusions:

1. That indeed special friendly relations were present between the parties in this case, although
decisions by either party on any particular issue were made not purely on the basis of such
special relations. For example, this Tribunal believes that, contrary to the allegation
of (CHATHAMs) witnesses, the decision not to terminate the contract was not due to the
admitted special relations only, but also due to the greater problems the project would be
faced with by terminating the MCI contract and mobilizing another contractor.
2. That while there was no official termination of the contract, the manner by which
CHATHAM had taken upon themselves the procurement of materials, the fielding of
labor, the control over MCIs engineers, and the subcontracting of various phases of work
on its own, is considered by this Tribunal as implied termination of the contract. The idea
of allowing MCI to remain on the project in spite of what CHATHAM claims (to be) MCIs
shortcomings, and MCIs agreement to stay on the project under conditions set by
CHATHAM, is believed a matter of mutual benefit to both parties.
 3. That CHATHAMs invoking its rights under the provisions of Article 27 of the construction
contract is believed out of place, as it failed to observe the required antecedent acts before
it can exercise its prerogative under the said contract provision.
4. That there is no reason to believe, either party was in any way guilty of bad faith in acting
as it did on certain relevant matters.However, this Tribunal is of the belief that due perhaps
to the eagerness on the part particularly of CHATHAMs representatives to take such steps
it considered necessary to insure completion of the project within the period desired by
CHATHAM, it deviated from some generally accepted procedures in the construction
industry in dealing with MCI. One example was not giving MCI the opportunity to rectify
some of what CHATHAM considered as construction deficiencies and instead engaging
the services of other parties to undertake the corrective works and later on charging the
costs thereof to MCI.

In addition to the above conclusions resulting from what this Tribunal considered
peculiar of circumstances surrounding the implementation of the project that were
revealed during the proceedings of this case, this Tribunal finds the necessity of
establishing a cut-off date with regard to the fiscal liability of one party towards
the other.

Mr. Avelino Mercado of CHATHAM presented a list of what he claims as its

Payments to MCI (Exhibit 7) summarized as follows:

a. Down payment (Paid in two equal trances) P20,000,000.00

b. Cash Advance for Mobilization 800,000.00
c. Payments of Progress Billings up to Billing No. 19 71,081,183.44
d. Other Payments (Mar 1994 to Apr 1996) 5,474,419.67
e. Advances on MCI Payrolls (April 1996 to March 1997) 8,196,755.51
Total P104,752,358.42

The records of this case show that the last progress payment to MCI was in
January 1996 representing payment of Progress Billing No. 19 for the period
ending 31 December 1995. The percentage of completion claimed then by MCI
was 80.02%, the amount evaluated and eventually paid to MCI was the equivalent
of 77.15% work accomplishment. No further progress payments were made
thereafter, other than for advances to cover MCI payrolls from April 1996 to
March 1997 in the amount of P8,196,755.51 and for various advances and
payments of approved change orders in the amount of P5,474,419.67.

In the meantime, up to Billing No. 23 for the period ending 30 April 1996, MCI
billed CHATHAM a total accomplishment of 95.29%. This billing was however,
evaluated by CHATHAM, and in its letter to MCI dated 27 May 1996 (Exhibit E)
it confirmed that MCIs remaining balance of work stands at P7,374,201.15 as of 23
May 1996. This amount, percentage-wise, equals roughly 5.88% of the contract
amount as testified to by Engr. Jose Infante. (Exhibit 22-B). Therefore, what was
computed as MCIs work accomplishment as of 23 May 1996 was 94.12% and it is
this evaluation which this Tribunal believes MCI is entitled to as of said date.
Applying this percentage of completion of 94.12% to the P125,000,000.00 contract
amount gives a total accomplishment equivalent to P117,650,000.00 as of 23 May
1996. Add to this amount the sum of P5,353,091.08 representing the total of
approved Change Orders as of 31 December 1995 gives a total MCI
accomplishment of P123,003,091.08, as CHATHAM saw it. Of this amount,
CHATHAM admitted having paid MCI the total sum of P104,752,358.42 only
(Exhibit 7) up to March 15, 1997, leaving a balance of P18,250,732.66. It should
be noted that of the total payment of P104,752,358.42, the sum of P5,750,000.00
was paid after May 1996 so that as of 23 May 1996, CHATHAMs total payment to
MCI was P99,002,358.42.

Effectively, therefore, the amount due MCI as of 23 May 1996 amounted to

P24,005,732.66 computed as follows:

Total accomplishment as of 23 May 1996 at 94.12% P117,655,000.00

Add approved change orders 5,353,091.08

Total P123,008,091.08

Less payments up to 23 May 1996 99,002,358.42

Balance due MCI as of 23 May 1996 P24,005,732.66

Of the above balance of P24,005,732.66 as of 23 May 1996, the only payments

made by CHATHAM to MCI is the sum of P5,750,000.00 from June 1996
onwards, allegedly to cover MCI payrolls. It is of course noted that CHATHAMs
suspension of further payments to MCI was because it had been undertaking on its
own, the further procurement of materials and sub-contracting of various phases of
works on the project.

In consideration of the above facts, this Tribunals conclusion that there was in fact
an implied take over of the project is further confirmed. Furthermore, this Tribunal
additionally concludes that the cut-off date for purposes of delineating the financial
obligations of the parties between them should be 23 May 1996, the date when
CHATHAM evaluated MCIs accomplishment at 94.10% but nevertheless
suspended all further progress payments to MCI.

MCI presented further documentary evidence (Exhibit E-6) the subject of which is
PUNCHLISTING-CIVIL STRUCTURAL. In this particular document which
bears the signatures of representatives of both MCI and RKDCCI, MCI tried to
prove that as of 30 August 1996 it had actually attained 99.16% work
accomplishment. While it may be true that as of that date the project had reached
99.16% completion, there is no incontrovertible evidence showing that MCI was
responsible for such accomplishment.This was in fact actually testified to by Engr.
Alex Bautista of RKDCCI, when he said that it was an evaluation of the projects
completion stage, not necessarily MCIs work accomplishment. This Tribunal
therefore stands firm on its conclusion that MCIs accomplishment is only up to the
extent of 94.10%. [5]

With those findings, the CIAC disposed of the specific money claims by either granting
or reducing them. On Issue No. 9, i.e., whether CHATHAM failed to complete and/or deliver
the project within the approved completion period and, if so, whether CHATHAM is liable for
liquidated damages and how much, the CIAC ruled in this wise:

This Tribunal holds that the provision of the contract insofar as the Overall
Schedule is concerned cannot justifiably be applied in the instant case in view of
the implied take-over of the Chatham House project by CHATHAM. Accordingly,
this Tribunal finds no necessity to resolve whether or not MCI complete[d] and/or
deliver[ed] the project within the approved completion period. In fact, Mr.
Mercado testified that it was CHATHAM who ultimately completed the project,
with assistance of the construction managers.

In any case, this Tribunal finds merit in RKDCCIs claim that MCI was in delay in
the concreting milestone and that [it] is liable for liquidated damages
therefor. This, notwithstanding MCIs invoking that Chatham is estopped from
claiming liquidated damages after it failed to deduct the alleged liquidated
damages from MCIs progress billings. This Tribunal holds that such failure to
deduct, which CHATHAM claims it did in order not to hamper progress of work in
the project, is an option which [it] may or may not exercise.

However, this Tribunal finds that CHATHAMs Exh. 11-A where the liquidated
damages on delays in concreting milestone was applied is not consistent with [its]
own Exhibit 3-I. This Tribunal notes that in Exh. 11-A, CHATHAM included a
projected delay of 85 days for the Helipad Concreting works, while no such
projected delay was included in Exh. 3-I as it should be.

This Tribunal holds that Exh. 3-I showing a delay of 294 days in concreting
milestones should rightfully be used in computing liquidated
damages. Accordingly, this Tribunal holds that MCI is liable for liquidated
damages in the amount of P3,062,498.78 as follows:

1/4x1/3[(1/10xP125,000,000.00)1%]x294=P3,062,498.78. [6]

The CIAC then decreed:

Accordingly, as presented below, all the amounts due MCI are first listed and
added up and the total payment is deducted therefrom. The admitted total payment
figure as reflected in the Terms of Reference is the amount applied instead of the
total reflected in CHATHAMs Summary of Payments which incidentally reflected
a lesser amount. From the Balance Due MCI the Amounts CPI is Held Entitled To
is deducted and the Net Amount Due MCI is arrived at.

A. AMOUNTS HELD MCI IS ENTITLED TO:

A.1. From the original contract: 94.12% of P125,000,000.00 P117,650,000.00

A.2 Approved Change Orders 5,353,091.08

A.3 Pending Change Orders 1,648,560.46

A.4 CHB Works 1,248,654.71

A.5 Workers Bonus -0-

A.6 Disputed Deductions 909,484.70

A.7 Labor Escalation 1,076,256.00

A.8 Attendance Fee 508,162.73

Total P128,394,209.68

Less: Total payments-Item II-6 of TOR 104,875,792.37

Balance Due MCI P 23,518,417.31

B. AMOUNTS HELD CPI IS ENTITLED TO:

B.1. Liquidated Damages P 3,062,498.78

B.2. Actual Damages 335,994.50

B.3. Penalties 1,778,285.44

B.4 Cash Payments in Behalf of MCI 2,214,715.68

Total Amount Due CPI P 7,391,494.40

C. NET AMOUNT DUE MCI (A minus B) P16,126,922.91

WHEREFORE, judgment is hereby rendered in favor of the Claimant [MCI]

directing Respondent [CHATHAM] to pay Claimant [MCI] the net sum of
SIXTEEN MILLION ONE HUNDRED TWENTY SIX THOUSAND NINE
HUNDRED TWENTY TWO & 91/100 (16,126,922.91) PESOS.

SO ORDERED. [7]
 Impugning the decision of the CIAC, CHATHAM instituted a petition for review with the
Court of Appeals, which was docketed as CA-G.R. SP No. 49429. In its petition, CHATHAM
alleged that:

The Arbitral Tribunal grossly erred in failing to indicate specific reference to the
evidence presented or to the transcript of stenographic notes in arriving at its
questioned Decision, in violation of the cardinal rule under Section 1, Rule 36 of
the Revised Rules of Civil Procedure that a judgment must state clearly and
definitely the facts and the law on which it is based.

The Tribunals conclusions are grounded entirely on speculations, surmises and

conjectures.

The Arbitral Tribunal grossly erred in failing to consider the evidence presented by
CHATHAM and the testimony of its witnesses.

The Arbitral Tribunal gravely abused its discretion in considering arbitrarily that
there was an implied takeover contrary to the facts and evidence submitted.

The Arbitral Tribunal committed grave error and gross misapprehension of facts in
holding that CHATHAM is not entitled to liquidated damages despite failure of
MCI to meet the over-all schedule of completion.

The Arbitral Tribunal manifestly erred in holding that MCI is entitled to its claim
for unpaid progress billings.

The Arbitral Tribunal committed gross and reversible error in equating the
percentage of MCIs work accomplishment with the entire work in place, despite
evidence to the contrary.

The Arbitral Tribunal gravely erred in making 23 May 1996 as the cut-off date for
purposes of delineating the financial obligations of the parties.

The Arbitral Tribunal erred in denying CHATHAM its claim for actual damages
pursuant to Article 27.8 of the Construction Contract.

The facts set forth in CHATHAMs Answer with Compulsory Counterclaim as well
as its documentary and testamentary evidence were not overturned or controverted
by any contrary evidence. [8]

In its decision of 30 September 1999,[9] the Court of Appeals simplified the assigned errors
into one core issue, namely, the propriety of the CIACs factual findings and conclusions. In
upholding the decision of the CIAC, the Court of Appeals confirmed the jurisprudential
principle that absent any showing of arbitrariness, the CIACs findings as an administrative
agency and quasi-judicial body should not only be accorded great respect but also given the
stamp of finality. However, the Court of Appeals found exception in the CIACs disquisition of
Issue No. 9 on the matter of liquidated damages.
 The Court of Appeals disagreed with the CIACs finding that there was an implied takeover
by CHATHAM of the project and that it was unnecessary for the CIAC to rule on whether MCI
completed and/or delivered the project within the approved completion schedule of the project
since CHATHAM failed to observe the antecedent acts required for the termination of the
contract, as set forth in the Construction Agreement.
The Court of Appeals ascertained that the evidence overwhelmingly proved that there was
no takeover by CHATHAM and that MCI exercised complete control, authority and
responsibility over the construction. In support of this conclusion, the appellate court pointed
to the following evidentiary bases:[10]

1. Testimony of CHATHAMs Engr. Kapunan that the interim takeover for the
works on the basement was triggered by lack of manpower and delays as early as
February 1995, as evidenced by their assessment and that the interim takeover
[11]

was only with respect to the direction or management of the field operations and
was limited only to works on the basement and intended to assist MCI to catch up
with the schedule of completion, since at that time the project was very much
delayed; thereafter, the MCI was back in full control of the project. [12]

2. Testimony of Engr. Bautista that the takeover was only partial and temporary
and limited to the management portion on the basement only and that MCI was
always in control of the project. [13]

3. Testimony of Engr. Infante that MCI personnel were constantly present in the
project and the intervention (not takeover) by CHATHAM was justified to ensure
completion of the project on time. [14]

4. Documentary exhibits evincing the nature and extent of MCIs work during the
takeover period which belied its claims that it was not in control of the project
because of the takeover thus:

Exhibit 4 Letter dated 15 February 1995 of Engr. Kapunan of RKDCCI to John Lai
of MCI stating that the takeover of directions or management of the field
operations is interim, i.e. while the takeover is effective immediately it will extend
only after concreting Level B-1 or approximately until 30 May 1995 which ever is
later.

Exhibit 4-A Letter dated 17 February 1995 written by Dr. Lai of MCI to Engr.
Kapunan in response to the latters 15 February 1995 letter stating that [A]lso we
were assured that we will not be responsible for any errors or accidents that may
occur during this INTERIM period, indicating that Dr. Lai was very much aware of
the interim period.

Exhibit 4-C - Letter dated 18 February 1995 written by Engr. Ben C. Ruiz of
RKDCCI to Dr. Lai containing the reasons for the takeover.
Exhibit 8A Letter dated 5 September 1995 written by Dr. E.G. Tabujara to Dr.
Lai/Romy Laron (Project Manager of MCI) requesting for an engineer of MCI to
accompany the inspector of RKDCCI to witness batching procedures. By so doing,
Dr. E.G. Tabujara acknowledged that Dr. Lai was in control of the project.

Exhibit 8 Letter dated 4 September 1995 by Engr. Romulo R. Sugay to Dr. Lai
offering an incentive to the workers of MCI to exert (their) best effort for topping
off by the end of December; another clear indication that Dr. Lai was in control of
the project.

Exhibit 4-D Letter dated 4 January 1996 indicating that Mr. H.T. Go offered Dr
Lai an incentive of P1,800,000 on the condition that MCI meets the new
schedule/milestones. MCIs acceptance of the incentive offer likewise shows that
MCI was in control of the Project.

Exhibits 3, 3-I, 3-M, 3-N, 3-W-1, 3-X, 3-Y, and 3-Z among others containing
reminders to MCI of its duties and shortcomings, likewise attest to the fact that
MCI was in control (of) and responsible for the Project, although markedly
deficient.

Exhibits 5, 5-A, 5-B, 5-C, 5-D, 5-E, 5-F, 5-O, C-7, and E-9 evidencing that MCI
continued to manage other works on the project even during the time of the interim
takeover of the basement works, as seen in the series of communications between
CHATHAM or RKDCCI and MCI within the period beginning February 1995 to
30 May 1995.

5. Respondents Request for Adjudication, Annex G, Records, Folder No. 6 - which

incorporated Change Order No. 12, among others, dated 28 August 1995,
recommended by the RKDCCI and accepted by Dr. Lai, and which request for an
extension of 25 days readily showed that even after 30 May 1995, after the close of
the supposed takeover period, MCI was still the contractor in complete control of
the project for it would not have otherwise accepted the said change order if it
(were) no longer the Contractor of the project due to the termination of the
Construction agreement as of said date on account of the alleged takeover.

6. Exhibits 3-J, 3-M, 3-Q, 3-R, 3-V, 3-W-1, 3-W-2, 5-F, 5-1, 6, 12-II, 12-JJ, 12-
MM, and 12-NN tending to prove that RKDCCI monitored the work from start to
finish and had zealously pointed out to MCI the defects or improper execution of
the construction works, and gave MCI all the opportunity to rectify the
construction deficiencies and complete the works of the project.

The Court of Appeals concluded that the interim takeover was necessitated by
CHATHAMs insistence to meet its own turnover dates with the buyers of the projects
units. Thus, CHATHAM was constrained to hire subcontractors with sufficient manpower and
supervision and incur various expenses to facilitate the completion of the project and/or assist
MCI in making up for its delay.
 The Court of Appeals then considered it imperative to determine whether MCI failed to
complete the project on time for which it may be held liable for liquidated damages based on
the delays in the overall schedule of completion pursuant to Art. 13.5 of the Construction
Agreement, to wit:

13.5. Over-All Schedule For not meeting the final completion date of the
PROJECT, the OWNER will deduct from the Contract Sum or amounts due the
CONTRACTOR, the amount equivalent to 1/10 of 1% of the Contract Sum for
every calendar day of delay, provided, however, that the maximum penalty should
not exceed 25% of the fee payable to the CONTRACTOR as stipulated in the Bill
of Quantities. Penalties from concreting milestones shall be deducted from the
penalty of Over-All Schedule. [15]

The Court of Appeals disposed of the controversy in this wise:

As is extant from the records, the completion date of the Project under the
Construction Contract or under the revised construction schedule was never met by
reason of [MCIs] lack of manpower, necessary equipment, qualified engineers and
inefficient management of the construction works on the Project. Thus, under the
Contract (Exhibit 1), [MCI] had 780 days, or until 22 January 1996, from starting
date, or April 12, 1994, to finish the project. The completion date, however, was
not followed and was revised as early as December 17, 1994, extending the
milestone dates up to March 15, 1996 (Exhibits 3-G and 3-H). As of December 25,
1995, the number of days delayed was already 294 days. Thus, on February 22,
1996, the contract milestones were again revised, inclusive of 53 days extension, to
May 23, 1996 (Exhibits 3-I and 3-O). The May 23, 1996 turnover milestone nor
the July 22, 1996 turnover of the whole project were neither met (Exhibits 3-P, 3-
R, 3-S and 3-T but [CHATHAM] was again constrained to allow [MCI] to
continue working on the Project to complete the balance of the works (Exhibit
M). And all throughout the construction of the Project, [CHATHAM] had to assist
[MCI] along the way to expedite the execution and completion of the Project
(Exhibits 3-K and 3-V).

From the foregoing disquisitions, it is clear that [MCI] is liable for liquidated
damages, as per Article 13.5 of the Construction Contract, for its failure to
complete the project within the period stipulated in the Construction Contract and
even despite an extension of 53 days from the original schedule or of the overall
schedule of completion. [MCI] should therefore pay [CHATHAM] the amount of
liquidated damages equivalent to P24,125,000.00 for 193 days of delay in the
overall schedule of completion counted from overall completion date on July 22,
1996 up to the date of completion on February 15, 1997, as stated in the Certificate
of Occupancy, computed as follows, to wit:

1/10[1%(P125,000,000.00)] per day x 193 days

=[1/10 (P1,250,000.00)] per day x 193 days

=P125,000.00 per day x 193 days

=P24,125,000.00

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered partially

granting [CHATHAMs] claim for liquidated damages. The Tribunals Decision
dated 19 October 1998 is hereby AFFIRMED with the modification on [MCIs]
liability for liquidated damages in the amount of P24,125,000.00. Thus,

A. AMOUNTS [MCI] IS ENTITLED TO:

A.1. From the original contract: 94.12% of P125,000,000.00 P117,650,000.00

A.2 Approved Change Orders 5,353,091.08

A.3 Pending Change Orders 1,648,560.46

A.4 CHB Works 1,248,654.71

A.5 Workers Bonus -0-

A.6 Disputed Deductions 909,484.70

A.7 Labor Escalation 1,076,256.00

A.8 Attendance Fee 508,162.73

Total P128,394,209.68

Less: Total payments-Item ll-6 of TOR 104,875,792.37

Balance Due Respondent P 23,518,417.31

B. AMOUNTS [CHATHAM] IS ENTITLED TO:

B.1. Liquidated Damages P 24,125,000.00

B.2. Actual Damages 335,994.50

B.3. Penalties 1,778,285.44

B.4 Cash Payments in Behalf of MCI 2,214,715.68

Total Amount Due CPI P 28,453,995.62

C. NET AMOUNT DUE [CHATHAM] (B minus A) P 4,935,578.31

Correspondingly, Respondent [MCI] is hereby directed to pay the Petitioner
[CHATHAM] the net sum of FOUR MILLION NINE HUNDRED THIRTY-FIVE
THOUSAND FIVE HUNDRED SEVENTY-EIGHT & 31/100 (P4,935,578.31)
PESOS. [16]

MCI promptly filed on 25 October 1999 a motion for reconsideration. In its Resolution of
4 February 2000, the Court of Appeals denied MCIs motion for reconsideration for lack of
merit, as well as CHATHAMs Motion to Lift Garnishment and Levy Pending Appeal, filed on
13 October 1999, for being premature.[17]
Thus, MCI filed the instant petition for review to challenge the decision of the Court of
Appeals. MCI alleges that the Court of Appeals erred in reviewing and reversing the CIACs
factual findings, that there was an implied takeover by CHATHAM of the project, and that
MCI was not in delay in the overall schedule. In so doing, the Court of Appeals contravened
Section 19 of Executive Order (E.O.) No. 1008,[18] which limits the review of an Arbitral Award
to only questions of law, thus:

Section 19. Finality of Awards The arbitral award shall be binding upon the
parties. It shall be final and inappealable (sic) except on questions of law which
shall be appealable to the Supreme Court.

MCI then asserts that as signatories to the contract, it and CHATHAM complied with this
legal provision when they included as part of their TOR the stipulation that [t]he decision of
the Arbitral Tribunal shall be final and non-appealable except on questions of
law. Accordingly, the binding character of this provision upon the parties is conclusive and
final.
MCI also contends that while it may be argued that recent (1) issuances by the Supreme
Court, specifically, Circular No. 1-91, which eventually became Revised Administrative
Circular No. 1-95; (2) legislation, in particular, Republic Act No. 7902, which amended Batas
Pambansa Blg. 129; and (3) amendments to the Rules on Civil Procedure, modifying E.O. No.
1008 in the sense that questions of facts, of law, or mixed questions of facts and law may be
the subject of an appeal of the CIACs decision to the Court of Appeals, it is still E.O. No. 1008
which remains to be the fundamental and substantive law that endows parties to an arbitral
controversy the right to appeal. Hence, the provisions on appeal of E.O. No. 1008 should be
controlling, i.e., only questions of law should be entertained. Therefore, the only effect of these
rules on E.O. No. 1008 is the transfer of the appeal forum from the Supreme Court to the Court
of Appeals.
MCI further asserts that, even assuming that the CIACs findings of facts are reviewable
on appeal, the Court of Appeals gravely abused its discretion when it accepted hook, line and
sinker CHATHAMs contention that MCI was in delay, and ignored competent, clear and
substantial evidence that prove the contrary, and that CHATHAM is not entitled to liquidated
damages.
For its part, CHATHAM avers that the evolution on the rules governing appeals from
judgments, decisions, resolutions, orders or awards of the CIAC convincingly discloses that
E.O. No. 1008 has already been superseded. With the power of the Supreme Court to
promulgate rules concerning the protection and enforcement of constitutional rights, pleadings,
practice, and procedure in all courts, its issuances and amendments to the Rules on Civil
Procedure, not to mention R.A. No. 7902, as enacted by Congress, effectively modified E.O.
No. 1008. Accordingly, the judgments, awards, decisions, resolutions, orders or awards of the
CIAC are now appealable to the Court of Appeals on questions of facts, mixed questions of
facts and law, and questions of law, and no longer with the Supreme Court on exclusively
questions of law. Further, the TOR cannot limit the expanded jurisdiction of the Court of
Appeals based on the latest rules. Thus, the Court of Appeals did not err in reviewing the factual
findings of the CIAC.
CHATHAM also contends that, even if the Court of Appeals can only review questions of
law, said court did not err in rendering the questioned decision as the conclusions therein,
drawn as they were from factual determinations, can be considered questions of law.
Finally, CHATHAM asseverates that the Court of Appeals did not commit grave abuse of
discretion in reversing the CIACs ascertainment on the implied take-over and liquidated
damages.
This Court shall now resolve the primary issue raised in this case.
E.O. No. 1008 vests upon the CIAC original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered into by parties involved in construction in
the Philippines, whether the dispute arises before or after the completion of the contract, or
after the abandonment or breach thereof.[19] 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.
The parties, however, disagree on whether the subsequent Supreme Court issuances on
appellate procedure and R.A. No. 7902 removed from the Supreme Court its appellate
jurisdiction in Section 19 of E.O. No. 1008 and vested the same in the Court of Appeals, and
whether appeals from CIAC awards are no longer confined to questions of law.
On 27 February 1991, this Court issued Circular No. 1-91, which prescribes the Rules
Governing Appeals to the Court of Appeals from Final Orders or Decisions of the Court of Tax
Appeals and Quasi-Judicial Agencies. Pertinent portions thereof read as follows:

1. Scope -- These rules shall apply to appeals from final orders or decisions of the
Court of Tax Appeals. They shall also apply to appeals from final orders or
decisions of any quasi-judicial agency from which an appeal is now allowed by
statute to the Court of Appeals or the Supreme Court. Among these agencies are
the Securities and Exchange Commission, Land Registration Authority, Social
Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks
and Technology Transfer, National Electrification Administration, Energy
Regulatory Board, National Telecommunications Commission, Secretary of
Agrarian Reform and Special Agrarian Courts under R.A. No. 6657, Government
Service Insurance System, Employees Compensation Commission, Agricultural
Inventions Board, Insurance Commission and Philippine Atomic Energy
Commission.

2. Cases not Covered. -- These rules shall not apply to decisions and interlocutory
orders of the National Labor Relations Commission or the Secretary of Labor and
Employment under the Labor Code of the Philippines, the Central Board of
Assessment Appeals, and other quasi-judicial agencies from which no appeal to the
courts is prescribed or allowed by statute.
3. Who may appeal and where to appeal. -- The appeal of a party affected by a
final order, decision, or judgment of the Court of Tax Appeals or a quasi-judicial
agency shall be taken to the Court of Appeals within the period and in the manner
herein provided, whether the appeal involves questions of fact or of law or mixed
questions of fact and law. From final judgments or decisions of the Court of
Appeals, the aggrieved party may appeal by certiorari to the Supreme Court as
provided in Rule 45 of the Rules of Court.

Subsequently, on 23 February 1995, R.A. No. 7902 was enacted. It expanded the
jurisdiction of the Court of Appeals and amended for that purpose Section 9 of B.P. Blg. 129,
otherwise known as the Judiciary Reorganization Act of 1980.[20]
Section 9(3) thereof reads:

Section 9. Jurisdiction. -- The Court of Appeals shall exercise:

xxx

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions,
orders or awards of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, including the Securities and Exchange
Commission, the Social Security Commission, the Employees Compensation
Commission and the Civil Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution,
the Labor Code of the Philippines under Presidential Decree No. 442, as amended,
the provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of
1948.

The Court of Appeals shall have the power to try cases and conduct hearings,
receive evidence and perform any and all acts necessary to resolve factual issues
raised in cases falling within its original and appellate jurisdiction, including the
power to grant and conduct new trials or further proceedings. x x x

Then this Court issued Administrative Circular No. 1-95,[21] which revised Circular No. 1-
91. Relevant portions of the former reads as follows:

1. Scope. --These rules shall apply to appeals from judgments or final orders of the
Court of Tax Appeals and from awards, judgments, final orders or resolutions of
any quasi-judicial agency from which an appeal is authorized to be taken to the
Court of Appeals or the Supreme Court. Among these agencies are the Securities
and Exchange Commission, Land Registration Authority, Social Security
Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and
Technology Transfer, National Electrification Administration, Energy Regulatory
Board, National Telecommunication Commission, Department of Agrarian Reform
under Republic Act No. 6657, Government Service Insurance System, Employees
Compensation Commission, Agricultural Inventions Board, Insurance
Commission, Philippine Atomic Energy Commission, Board of Investments, and
Construction Industry Arbitration Commission.

Section 2. Cases Not Covered. These rules shall not apply to judgments or final
orders issued under the Labor Code of the Philippines, Central Board of
Assessment Appeals, and by other quasi-judicial agencies from which no appeal to
the court is prescribed or allowed.

Section 3. Where to Appeal. -- An appeal under these rules may be taken to the
Court of Appeals within the period and in the manner herein provided, whether the
appeal involves questions of fact, of law, or mixed questions of fact and law.

Thereafter, this Court promulgated the 1997 Rules on Civil Procedure. Sections 1, 2 and
3 of Rule 43 thereof provides:

Section 1. Scope. -- This Rule shall apply to appeals from judgments or final orders
of the Court of Tax Appeals and from awards, judgments, final orders or
resolutions of or authorized by any quasi-judicial agency in the exercise of its
quasi-judicial functions.Among these agencies are the Civil Service Commission,
Central Board of Assessment Appeals, Securities and Exchange Commission,
Office of the President, Land Registration Authority, Social Security Commission,
Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer,
National Electrification Administration, Energy Regulatory Board, National
Telecommunications Commission, Department of Agrarian Reform under
Republic Act No. 6657, Government Service Insurance System, Employees
Compensation Commission, Agricultural Inventions Board, Insurance
Commission, Philippine Atomic Energy Commission, Board of Investments,
Construction Industry Arbitration Commission, and voluntary arbitrators
authorized by law.

Section 2. Cases Not Covered. This Rule shall not apply to judgments or final
orders issued under the Labor Code of the Philippines.

Section 3. Where to Appeal. -- An appeal under this Rule may be taken to the
Court of Appeals within the period and in the manner herein provided, whether the
appeal involves question of fact, of law, or mixed questions of fact and law.

Through Circular No. 1-91, the Supreme Court intended to establish a uniform procedure
for the review of the final orders or decisions of the Court of Tax Appeals and other quasi-
judicial agencies provided that an appeal therefrom is then allowed under existing statutes to
either the Court of Appeals or the Supreme Court. The Circular designated the Court of
Appeals as the reviewing body to resolve questions of fact or of law or mixed questions of fact
and law.
It is clear that Circular No. 1-91 covers the CIAC. In the first place, it is a quasi-judicial
agency. A quasi-judicial agency or body has been defined as an organ of government other
than a court and other than a legislature, which affects the rights of private parties through
either adjudication or rule-making.[22] The very definition of an administrative agency includes
its being vested with quasi-judicial powers. The ever increasing variety of powers and
functions given to administrative agencies recognizes the need for the active intervention of
administrative agencies in matters calling for technical knowledge and speed in countless
controversies which cannot possibly be handled by regular courts.[23] The CIACs primary
function is that of a quasi-judicial agency, which is to adjudicate claims and/or determine rights
in accordance with procedures set forth in E.O. No. 1008.
In the second place, the language of Section 1 of Circular No. 1-91 emphasizes the obvious
inclusion of the CIAC even if it is not named in the enumeration of quasi-judicial agencies. The
introductory words [a]mong these agencies are preceding the enumeration of specific quasi-
judicial agencies only highlight the fact that the list is not exclusive or conclusive. Further, the
overture stresses and acknowledges the existence of other quasi-judicial agencies not included
in the enumeration but should be deemed included. In addition, the CIAC is obviously excluded
in the catalogue of cases not covered by the Circular and mentioned in Section 2 thereof for
the reason that at the time the Circular took effect, E.O. No. 1008 allows appeals to the Supreme
Court on questions of law.
In sum, under Circular No. 1-91, appeals from the arbitral awards of the CIAC may be
brought to the Court of Appeals, and not to the Supreme Court alone. The grounds for the
appeal are likewise broadened to include appeals on questions of facts and appeals involving
mixed questions of fact and law.
The jurisdiction of the Court of Appeals over appeals from final orders or decisions of the
CIAC is further fortified by the amendments to B.P. Blg.129, as introduced by R.A. No.
7902. With the amendments, the Court of Appeals is vested with appellate jurisdiction over all
final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-
judicial agencies, instrumentalities, boards or commissions, except those within the appellate
jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the
Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of
subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section
17 of the Judiciary Act of 1948.
While, again, the CIAC was not specifically named in said provision, its inclusion therein
is irrefutable. The CIAC was not expressly covered in the exclusion. Further, it is a quasi-
judicial agency or instrumentality. The decision in Luzon Development Bank v. Luzon
Development Bank Employees[24] sheds light on the matter, thus:

Assuming arguendo that the voluntary arbitrator or the panel of voluntary

arbitrators may not strictly be considered as a quasi-judicial agency, board or
commission, still both he and the panel are comprehended within the concept of a
quasi-judicial instrumentality. It may even be stated that it was to meet the very
situation presented by the quasi-judicial functions of the voluntary arbitrators here,
as well as the subsequent arbitrator/arbitral tribunal operating under the
Construction Industry Arbitration Commission, that the broader term
instrumentalities was purposely included in [Section 9 of B.P. Blg. 129 as
amended by R.A. No. 7902].

An instrumentality is anything used as a means or agency. Thus, the terms

governmental agency or instrumentality are synonymous in the sense that either of
them is a means by which a government acts, or by which a certain government act
or function is performed. The word instrumentality, with respect to a state,
contemplates an authority to which the state delegates governmental power for the
performance of a state function.

Any remaining doubt on the procedural mutation of the provisions on appeal in E.O. No.
1008, vis--vis Circular No. 1-91 and R.A. No. 7902, was completely removed with the issuance
by the Supreme Court of Revised Administrative Circular No. 1-95 and the 1997 Rules of Civil
Procedure. Both categorically include the CIAC in the enumeration of quasi-judicial agencies
comprehended therein. Section 3 of the former and Section 3, Rule 43 of the latter, explicitly
expand the issues that may be raised in an appeal from quasi-judicial agencies or
instrumentalities to the Court of Appeals within the period and in the manner therein provided.
Indisputably, the review of the CIAC award may involve either questions of fact, of law, or of
fact and law.
In view of all the foregoing, we reject MCIs submission that Circular No. 1-91, B.P. Blg.
129, as amended by R.A. 7902, Revised Administrative Circular 1-95, and Rule 43 of the 1997
Rules of Civil Procedure failed to efficaciously modify the provision on appeals in E.O. No.
1008. We further discard MCIs claim that these amendments have the effect of merely
changing the forum for appeal from the Supreme Court to the Court of Appeals.
There is no controversy on the principle that the right to appeal is statutory. However, the
mode or manner by which this right may be exercised is a question of procedure which may be
altered and modified provided that vested rights are not impaired. The Supreme Court is
bestowed by the Constitution with the power and prerogative, inter alia, to promulgate rules
concerning pleadings, practice and procedure in all courts, as well as to review rules of
procedure of special courts and quasi-judicial bodies, which, however, shall remain in force
until disapproved by the Supreme Court.[25] This power is constitutionally enshrined to enhance
the independence of the Supreme Court.[26]
The right to appeal from judgments, awards, or final orders of the CIAC is granted in E.O.
No. 1008. The procedure for the exercise or application of this right was initially outlined in
E.O. No. 1008. While R. A. No. 7902 and circulars subsequently issued by the Supreme Court
and its amendments to the 1997 Rules on Procedure effectively modified the manner by which
the right to appeal ought to be exercised, nothing in these changes impaired vested rights. The
new rules do not take away the right to appeal allowed in E.O. No. 1008. They only prescribe
a new procedure to enforce the right. [27] No litigant has a vested right in a particular remedy,
which may be changed by substitution without impairing vested rights; hence, he can have
none in rules of procedure which relate to remedy.[28]
The foregoing discussion renders academic MCIs assertion on the binding effect of its
stipulation with CHATHAM in the TOR that the decision of the CIAC shall be final and non-
appealable except on questions of law. The agreement merely adopted Section 19 of E.O. No.
1008, which, as shown above, had been modified.
The TOR, any contract or agreement of the parties cannot amend, modify, limit, restrict or
circumscribe legal remedies or the jurisdiction of courts. Rules of procedure are matters of
public order and interest and unless the rules themselves so allow, they cannot be altered,
changed or regulated by agreements between or stipulations of the parties for their singular
convenience.[29]
 Having resolved the existence of the authority of the Court of Appeals to review the
decisions, awards, or final orders of the CIAC, the Court shall now determine whether the
Court of Appeals erred in rendering the questioned decision of 30 September 1999.
Settled is the general rule that the findings of facts of the Court of Appeals are binding on
us. There are recognized exceptions to the rule, such as when the findings are contrary to those
of the trial court,[30] as in this case. Hence, we have to take a closer reexamination of this case.
The CIAC is certain that the evidence overwhelmingly tended to prove that the manner by
which CHATHAM took charge in the procurement of materials, fielding of labor, control of
MCI engineers and the subcontracting of various phases of the work, constituted an implied
takeover of the project. The CIAC then concludes that the cut-off date for delineating the fiscal
liabilities of the parties is 23 May 1996 when CHATHAM evaluated MCIs work
accomplishment at 94.12% and then suspended all further progress payments to MCI. For these
reasons, the CIAC found it trifling to determine whether MCI was in delay based on the Overall
Schedule. However, the CIAC discovered that MCI was in delay for 294 days in the concreting
milestone and held the latter liable for liquidated damages in the amount of P3,062,498.78.
The Court of Appeals made a contrary conclusion and declared that MCI was in delay for
193 days based on the overall schedule of completion of the project and should incur liquidated
damages in the amount of P24,125,000.00.
It is undisputed that the CIAC and the Court of Appeals found MCI liable for liquidated
damages but on different premises.Based on the CIACs assessment, MCIs responsibility was
anchored on its delay in the concreting milestone, while the Court of Appeals evaluation
concentrated on MCIs delay in completing the project based on the overall schedule of
work. The variance in the evaluation spells a staggering difference in the party who should
ultimately be held liable and the net amount involved.
A study of the final computation of the net amount due in both the final disquisitions of
the CIAC and the Court of Appeals shows that all the other figures therein are constant, save
for the amount of liquidated damages for which MCI should be accountable. If this Court
concurs with the CIACs conclusions, MCIs responsibility for liquidated damages is, as already
stated, P3,062,498.78. Setting this off against CHATHAMs overall fiscal accountability would
bring the latters total liability to MCI to P16,126,922.91. If the Court of Appeals is correct,
MCI would be held liable for a much higher P24,125,000 liquidated damages.Setting this off
against CHATHAMs monetary responsibilities, MCI would still have to pay CHATHAM
P4,935,578.31.
After painstakingly combing through the voluminous records, we affirm the findings of
the CIAC. The evidence taken as a whole or in their totality reveals that there was an implied
takeover by CHATHAM on the completion of the project. The evidence that appears to
accentuate the Court of Appeals decision ironically bolstered the CIACs conclusion. The
testimonies of Engr. Kapunan, Engr. Bautista, Dr. Lai, and the letter of Engr.
Ruiz,[31] acknowledging the temporary takeover by CHATHAM of the project, underscore the
palpable fact that there was indeed a takeover. We confer particular credit to Dr. Lais testimony
that as of 15 February 1995, MCI was relieved of full control of the construction operations,
that it was relegated to a mere supplier of labor, materials and equipment, and that the alleged
interim takeover actually extended through the completion of the project. Even CHATHAM
admits the takeover but sugarcoated the same with words like interim and charging the costs
to MCI. With these glaring admissions, we can even consider that the takeover was not implied
but blatant.
 Exhibits 4, 4-A, 4-C, 8A, 8, 4-D, 3, 3-I, 3-M, 3-N, 3-W-1, 3-X, 3-Y, 3-Z, 5,5-A, 5-B, 5-C
5-D, 5-E, 5-F, 5-O, C-7, E-9, etc.,[32]relied upon by the Court of Appeals when considered by
themselves and singly, seemingly and initially evince MCIs control over the project. However,
they eventually lose evidentiary puissance to support the Court of Appeals conclusion when
reckoned against the totality of the evidence that CHATHAM took charge of the completion
of the project, particularly, the fact that CHATHAM suspended all progress billing payments
to MCI. The continued presence and participation of MCI in the project was, as found by the
CIAC, a matter of mutual benefit to and convenience of the parties.
WHEREFORE, IN VIEW OF ALL THE FOREGOING, the assailed 30 September 1999
decision of the Court of Appeals in CA-G.R. SP No. 49429 is hereby PARTIALLY
MODIFIED by setting aside the order directing Metro Construction, Inc. to pay Chatham
Properties, Inc. the amount of P4,935,578.31. The arbitral award of the Construction Industry
Arbitration Commission in CIAC Case 10-98, promulgated on 19 October 1998, directing
Chatham Properties, Inc. to pay Metro Construction, Inc. the sum of SIXTEEN MILLION
ONE HUNDRED TWENTY-SIX THOUSAND NINE HUNDRED TWENTY-TWO &
91/100 (P16,126,922.91) PESOS, is accordingly REINSTATED.
No pronouncement as to costs.
SO ORDERED.
Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concur.

[1]
Rollo, 101-107; Annex C.
[2]
Id., 108-110; Annex C-1. All references to the owner and claimant or contractor were changed to CHATHAM and
MCI, respectively.
[3]
Rollo, 103-107.
[4]
Decision of the CIAC, Rollo, 276-325; Annex E.
[5]
Rollo, 280-285.
[6]
Rollo, Decision of CIAC, 304-305.
[7]
Id. 324-325.
[8]
MCIs Petition for Review with the Court of Appeals, 8-9; OR, 15-16.
[9]
Per Rivera, J., with Abad Santos, Jr. and Salas, B., JJ., concurring.
[10]
See Decision of the Court of Appeals, Rollo, 88-90.
[11]
Exhibit 19-Q and 19-R; TSN 5 August 1998, 82-83.
[12]
TSN, 5 August 1998, 84-85.
[13]
TSN, 19 August 19 1998, 173-182.
[14]
TSN, 7 September 1998 62-63.
[15]
OR, 487-488.
[16]
Rollo, 91-92.
[17]
Id., 94-99.
[18]
Entitled Creating an Arbitration Machinery for the Philippine Construction Industry, which took effect on 4
February 1985.
[19]
See National Irrigation Administration v. Court of Appeals, 318 SCRA 255, 266 [1999].
[20]
B.P. Blg. 129 was signed into law on 14 August 1981.
[21]
This took effect on 1 June 1995.
[22]
See The Presidential Anti-Dollar Salting Task Force v. Court of Appeals, 171 SCRA 348 [1989].
[23]
See Tropical Homes v. National Housing Authority, 152 SCRA 540 [1987]; See also Antipolo Realty
Corp. v. NHA, 153 SCRA 399 [1987]; Solid Homes, Inc. v. Payawal, 177 SCRA 572 [1989].
[24]
249 SCRA 162 [1995].
[25]
Article VIII, Section 5 of the 1987 Constitution.
[26]
See Echegaray v. Secretary of Justice, 301 SCRA 96 [1999]; See also GSIS v. Court of Appeals, 222 SCRA 685
[1993].
[27] See Fabian v. Desierto, 295 SCRA 470 [1998].

[28]
Ibid.
[29]
See Republic of the Philippines v. Hernandez, 253 SCRA 509 [1996].
[30]
Litonjua v. Court of Appeals, 286 SCRA 136 [1998]; Rosario v. Court of Appeals, 310 SCRA 464 [1999];
Republic v. Court of Appeals, 314 SCRA 230 [1999].
[31]
See Decision of the Court of Appeals, Rollo, 88-90.
[32]
Id.

THIRD DIVISION

[G.R. Nos. 132848-49. June 26, 2001]

PHILROCK, INC., petitioner, vs. CONSTRUCTION INDUSTRY

ARBITRATION COMMISSION and Spouses VICENTE and NELIA
CID, respondents.

DECISION
PANGANIBAN, J.:

Courts encourage the use of alternative methods of dispute resolution. When parties agree
to settle their disputes arising from or connected with construction contracts, the Construction
Industry Arbitration Commission (CIAC) acquires primary jurisdiction.It may resolve not only
the merits of such controversies; when appropriate, it may also award damages, interests,
attorneys fees and expenses of litigation.

The Case
 Before us is a Petition for Review under Rule 45 of the Rules of Court. The Petition seeks
the reversal of the July 9, 1997 Decision[1] and the February 24, 1998 Resolution of the Court
of Appeals (CA) in the consolidated cases docketed as CA-GR SP Nos. 39781 and 42443. The
assailed Decision disposed as follows:

WHEREFORE, judgment is hereby rendered DENYING the petitions and,

accordingly, AFFIRMING in toto the CIACs decision.Costs against petitioner.[2]

The assailed Resolution ruled in this wise:

Considering that the matters raised and discussed in the motion for reconsideration
filed by appellants counsel are substantially the same arguments which the Court
had passed upon and resolved in the decision sought to be reconsidered, and there
being no new issue raised, the subject motion is hereby DENIED.[3]

The Facts

The undisputed facts of the consolidated cases are summarized by the CA as follows:

"On September 14, 1992, the Cid spouses, herein private respondents, filed a
Complaint for damages against Philrock and seven of its officers and engineers
with the Regional Trial Court of Quezon City, Branch 82.

On December 7, 1993, the initial trial date, the trial court issued an Order
dismissing the case and referring the same to the CIAC because the Cid spouses
and Philrock had filed an Agreement to Arbitrate with the CIAC.

Thereafter, preliminary conferences were held among the parties and their
appointed arbitrators. At these conferences, disagreements arose as to whether
moral and exemplary damages and tort should be included as an issue along with
breach of contract, and whether the seven officers and engineers of Philrock who
are not parties to the Agreement to Arbitrate should be included in the arbitration
proceedings. No common ground could be reached by the parties, hence, on April
2, 1994, both the Cid spouses and Philrock requested that the case be remanded to
the trial court. On April 13, 1994, the CIAC issued an Order stating, thus:

'x x x the Arbitral Tribunal hereby formally dismisses the above-captioned case for
referral to Branch 82 of the Regional Trial Court, Quezon City where it first
originated.

SO ORDERED.'

The Cid spouses then filed with said Branch of the Regional Trial Court of Quezon
City a Motion To Set Case for Hearing which motion was opposed by Philrock.
On June 13, 1995, the trial court declared that it no longer had jurisdiction over the
case and ordered the records of the case to be remanded anew to the CIAC for
arbitral proceedings.

Pursuant to the aforementioned Order of the Regional Trial C[o]urt of Quezon

City, the CIAC resumed conducting preliminary conferences. On August 21, 1995,
herein [P]etitioner Philrock requested to suspend the proceedings until the court
clarified its ruling in the Order dated June 13, 1995. Philrock argued that said
Order was based on a mistaken premise that 'the proceedings in the CIAC fell
through because of the refusal of [Petitioner] Philrock to include the issue of
damages therein,' whereas the true reason for the withdrawal of the case from the
CIAC was due to Philrock's opposition to the inclusion of its seven officers and
engineers, who did not give their consent to arbitration, as party defendants. On the
other hand, private respondent Nelia Cid manifested that she was willing to
exclude the seven officers and engineers of Philrock as parties to the case so as to
facilitate or expedite the proceedings. With such manifestation from the Cid
spouses, the Arbitral Tribunal denied Philrock's request for the suspension of the
proceedings. Philrock's counsel agreed to the continuation of the proceedings but
reserved the right to file a pleading elucidating the position he [had] raised
regarding the Court's Order dated June 13, 1995. The parties then proceeded to
finalize, approve and sign the Terms of Reference. Philrock's counsel and
representative, Atty. Pericles C. Consunji affixed his signature to said Terms of
Reference which stated that 'the parties agree that their differences be settled by an
Arbitral Tribunal x x x x' (p. 9, Terms of Reference, p. 200, Rollo).

On September 12, 1995, [P]etitioner Philrock filed its Motion to Dismiss, alleging
therein that the CIAC had lost jurisdiction to hear the arbitration case due to the
parties' withdrawal of their consent to arbitrate. The motion was denied by x x x
CIAC per Order dated September 22, 1995. On November 8, public respondent
ordered the parties to appear before it on November 28, 1995 for the continuation
of the arbitral proceedings, and on February 7, 1996, public respondent directed
[P]etitioner Philrock to set two hearing dates in the month of February to present
its evidence and to pay all fees assessed by it, otherwise x x x Philrock would be
deemed to have waived its right to present evidence.

Hence, petitioner instituted the petition for certiorari but while said petition was
pending, the CIAC rendered its Decision dated September 24, 1996, the dispositive
portion of which reads, as follows:

'WHEREFORE, judgment is hereby rendered in favor of the Claimant, directing

Respondent to pay Claimant as follows:

1. P23,276.25 representing the excess cash payment for materials ordered by the Claimants,
(No. 7 of admitted facts) plus interests thereon at the rate of 6% per annum from September
26, 1995 to the date payment is made.
 2. P65,000.00 representing retrofitting costs.
3. P13,404.54 representing refund of the value of delivered but unworkable concrete mix that
was laid to waste.
4. P50,000.00 representing moral damages.
5. P50,000.00 representing nominal damages.
6. P50,000.00 representing attorney's fees and expenses of litigation.
7. P144,756.80 representing arbitration fees, minus such amount that may already have been
paid to CIAC by respondent.

Let a copy of this Decision be furnished the Honorable Salvador C. Ceguera,

presiding judge, Branch 82 of Regional Trial Court of Quezon City who referred
this case to the Construction Industry Arbitration Commission for arbitration and
proper disposition.' (pp. 44-45, Rollo, CA-G.R. SP No. 42443) "[4]

Before the CA, petitioner filed a Petition for Review, docketed as CA-GR SP No. 42443,
contesting the jurisdiction of the CIAC and assailing the propriety of the monetary awards in
favor of respondent spouses. This Petition was consolidated by the CA with CA-GR SP No.
39781, a Petition for Certiorari earlier elevated by petitioner questioning the jurisdiction of the
CIAC.

Ruling of the Court of Appeals

The CA upheld the jurisdiction of the CIAC[5] over the dispute between petitioner and
private respondent. Under Executive Order No. 1008, the CIAC acquires jurisdiction when the
parties agree to submit their dispute to voluntary arbitration. Thus, in the present case, its
jurisdiction continued despite its April 13, 1994 Order referring the case back to the Regional
Trial Court (RTC) of Quezon City, Branch 82, the court of origin. The CIACs action was based
on the principle that once acquired, jurisdiction remains until the full termination of the case
unless a law provides the contrary. No such full termination of the case was evident in the said
Order; nor did the CIAC or private respondents intend to put an end to the case.
Besides, according to Section 3 of the Rules of Procedure Governing Construction
Arbitration, technical rules of law or procedure are not applicable in a single arbitration or
arbitral tribunal. Thus, the dismissal could not have divested the CIAC of jurisdiction to
ascertain the facts of the case, arrive at a judicious resolution of the dispute and enforce its
award or decision.
Since the issues concerning the monetary awards were questions of fact, the CA held that
those awards were inappropriate in a petition for certiorari. Such questions are final and not
appealable according to Section 19 of EO 1008, which provides that arbitral awards shall be x
x x final and [u]nappealable except on questions of law which shall be appealable to the
Supreme Court x x x. Nevertheless, the CA reviewed the records and found that the awards
were supported by substantial evidence. In matters falling under the field of expertise of quasi-
judicial bodies, their findings of fact are accorded great respect when supported by substantial
evidence.
Hence, this Petition.[6]
 Issues

The petitioner, in its Memorandum, raises the following issues:

A.

Whether or not the CIAC could take jurisdiction over the case of Respondent
Cid spouses against Petitioner Philrock after the case had been dismissed by
both the RTC and the CIAC.
B.

Whether or not Respondent Cid spouses have a cause of action against

Petitioner Philrock.
C.

Whether or not the awarding of the amount of P23,276.75 for materials

ordered by Respondent Spouses Cid plus interest thereon at the rate of 6%
from 26 September 1995 is proper.
D.

Whether or not the awarding of the amount of P65,000.00 as retrofitting costs is

proper.
E.

Whether or not the awarding of the amount of P1,340,454 for the value of the
delivered but the allegedly unworkable concrete which was wasted is proper.
F.

Whether or not the awarding o[f] moral and nominal damages and attorney's
fees and expenses of litigation in favor of respondents is proper.
G.

Whether or not Petitioner Philrock should be held liable for the payment of
arbitration fees.[7]

In sum, petitioner imputes reversible error to the CA (1) for upholding the jurisdiction of
the CIAC after the latter had dismissed the case and referred it to the regular court, (2) for
ruling that respondent spouses had a cause of action against petitioner, and (3) for sustaining
the award of damages.

This Courts Ruling

 The Petition has no merit.

First Issue: Jurisdiction

Petitioner avers that the CIAC lost jurisdiction over the arbitration case after both parties
had withdrawn their consent to arbitrate. The June 13, 1995 RTC Order remanding the case to
the CIAC for arbitration was allegedly an invalid mode of referring a case for arbitration.
We disagree. Section 4 of Executive Order 1008 expressly vests in the CIAC original and
exclusive jurisdiction over disputes arising from or connected with construction contracts
entered into by parties that have agreed to submit their dispute to voluntary arbitration.[8]
It is undisputed that the parties submitted themselves to the jurisdiction of the Commission
by virtue of their Agreement to Arbitrate dated November 24, 1993. Signatories to the
Agreement were Atty. Ismael J. Andres and Perry Y. Uy (president of Philippine Rock
Products, Inc.) for petitioner, and Nelia G. Cid and Atty. Esteban A. Bautista for respondent
spouses.[9]
Petitioner claims, on the other hand, that this Agreement was withdrawn by respondents
on April 8, 1994, because of the exclusion of the seven engineers of petitioners in the arbitration
case. This withdrawal became the basis for the April 13, 1994 CIAC Order dismissing the
arbitration case and referring the dispute back to the RTC. Consequently, the CIAC was
divested of its jurisdiction to hear and decide the case.
This contention is untenable. First, private respondents removed the obstacle to the
continuation of the arbitration, precisely by withdrawing their objection to the exclusion of the
seven engineers. Second, petitioner continued participating in the arbitration even after the
CIAC Order had been issued. It even concluded and signed the Terms of Reference[10] on
August 21, 1995, in which the parties stipulated the circumstances leading to the dispute;
summarized their respective positions, issues, and claims; and identified the composition of the
tribunal of arbitrators. The document clearly confirms both parties intention and agreement to
submit the dispute to voluntary arbitration. In view of this fact, we fail to see how the CIAC
could have been divested of its jurisdiction.
Finally, as pointed out by the solicitor general, petitioner maneuvered to avoid the RTCs
final resolution of the dispute by arguing that the regular court also lost jurisdiction after the
arbitral tribunals April 13, 1994 Order referring the case back to the RTC. In so doing,
petitioner conceded and estopped itself from further questioning the jurisdiction of the
CIAC. The Court will not countenance the effort of any party to subvert or defeat the objective
of voluntary arbitration for its own private motives. After submitting itself to arbitration
proceedings and actively participating therein, petitioner is estopped from assailing the
jurisdiction of the CIAC, merely because the latter rendered an adverse decision.[11]

Second Issue: Cause of Action

Petitioner contends that respondent spouses were negligent in not engaging the services of
an engineer or architect who should oversee their construction, in violation of Section 308 of
the National Building Code. It adds that even if the concrete it delivered was defective,
respondent spouses should bear the loss arising from their illegal operation. In short, it alleges
that they had no cause of action against it.
We disagree. Cause of action is defined as an act or omission by which a party violates
the right of another.[12] A complaint is deemed to have stated a cause of action provided it has
indicated the following: (1) the legal right of the plaintiff, (2) the correlative obligation of the
defendant, and (3) the act or the omission of the defendant in violation of the said legal
right.[13] The cause of action against petitioner was clearly established. Respondents were
purchasers of ready-mix concrete from petitioner. The concrete delivered by the latter turned
out to be of substandard quality. As a result, respondents sustained damages when the
structures they built using such cement developed cracks and honeycombs. Consequently, the
construction of their residence had to be stopped.
Further, the CIAC Decision clearly spelled out respondents cause of action against
petitioner, as follows:

Accordingly, this Tribunal finds that the mix was of the right proportions at the
time it left the plant. This, however, does not necessarily mean that all of the
concrete mix delivered had remained workable when it reached the jobsite. It
should be noted that there is no evidence to show that all the transit mixers arrived
at the site within the allowable time that would ensure the workability of the
concrete mix delivered.

On the other hand, there is sufficiently strong evidence to show that difficulties
were encountered in the pouring of concrete mix from certain transit mixers
necessitating the [addition] of water and physically pushing the mix, obviously
because the same [was] no longer workable. This Tribunal holds that the
unworkability of said concrete mix has been firmly established.

There is no dispute, however, to the fact that there are defects in some areas of the
poured structures. In this regard, this Tribunal holds that the only logical reason is
that the unworkable concrete was the one that was poured in the defective
sections.[14]

Third Issue: Monetary Awards

Petitioner assails the monetary awards given by the arbitral tribunal for alleged lack of
basis in fact and in law. The solicitor general counters that the basis for petitioners assigned
errors with regard to the monetary awards is purely factual and beyond the review of this
Court. Besides, Section 19, EO 1008, expressly provides that monetary awards by the CIAC
are final and unappealable.
We disagree with the solicitor general. As pointed out earlier, factual findings of quasi-
judicial bodies that have acquired expertise are generally accorded great respect and even
finality, if they are supported by substantial evidence.[15] The Court, however, has consistently
held that despite statutory provisions making the decisions of certain administrative agencies
final, it still takes cognizance of petitions showing want of jurisdiction, grave abuse of
discretion, violation of due process, denial of substantial justice or erroneous interpretation of
the law.[16] Voluntary arbitrators, by the nature of their functions, act in a quasi-judicial
capacity, such that their decisions are within the scope of judicial review.[17]
Petitioner protests the award to respondent spouses of P23,276.25 as excess payment with
six percent interest beginning September 26, 1995. It alleges that this item was neither raised
as an issue by the parties during the arbitration case, nor was its justification discussed in the
CIAC Decision. It further contends that it could not be held liable for interest, because it had
earlier tendered a check in the same amount to respondent spouses, who refused to receive it.
Petitioners contentions are completely untenable. Respondent Nelia G. Cid had already
raised the issue of overpayment even prior to the formal arbitration. In paragraph 9 of the Terms
of Reference, she stated:
9. Claimants were assured that the problem and her demands had been the subject of several
staff meetings and that Arteche was very much aware of it, a memorandum having been
submitted citing all the demands of [c]laimants. This assurance was made on July 31, 1992
when Respondents Secillano, Martillano and Lomibao came to see Claimant Nelia Cid
and offered to refund P23,276.25, [t]he difference between the billing by Philrocks
Marketing Department in the amount of P125,586.25 and the amount charged by
Philrock's Batching Plant Department in the amount of only P102,586.25, which
[c]laimant refused to accept by saying, Saka na lang.[18]
The same issue was discussed during the hearing before the arbitration tribunal on
December 19, 1995.[19] It was also mentioned in that tribunals Decision dated September 24,
1996.[20]
The payment of interest is based on Article 2209 of the Civil Code, which provides that if
the obligation consists of the payment of a sum of money, and the debtor incurs delay, the
indemnity for damages shall be the payment of legal interest which is six per cent per annum,
in the absence of a stipulation of the rate.

Awards for Retrofitting Costs, Wasted Unworkable But Delivered Concrete, and
Arbitration Fees

Petitioner maintains that the defects in the concrete structure were due to respondent
spouses failure to secure the services of an engineer or architect to supervise their
project. Hence, it claims that the award for retrofitting cost was without legal basis. It also
denies liability for the wasted unworkable but delivered concrete, for which the arbitral court
awarded P13,404.54. Finally, it complains against the award of litigation expenses, inasmuch
as the case should not have been instituted at all had respondents complied with the
requirements of the National Building Code.
We are unconvinced. Not only did respondents disprove the contention of petitioner; they
also showed that they sustained damages due to the defective concrete it had delivered. These
were items of actual damages they sustained due to its breach of contract.

Moral and Nominal Damages, Attorneys Fees and Costs

Petitioner assails the award of moral damages, claiming no malice or bad faith on its part.
 We disagree. Respondents were deprived of the comfort and the safety of a house and were
exposed to the agony of witnessing the wastage and the decay of the structure for more than
seven years. In her Memorandum, Respondent Nelia G. Cid describes her familys sufferings
arising from the unreasonable delay in the construction of their residence, as follows: The
family lives separately for lack of space to stay in. Mrs. Cid is staying in a small dingy bodega,
while her son occupies another makeshift room. Their only daughter stayed with her aunt from
1992 until she got married in 1996. x x x.[21] The Court also notes that during the pendency of
the case, Respondent Vicente Cid died without seeing the completion of their home.[22] Under
the circumstances, the award of moral damages is proper.
Petitioner also contends that nominal damages should not have been granted, because it
did not breach its obligation to respondent spouses.
Nominal damages are recoverable only if no actual or substantial damages resulted from
the breach, or no damage was or can be shown.[23] Since actual damages have been proven by
private respondents for which they were amply compensated, they are no longer entitled to
nominal damages.
Petitioner protests the grant of attorneys fees, arguing that respondent spouses did not
engage the services of legal counsel.Also, it contends that attorneys fees and litigation expenses
are awarded only if the opposing party acted in gross and evident bad faith in refusing to satisfy
plaintiffs valid, just and demandable claim.
We disagree. The award is not only for attorneys fees, but also for expenses of
litigation. Hence, it does not matter if respondents represented themselves in court, because it
is obvious that they incurred expenses in pursuing their action before the CIAC, as well as the
regular and the appellate courts. We find no reason to disturb this award.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED;
however, the award of nominal damages isDELETED for lack of legal basis. Costs against
petitioner.
SO ORDERED.
Melo, (Chairman), Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.

Penned by Justice Ramon A. Barcelona with the concurrence of Justices Jesus M. Elbinias, Division chairman;
and Maximiano C. Asuncion, member. By the time the assailed Resolution was promulgated, Justice Asuncion
had died and had thus been replaced by Justice Jorge S. Imperial. [1]
[2]
CA Decision, p. 10; rollo, p. 55.
[3]
Rollo, p. 44.
[4]
CA Decision, pp. 1-5; rollo, pp. 46-50.
[5]
The Arbitral Tribunal was composed of Joven B. Joaquin, chairman; Atty. Alfredo F. Tadiar and Engr. Loreto
C. Aquino, members.
[6]
This case was deemed submitted for decision upon this Courts receipt on October 21, 1999, of the Memorandum
filed and personally signed by Respondent Nelia Cid; Vicente, her husband, had died in the meantime. The
Memorandum for petitioner was signed by Atty. Pericles C. Consunji of Ponce Enrile Reyes & Manalastas, while
the Memorandum for Public Respondent was signed by Assistant Solicitor General Carlos N. Ortega and Solicitor
Geraldine C. Fiel-Macaraig.
[7]
Rollo, pp. 155-156.
 [8]
SECTION 4. Jurisdiction The CIAC shall have original and exclusive jurisdiction over disputes arising
from, or connected with, contracts entered into by parties involved in construction in the Philippines, whether the
dispute arises before or after the completion of the contract, or after the abandonment or breach thereof. These
disputes may involve government or private contracts. For the Board to acquire jurisdiction, the parties to a dispute
must agree to submit the same to voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and
workmanship; violation of the terms of agreement; interpretation and/or application of contractual provisions;
amount of damages and penalties; commencement time and delays; maintenance and defects; payment; default of
employer or contractor and changes in contract cost.
Excluded from the coverage of this law are disputes arising from employer-employee relationships which shall
continue to be covered by the Labor Code of the Philippines. (EO 1008)
[9]
Annex C; CA rollo for GR SP No. 39781, p. 29.
[10]
Annex F; CA rollo for GR SP No. 39781, pp. 188-203.
[11]
See Spouses Benitez v. Court of Appeals, 266 SCRA 242, January 16, 1997.
[12]
Camara v. Court of Appeals, 310 SCRA 608, 618, July 20, 1999; Delos Reyes v. Court of Appeals, 285 SCRA
81, 85, January 27, 1998; Leberman Realty Corporation v. Typingco, 293 SCRA 316, 327, July 29, 1998.
[13]
Baluyot v. Court of Appeals, 311 SCRA 29, 45, July 22, 1999; Vergara v. Court of Appeals, 319 SCRA 323,
327, November 26, 1999; Leberman v. Typinco, ibid., p. 328.
[14]
CIAC Decision dated September 24, 1996; CA rollo for GR SP No. 42443, p. 42.
[15]
Villaflor v. Court of Appeals, 280 SCRA 297, 330, October 9, 1997; Philippine Merchant Marine School,
Inc. v. Court of Appeals, 244 SCRA 770, 785, June 2, 1995; COCOFED v. Trajano, 241 SCRA 262, 268,
February 15, 1995.
[16]
Villaflor v. CA, ibid.; De Ysasi III v. National Labor Relations Commission, 231 SCRA 173, 185, March 11,
1994.
[17]
Chung Fu Industries (Phils.), Inc. v. Court of Appeals, 206 SCRA 545, 556, February 25, 1992.
[18]
CA rollo for GR SP No. 39781, p. 195.
[19]
Ibid., pp. 118-120.
[20]
CA rollo for GR SP No. 42443, p. 36.
[21]
Rollo, p. 198.
[22]
Respondent Nelia Cids Explanation; rollo, pp. 184-186.
[23]
Go v. Intermediate Appellate Court, 197 SCRA 22, 28-29, May 13, 1991; Ventanilla v. Centeno, 1 SCRA 215,
220, January 28, 1961; Robes-Francisco Realty v. Court of First Instance, 86 SCRA 59, 65-66, October 30, 1978.

FIRST DIVISION

[G.R. No. 126212. March 2, 2000]

SEA-LAND SERVICE, INC., petitioner, vs. COURT OF APPEALS, A.P.

MOLLER/MAERSK LINE and MAERSK-TABACALERA SHIPPING
AGENCY (FILIPINAS), INC., respondents.
 DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari seeks to annul and set aside the decision of the
Court of Appeals dated September 29, 1995 in CA-G.R. SP No. 35777,[1] dismissing
the petition for certiorari filed by petitioner to annul the two (2) orders issued by the
Regional Trial Court of Quezon City, Branch 216, in Civil Case No. Q-92-12593.

The facts are as follows:

On April 29, 1991, petitioner Sea-Land Services, Inc. and private respondent A.P.
Moller/Maersk Line (hereinafter referred to as "AMML"), both carriers of cargo in
containerships as well as common carriers, entered into a contract entitled, "Co-
operation in the Pacific"[2] (hereinafter referred to as the "Agreement"), a vessel
sharing agreement whereby they mutually agreed to purchase, share and exchange
needed space for cargo in their respective containerships. Under the Agreement,
they could be, depending on the occasion, either a principal carrier (with a negotiable
bill of lading or other contract of carriage with respect to cargo) or a containership
operator (owner, operator or charterer of containership on which the cargo is
carried).

During the lifetime of the said Agreement, or on 18 May 1991, Florex International,
Inc. (hereinafter referred to as "Florex") delivered to private respondent AMML cargo
of various foodstuffs, with Oakland, California as port of discharge and San
Francisco as place of delivery. The corresponding Bill of Lading No. MAEU
MNL110263 was issued to Florex by respondent AMML. Pursuant to the Agreement,
respondent AMML loaded the subject cargo on MS Sealand Pacer, a vessel owned
by petitioner. Under this arrangement, therefore, respondent AMML was the principal
carrier while petitioner was the containership operator.

The consignee refused to pay for the cargo, alleging that delivery thereof was
delayed. Thus, on June 26, 1992, Florex filed a complaint against respondent
Maersk-Tabacalera Shipping Agency (Filipinas), Inc. for reimbursement of the value
of the cargo and other charges.[3] According to Florex, the cargo was received by the
consignee only on June 28, 1991, since it was discharged in Long Beach, California,
instead of in Oakland, California on June 5, 1991 as stipulated.

Respondent AMML filed its Answer[4] alleging that even on the assumption that
Florex was entitled to reimbursement, it was petitioner who should be liable.
Accordingly, respondent AMML filed a Third Party Complaint[5] against petitioner on
November 10, 1992, averring that whatever damages sustained by Florex were
caused by petitioner, which actually received and transported Florexs cargo on its
vessels and unloaded them.

On January 1, 1993, petitioner filed a Motion to Dismiss the Third Party

Complaint[6] on the ground of failure to state a cause of action and lack of jurisdiction,
the amount of damages not having been specified therein. Petitioner also prayed
either for dismissal or suspension of the Third Party Complaint on the ground that
there exists an arbitration agreement between it and respondent AMML. On
September 27, 1993, the lower court issued an Order denying petitioners Motion to
Dismiss. Petitioners Motion for Reconsideration was likewise denied by the lower
court in its August 22, 1994 Order.

Undaunted, petitioner filed a petition for certiorari[7] with the Court of Appeals on
November 23, 1994. Meanwhile, petitioner also filed its Answer to the Third Party
Complaint in the trial court.

On September 29, 1995, respondent Court of Appeals rendered the assailed

Decision dismissing the petition for certiorari. With the denial of its Motion for
Reconsideration, petitioner filed the instant petition for review, raising the following
issues

I.

THE COURT OF APPEALS DISREGARDED AN AGREEMENT TO

ARBITRATE IN VIOLATION OF STATUTE AND SUPREME COURT
DECISIONS HOLDING THAT ARBITRATION IS A CONDITION
PRECEDENT TO SUIT WHERE SUCH AN AGREEMENT TO
ARBITRATE EXISTS.

II.

THE COURT OF APPEALS HAS RULED IN A MANNER NOT IN

ACCORD WITH JURISPRUDENCE WHEN IT REFUSED TO HAVE
THE THIRD-PARTY COMPLAINT DISMISSED FOR FAILURE TO
STATE A CAUSE OF ACTION AND FOR RULING THAT THE
FAILURE TO STATE A CAUSE OF ACTION MAY BE REMEDIED BY
REFERENCE TO ITS ATTACHMENTS.[8]

Resolving first the issue of failure to state a cause of action, respondent Court of
Appeals did not err in reading the Complaint of Florex and respondent AMMLs
Answer together with the Third Party Complaint to determine whether a cause of
action is properly alleged. In Fil-Estate Golf and Development, Inc. vs. Court of
Appeals,[9] this Court ruled that in the determination of whether or not the complaint
states a cause of action, the annexes attached to the complaint may be considered,
they being parts of the complaint.

Coming now to the main issue of arbitration, the pertinent clauses of the "Co-
operation in the Pacific" contract entered into by the parties provide:

16.2 For the purposes of this agreement the Containership Operator

shall be deemed to have issued to the Principal Carrier for good
consideration and for both loaded and empty containers its non-
negotiable memo bills of lading in the form attached hereto as
Appendix 6, consigned only to the Principal Carrier or its agents,
provisions of which shall govern the liability between the Principal
Carrier and the Containership Operator and that for the purpose of
determining the liability in accordance with either Lines memo bill of
lading, the number of packages or customary freight units shown on
the bill of lading issued by the Principal Carrier to its shippers shall be
controlling.

16.3 The Principal Carrier shall use all reasonable endeavours to

defend all in personam and in rem suits for loss of or damage to cargo
carried pursuant to bills of lading issued by it, or to settle such suits for
as low a figure as reasonably possible. The Principal Carrier shall
have the right to seek damages and/or an indemnity from the
Containership Operator by arbitration pursuant to Clause 32
hereof.Notwithstanding the provisions of the Lines memo bills of lading
or any statutory rules incorporated therein or applicable thereto, the
Principal Carrier shall be entitled to commence such arbitration at
any time until one year after its liability has been finally
determined by agreement, arbitration award or judgment, such
award or judgment not being the subject of appeal, provided that
the Containership Operator has been given notice of the said
claim in writing by the Principal Carrier within three months of the
Principal Carrier receiving notice in writing of the claim. Further
the Principal Carrier shall have the right to grant extensions of time for
the commencement of suit to any third party interested in the cargo
without prior reference to the Containership Operator provided that
notice of any extension so granted is given to the Containership
Operator within 30 days of any such extension being granted.

xxxxxxxxx

32. ARBITRATION

32.1 If at any time a dispute or claim arises out of or in connection with

the Agreement the Lines shall endeavour to settle such amicably,
failing which it shall be referred to arbitration by a single arbitrator in
London, such arbitrator to be appointed by agreement between the
Lines within 14 days after service by one Line upon the other of a
notice specifying the nature of the dispute or claim and requiring
reference of such dispute or claim to arbitration pursuant to this Article.

32.2 Failing agreement upon an arbitrator within such period of 14

days, the dispute shall be settled by three Arbitrators, each party
appointing one Arbitrator, the third being appointed by the President of
the London Maritime Arbitrators Association.

32.3 If either of the appointed Arbitrators refuses or is incapable of

acting, the party who appointed him shall appoint a new Arbitrator in
his place.

32.4 If one of the parties fails to appoint an Arbitrator either originally or

by way of substitution for two weeks after the other party having
appointed his Arbitrator has sent the party making default notice by
mail, fax or telex to make the appointment, the party appointing the
third Arbitrator shall, after application from the party having appointed
 his Arbitrator, also appoint an Arbitrator in behalf of the party making
default.

32.5 Any such arbitration shall be in accordance with the Arbitration Act
1950 as amended by the Arbitration Act 1979 or any other subsequent
legislation and the arbitrators award shall be final and binding upon
Lines. To the extent permitted by the Arbitration Act 1979 the Lines
hereto exclude pursuant to S 3(1) of that Act the jurisdiction of the
English High Court of Justice to entertain any appeal or application
under Section 1 and 2 of the Arbitration Act 1979.[10]

From the foregoing, the following matters are clear: First, disputes between the
Principal Carrier and the Containership Operator arising from contracts of carriage
shall be governed by the provisions of the bills of lading issued to the Principal
Carrier by the Containership Operator. Second, the Principal Carrier shall use its
best efforts to defend or settle all suits against it for loss of or damage to cargo
pursuant to bills of lading issued by it. Third, the Principal Carrier shall have the right
to seek damages and/or indemnity from the Containership Operator by arbitration,
pursuant to Clause 32 of the agreement. Fourth, the Principal Carrier shall have the
right to commence such arbitration any time until one year after its liability has been
finally determined by agreement, arbitration award or judgment, provided that the
Containership Operator was given notice in writing by the Principal Carrier within
three months of the Principal Carrier receiving notice in writing of said claim.

Prescinding from the foregoing matters, we find that both the trial court and the Court
of Appeals erred in denying petitioners prayer for arbitration.

To begin with, allowing respondent AMMLs Third Party Claim against petitioner to
proceed would be in violation of Clause 16.2 of the Agreement. As summarized, the
clause provides that whatever dispute there may be between the Principal Carrier
and the Containership Operator arising from contracts of carriage shall be governed
by the provisions of the bills of lading deemed issued to the Principal Carrier by the
Containership Operator. On the other hand, to sustain the Third Party Complaint
would be to allow private respondent to hold petitioner liable under the provisions of
the bill of lading issued by the Principal Carrier to Florex, under which the latter is
suing in its Complaint, not under the bill of lading petitioner, as containership
operator, issued to respondent AMML, as Principal Carrier, contrary to what is
contemplated in Clause 16.2.

The Court of Appeals ruled that the terms of the Agreement "explicitly required that
the principal carriers claim against the containership operator first be finally
determined by, among others, a court judgment, before the right to arbitration
accrues." However, the Court of Appeals failed to consider that, precisely, arbitration
is the mode by which the liability of the Containership Operator may be finally
determined. This is clear from the mandate of Clause 16.3 that "(T)he Principal
Carrier shall have the right to seek damages and/or an indemnity from the
Containership Operator by arbitration" and that it "shall be entitled to commence
such arbitration at any time until one year after its liability has been finally
determined by agreement, arbitration award or judgment".
For respondent Court of Appeals to say that the terms of the contract do not require
arbitration as a condition precedent to judicial action is erroneous. In the light of the
Agreement clauses aforequoted, it is clear that arbitration is the mode provided by
which respondent AMML as Principal Carrier can seek damages and/or indemnity
from petitioner, as Containership Operator. Stated differently, respondent AMML is
barred from taking judicial action against petitioner by the clear terms of their
Agreement.

As the Principal Carrier with which Florex directly dealt with, respondent AMML can
and should be held accountable by Florex in the event that it has a valid claim
against the former. Pursuant to Clause 16.3 of the Agreement, respondent AMML,
when faced with such a suit "shall use all reasonable endeavours to defend" itself or
"settle such suits for as low a figure as reasonably possible". In turn, respondent
AMML can seek damages and/or indemnity from petitioner as Containership
Operator for whatever final judgment may be adjudged against it under the
Complaint of Florex. The crucial point is that collection of said damages and/or
indemnity from petitioner should be by arbitration.

All told, when the text of a contract is explicit and leaves no doubt as to its intention,
the court may not read into it any other intention that would contradict its plain
import.[11] Arbitration being the mode of settlement between the parties expressly
provided for by their Agreement, the Third Party Complaint should have been
dismissed.

This Court has previously held that arbitration is one of the alternative methods of
dispute resolution that is now rightfully vaunted as "the wave of the future" in
international relations, and is recognized worldwide. To brush aside a contractual
agreement calling for arbitration in case of disagreement between the parties would
therefore be a step backward.[12]

WHEREFORE, premises considered, the instant Petition for Review on Certiorari is

GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 35777 is
REVERSED and SET ASIDE. The Regional Trial Court of Quezon City, Branch 77,
is ordered to DISMISS Respondent AMMLs Third Party Complaint in Civil Case No.
Q-92-12593. No pronouncement as to costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.

[1]
Petition, Annex "A"; Rollo, pp. 71-83.
[2]
Id., Annex "O" of Annex "L"; Rollo, pp. 298-352.
[3]
Id., Annex "D"; Rollo, pp. 88-110.
[4]
Id., Annex "A-1" of Annex "E"; Rollo, pp. 122-125.
[5]
Id., Annex "E"; Rollo, pp. 111-127.
[6]
Id., Annex "F"; Rollo, pp. 128-135.
[7]
Id., Annex "L"; Rollo, p. 170-186.
[8]
Id., p. 7; Rollo, p. 53.
[9]
G.R. No. 120958, 265 SCRA 614 [1996].
[10]
Rollo, pp. 326-327, 336-337; emphasis provided.
[11]
Cruz vs. Court of Appeals, G.R. No. 126713, 293 SCRA 239 [1998].
[12]
BF Corporation vs. Court of Appeals, G.R. No. 120105, 288 SCRA 267, 286 [1998].

SECOND DIVISION

[G.R. No. 129916. March 26, 2001]

MAGELLAN CAPITAL MANAGEMENT CORPORATION and

MAGELLAN CAPITAL HOLDINGS CORPORATION, petitioners,
vs. ROLANDO M. ZOSA and HON. JOSE P. SOBERANO, JR., in his
capacity as Presiding Judge of Branch 58 of the Regional Trial Court
Of Cebu, 7th Judicial Region, respondents.

DECISION
BUENA, J.:

Under a management agreement entered into on March 18, 1994, Magellan Capital
Holdings Corporation [MCHC] appointed Magellan Capital Management Corporation
[MCMC] as manager for the operation of its business and affairs.[1] Pursuant thereto, on the
same month, MCHC, MCMC, and private respondent Rolando M. Zosa entered into an
"Employment Agreement" designating Zosa as President and Chief Executive Officer of
MCHC.
Under the "Employment Agreement", the term of respondent Zosa's employment shall be
co-terminous with the management agreement, or until March 1996,[2] unless sooner terminated
pursuant to the provisions of the Employment Agreement.[3] The grounds for termination of
employment are also provided in the Employment Agreement.
On May 10, 1995, the majority of MCHCs Board of Directors decided not to re-elect
respondent Zosa as President and Chief Executive Officer of MCHC on account of loss of trust
and confidence[4] arising from alleged violation of the resolution issued by MCHC's board of
directors and of the non-competition clause of the Employment Agreement.[5] Nevertheless,
respondent Zosa was elected to a new position as MCHC's Vice-Chairman/Chairman for New
Ventures Development.[6]
On September 26, 1995, respondent Zosa communicated his resignation for good reason
from the position of Vice-Chairman under paragraph 7 of the Employment Agreement on the
ground that said position had less responsibility and scope than President and Chief Executive
Officer. He demanded that he be given termination benefits as provided for in Section 8 (c) (i)
(ii) and (iii) of the Employment Agreement.[7]
In a letter dated October 20, 1995, MCHC communicated its non-acceptance of respondent
Zosa's resignation for good reason, but instead informed him that the Employment
Agreement is terminated for cause, effective November 19, 1995, in accordance with Section
7 (a) (v) of the said agreement, on account of his breach of Section 12 thereof. Respondent
Zosa was further advised that he shall have no further rights under the said Agreement or any
claims against the Manager or the Corporation except the right to receive within thirty (30)
days from November 19, 1995, the amounts stated in Section 8 (a) (i) (ii) of the Agreement.[8]
Disagreeing with the position taken by petitioners, respondent Zosa invoked the
Arbitration Clause of the Employment Agreement, to wit:

23. Arbitration. In the event that any dispute, controversy or claim arises out of or
under any provisions of this Agreement, then the parties hereto agree to submit
such dispute, controversy or claim to arbitration as set forth in this Section and the
determination to be made in such arbitration shall be final and binding. Arbitration
shall be effected by a panel of three arbitrators. The Manager, Employee and
Corporation shall designate one (1) arbitrator who shall, in turn, nominate and elect
who among them shall be the chairman of the committee. Any such arbitration,
including the rendering of an arbitration award, shall take place in Metro
Manila.The arbitrators shall interpret this Agreement in accordance with the
substantive laws of the Republic of the Philippines. The arbitrators shall have no
power to add to, subtract from or otherwise modify the terms of Agreement or to
grant injunctive relief of any nature. Any judgment upon the award of the
arbitrators may be entered in any court having jurisdiction thereof, with costs of
the arbitration to be borne equally by the parties, except that each party shall pay
the fees and expenses of its own counsel in the arbitration.

On November 10, 1995, respondent Zosa designated his brother, Atty. Francis Zosa, as his
representative in the arbitration panel[9] while MCHC designated Atty. Inigo S. Fojas[10] and
MCMC nominated Atty. Enrique I. Quiason[11] as their respective representatives in the
arbitration panel. However, instead of submitting the dispute to arbitration, respondent Zosa,
on April 17, 1996, filed an action for damages against petitioners before the Regional Trial
Court of Cebu[12] to enforce his benefits under the Employment Agreement.
On July 3, 1996, petitioners filed a motion to dismiss[13] arguing that (1) the trial court has
no jurisdiction over the instant case since respondent Zosa's claims should be resolved through
arbitration pursuant to Section 23 of the Employment Agreement with petitioners; and (2) the
venue is improperly laid since respondent Zosa, like the petitioners, is a resident of Pasig City
and thus, the venue of this case, granting without admitting that the respondent has a cause of
action against the petitioners cognizable by the RTC, should be limited only to RTC-Pasig
City.[14]
Meanwhile, respondent Zosa filed an amended complaint dated July 5, 1996.
On August 1, 1996, the RTC Branch 58 of Cebu City issued an Order denying petitioners
motion to dismiss upon the findings that (1) the validity and legality of the arbitration provision
can only be determined after trial on the merits; and (2) the amount of damages claimed, which
is over P100,000.00, falls within the jurisdiction of the RTC.[15] Petitioners filed a motion for
reconsideration which was denied by the RTC in an order dated September 5, 1996.[16]
In the interim, on August 22, 1996, in compliance with the earlier order of the court
directing petitioners to file responsive pleading to the amended complaint, petitioners filed
their Answer Ad Cautelam with counterclaim reiterating their position that the dispute should
be settled through arbitration and the court had no jurisdiction over the nature of the action.[17]
 On October 21, 1996, the trial court issued its pre-trial order declaring the pre-trial stage
terminated and setting the case for hearing. The order states:

ISSUES:

The Court will only resolve one issue in so far as this case is concerned, to wit:

Whether or not the Arbitration Clause contained in Sec.23 of the Employment

Agreement is void and of no effect: and, if it is void and of no effect, whether or
not the plaintiff is entitled to damages in accordance with his complaint and the
defendants in accordance with their counterclaim.

It is understood, that in the event the arbitration clause is valid and binding
between the parties, the parties shall submit their respective claim to the
Arbitration Committee in accordance with the said arbitration clause, in which
event, this case shall be deemed dismissed.[18]

On November 18, 1996, petitioners filed their Motion Ad Cautelam for the Correction,
Addition and Clarification of the Pre-trial Order dated November 15 1996,[19] which was denied
by the court in an order dated November 28, 1996.[20]
Thereafter, petitioners MCMC and MCHC filed a Motion Ad Cautelam for the parties to
file their Memoranda to support their respective stand on the issue of the validity of the
arbitration clause contained in the Employment Agreement. In an order dated December 13,
1996, the trial court denied the motion of petitioners MCMC and MCHC.
On January 17, 1997, petitioners MCMC and MCHC filed a petition for certiorari and
prohibition under Rule 65 of the Rules of Court with the Court of Appeals, questioning the trial
court orders dated August 1, 1996, September 5, 1996, and December 13, 1996.[21]
On March 21, 1997, the Court of Appeals rendered a decision, giving due course to the
petition, the decretal portion of which reads:

WHEREFORE, the petition is GIVEN DUE COURSE. The respondent court is

directed to resolve the issue on the validity or effectivity of the arbitration clause in
the Employment Agreement, and to suspend further proceedings in the trial on the
merits until the said issue is resolved. The questioned orders are set aside insofar as
they contravene this Courts resolution of the issues raised as herein pronounced.

The petitioner is required to remit to this Court the sum of P81.80 for cost within
five (5) days from notice.

SO ORDERED.[22]

Petitioners filed a motion for partial reconsideration of the CA decision praying (1) for the
dismissal of the case in the trial court, on the ground of lack of jurisdiction, and (2) that the
parties be directed to submit their dispute to arbitration in accordance with the Employment
Agreement dated March 1994. The CA, in a resolution promulgated on June 20, 1997, denied
the motion for partial reconsideration for lack of merit.
 In compliance with the CA decision, the trial court, on July 18, 1997, rendered a decision
declaring the arbitration clause in the Employment Agreement partially void and of no effect.
The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered partially

declaring the arbitration clause of the Employment Agreement void and of no
effect, only insofar as it concerns the composition of the panel of arbitrators, and
directing the parties to proceed to arbitration in accordance with the Employment
Agreement under the panel of three (3) arbitrators, one for the plaintiff, one for the
defendants, and the third to be chosen by both the plaintiff and defendants. The
other terms, conditions and stipulations in the arbitration clause remain in force
and effect."[23]

In view of the trial courts decision, petitioners filed this petition for review on certiorari,
under Rule 45 of the Rules of Court, assigning the following errors for the Courts resolution:

I. The trial court gravely erred when it ruled that the arbitration clause under the
employment agreement is partially void and of no effect, considering that:

A. The arbitration clause in the employment agreement dated March 1994 between
respondent Zosa and defendants MCHC and MCMC is valid and binding upon the parties
thereto.
B. In view of the fact that there are three parties to the employment agreement, it is but proper
that each party be represented in the arbitration panel.
C. The trial court grievously erred in its conclusion that petitioners MCMC and MCHC
represent the same interest.
D. Respondent Zosa is estopped from questioning the validity of the arbitration clause,
including the right of petitioner MCMC to nominate its own arbitrator, which he himself
has invoked.

II. In any event, the trial court acted without jurisdiction in hearing the case below,
considering that it has no jurisdiction over the nature of the action or suit since
controversies in the election or appointment of officers or managers of a
corporation, such as the action brought by respondent Zosa, fall within the original
and exclusive jurisdiction of the Securities and Exchange Commission.

III. Contrary to respondent Zosas allegation, the issue of the trial courts jurisdiction
over the case below has not yet been resolved with finality considering that
petitioners have expressly reserved their right to raise said issue in the instant
petition. Moreover, the principle of the law of the case is not applicable in the
instant case.

IV. Contrary to respondent Zosas allegation, petitioners MCMC and MCHC are
not guilty of forum shopping.
V. Contrary to respondent Zosas allegation, the instant petition for review involves
only questions of law and not of fact.[24]

We rule against the petitioners.

It is error for the petitioners to claim that the case should fall under the jurisdiction of the
Securities and Exchange Commission [SEC, for brevity]. The controversy does not in anyway
involve the election/appointment of officers of petitioner MCHC, as claimed by petitioners in
their assignment of errors. Respondent Zosas amended complaint focuses heavily on the
illegality of the Employment Agreements Arbitration Clause initially invoked by him in
seeking his termination benefits under Section 8 of the employment contract. And under
Republic Act No. 876, otherwise known as the Arbitration Law, it is the regional trial court
which exercises jurisdiction over questions relating to arbitration. We thus advert to the
following discussions made by the Court of Appeals, speaking thru Justice Minerva P.
Gonzaga-Reyes,[25] in C.A.-G.R. S.P. No. 43059, viz:

As regards the fourth assigned error, asserting that jurisdiction lies with the SEC,
which is raised for the first time in this petition, suffice it to state that the Amended
Complaint squarely put in issue the question whether the Arbitration Clause is
valid and effective between the parties. Although the controversy which spawned
the action concerns the validity of the termination of the service of a corporate
officer, the issue on the validity and effectivity of the arbitration clause is
determinable by the regular courts, and do not fall within the exclusive and original
jurisdiction of the SEC.

The determination and validity of the agreement is not a matter intrinsically

connected with the regulation and internal affairs of corporations (see Pereyra vs.
IAC, 181 SCRA 244; Sales vs. SEC, 169 SCRA 121); it is rather an ordinary case
to be decided in accordance with the general laws, and do not require any
particular expertise or training to interpret and apply (Viray vs. CA, 191 SCRA
308).[26]

Furthermore, the decision of the Court of Appeals in CA-G.R. SP No. 43059 affirming the
trial courts assumption of jurisdiction over the case has become the law of the case which now
binds the petitioners. The law of the case doctrine has been defined as a term applied to an
established rule that when an appellate court passes on a question and remands the cause to the
lower court for further proceedings, the question there settled becomes the law of the case upon
subsequent appeal.[27] To note, the CAs decision in CA-G.R. SP No. 43059 has already attained
finality as evidenced by a Resolution of this Court ordering entry of judgment of said case, to
wit:

ENTRY OF JUDGMENT

This is to certify that on September 8, 1997 a decision/resolution rendered in the

above-entitled case was filed in this Office, the dispositive part of which reads as
follows:
G.R. No. 129615 (Magellan Capital Management Corporation, et al. vs. Court of
Appeals, Rolando Zosa, et al.).- Considering the petitioners manifestation dated
August 11, 1997 and withdrawal of intention to file petition for review on
certiorari, the Court Resolved to DECLARE THIS CASE TERMINATED and
DIRECT the Clerk of Court to INFORM the parties that the judgment sought to be
reviewed has become final and executory, no appeal therefore having been timely
perfected.

and that the same has, on September 17, 1997, become final and executory and is
hereby recorded in the Book of Entries of Judgments. [28]

Petitioners, therefore, are barred from challenging anew, through another remedial measure
and in any other forum, the authority of the regional trial court to resolve the validity of the
arbitration clause, lest they be truly guilty of forum-shopping which the courts consistently
consider as a contumacious practice that derails the orderly administration of justice.
Equally unavailing for the petitioners is the review by this Court, via the instant petition,
of the factual findings made by the trial court that the composition of the panel of arbitrators
would, in all probability, work injustice to respondent Zosa. We have repeatedly stressed that
the jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Revised
Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings
complained of are devoid of support by the evidence on record, or the assailed judgment is
based on misapprehension of facts.[29]
Even if procedural rules are disregarded, and a scrutiny of the merits of the case is
undertaken, this Court finds the trial courts observations on why the composition of the panel
of arbitrators should be voided, incisively correct so as to merit our approval.Thus,

From the memoranda of both sides, the Court is of the view that the defendants
[petitioner] MCMC and MCHC represent the same interest. There is no quarrel
that both defendants are entirely two different corporations with personalities
distinct and separate from each other and that a corporation has a personality
distinct and separate from those persons composing the corporation as well as from
that of any other legal entity to which it may be related.

But as the defendants [herein petitioner] represent the same interest, it could never
be expected, in the arbitration proceedings, that they would not protect and
preserve their own interest, much less, would both or either favor the interest of the
plaintiff. The arbitration law, as all other laws, is intended for the good and welfare
of everybody. In fact, what is being challenged by the plaintiff herein is not the law
itself but the provision of the Employment Agreement based on the said law,
which is the arbitration clause but only as regards the composition of the panel of
arbitrators. The arbitration clause in question provides, thus:

In the event that any dispute, controversy or claim arise out of or under any
provisions of this Agreement, then the parties hereto agree to submit such dispute,
controversy or claim to arbitration as set forth in this Section and the determination
to be made in such arbitration shall be final and binding. Arbitration shall be
effected by a panel of three
arbitrators. The Manager, Employee,and Corporation shall designate one (1)
arbitrator who shall, in turn, nominate and elect as who among them shall be the
chairman of the committee. Any such arbitration, including the rendering of an
arbitration award, shall take place in Metro Manila. The arbitrators shall interpret
this Agreement in accordance with the substantive laws of the Republic of the
Philippines. The arbitrators shall have no power to add to, subtract from or
otherwise modify the terms of this Agreement or to grant injunctive relief of any
nature. Any judgment upon the award of the arbitrators may be entered in any
court having jurisdiction thereof, with costs of the arbitration to be borne equally
by the parties, except that each party shall pay the fees and expenses of its own
counsel in the arbitration. (Emphasis supplied).

From the foregoing arbitration clause, it appears that the two (2) defendants
[petitioners] (MCMC and MCHC) have one (1) arbitrator each to compose the
panel of three (3) arbitrators. As the defendant MCMC is the Manager of defendant
MCHC, its decision or vote in the arbitration proceeding would naturally and
certainly be in favor of its employer and the defendant MCHC would have to
protect and preserve its own interest; hence, the two (2) votes of both defendants
(MCMC and MCHC) would certainly be against the lone arbitrator for the plaintiff
[herein defendant]. Hence, apparently, plaintiff [defendant] would never get or
receive justice and fairness in the arbitration proceedings from the panel of
arbitrators as provided in the aforequoted arbitration clause. In fairness and justice
to the plaintiff [defendant], the two defendants (MCMC and MCHC)[herein
petitioners] which represent the same interest should be considered as one and
should be entitled to only one arbitrator to represent them in the arbitration
proceedings. Accordingly, the arbitration clause, insofar as the composition of the
panel of arbitrators is concerned should be declared void and of no effect, because
the law says, Any clause giving one of the parties power to choose more arbitrators
than the other is void and of no effect (Article 2045, Civil Code).

The dispute or controversy between the defendants (MCMC and MCHC) [herein
petitioners] and the plaintiff [herein defendant] should be settled in the arbitration
proceeding in accordance with the Employment Agreement, but under the panel of
three (3) arbitrators, one (1) arbitrator to represent the plaintiff, one (1) arbitrator to
represent both defendants (MCMC and MCHC)[herein petitioners] and the third
arbitrator to be chosen by the plaintiff [defendant Zosa] and defendants
[petitioners].

x x x x x x x x x[30]
In this connection, petitioners attempt to put respondent in estoppel in assailing the
arbitration clause must be struck down.For one, this issue of estoppel, as likewise noted by the
Court of Appeals, found its way for the first time only on appeal. Well-settled is the rule that
issues not raised below cannot be resolved on review in higher courts.[31] Secondly,
employment agreements such as the one at bar are usually contracts of adhesion. Any
ambiguity in its provisions is generally resolved against the party who drafted the
document. Thus, in the relatively recent case of Phil. Federation of Credit Cooperatives, Inc.
(PFCCI) and Fr. Benedicto Jayoma vs. NLRC and Victoria Abril,[32] we had the occasion to
stress that where a contract of employment, being a contract of adhesion, is ambiguous, any
ambiguity therein should be construed strictly against the party who prepared it. And, finally,
respondent Zosa never submitted himself to arbitration proceedings (as there was none yet)
before bewailing the composition of the panel of arbitrators. He in fact, lost no time in assailing
the arbitration clause upon realizing the inequities that may mar the arbitration proceedings if
the existing line-up of arbitrators remained unchecked.
We need only to emphasize in closing that arbitration proceedings are designed to level
the playing field among the parties in pursuit of a mutually acceptable solution to their
conflicting claims. Any arrangement or scheme that would give undue advantage to a party in
the negotiating table is anathema to the very purpose of arbitration and should, therefore, be
resisted.
WHEREFORE, premises considered, the petition is hereby DISMISSED and the
decision of the trial court dated July 18, 1997 is AFFIRMED.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, and De Leon, Jr., JJ., concur.
Quisumbing, J., on leave.

[1]
Section 1 of Amended and Restated Management Agreement, Annex, "B," Rollo p. 74.
[2]
par. 2 of the Pre-Trial Order dated October 21, 1996; Annex "BB," Rollo, p. 241.
[3]
Annex "C" of Petition, Rollo, pp.89-101; 217 - 229.
[4]
par. 5 of Petitioner's Memorandum, Rollo, p. 560.
[5]
par. 5.1 - 6.4, ibid., Rollo, pp. 560-562.
[6]
par. 4, ibid., Rollo, p. 559.
[7]
par. 6-7, Amended Complaint, Rollo, pp. 173-174; p. 562.
[8]
Annex "O" of Petition, Rollo, p. 130.
[9]
Annex "P" of Petition, Rollo, p. 131.
[10]
Annex "R" of Petition, Rollo, p. 133.
[11]
Annex "Q" of Petition, Rollo, p. 132.
[12]
Annex "BB," Rollo, p. 241.
[13]
Annex "S," Rollo, pp. 134- 145.
[14]
Annex "U," Rollo, p. 179.
[15]
Annex "X," Rollo, p. 185 - 186.
[16]
Annex AA, Rollo, p. 240.
[17]
Par. 9, Petitioners Memorandum, Rollo, p. 566.
[18]
Pre-trial Order, Annex BB, Rollo, pp. 241-243.
[19]
Annex CC, Rollo, pp. 248; 566-567.
[20]
Annex DD, Rollo, p. 252.
[21]
The issues submitted to the Court of Appeals are as follows:
I.
RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN IT ISSUED THE QUESTIONED ORDERS DATED 1 AUGUST 1996 (ANNEX A),
05 SEPTEMBER 1996 (ANNEX B) AND 13 DECEMBER 1996 (ANNEX C) WHICH DEFERRED THE
RESOLUTION OF THE ISSUE REGARDING THE VALIDITY OF THE ARBITRATION CLAUSE IN THE
EMPLOYMENT AGREEMENT UNTIL AFTER TRIAL ON THE MERITS.
II.
RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN IT FAILED TO RULE THAT THE ARBITRATION CLAUSE UNDER THE
EMPLOYMENT AGREEMENT IS VALID AND BINDING ON THE PARTIES THERETO.
III.
RESPONDENT COURT ACTED WITHOUT OR IN EXCESS OF JURISDICTION WHEN IT TOOK
COGNIZANCE OF RESPONDENT ZOSAS AMENDED COMPLAINT INSTEAD OF REFERRING THE
SAME IMMEDIATELY TO ARBITRATION PURSUANT TO THE EMPLOYMENT AGREEMENT
BETWEEN PETITIONERS AND RESPONDENT ZOSA.
IV.
IN ANY EVENT, RESPONDENT COURT ACTED AND IS CONTINUING TO ACT WITHOUT
JURISDICTION IN HEARING THE CASE BELOW, CONSIDERING THAT IT HAS NO JURISDICTION
OVER THE NATURE OF THE ACTION OR SUIT SINCE CONTROVERSIES IN THE ELECTION OR
APPOINTMENT OF OFFICERS OR MANAGERS OF A CORPORATION, SUCH AS THE ACTION
BROUGHT BY RESPONDENT ZOSA, FALL WITHIN THE ORIGINAL AND EXCLUSIVE JURISDICTION
OF THE SECURITIES AND EXCHANGE COMMISSION.
V.
RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN IT REFUSED TO DISMISS THE ACTION BELOW FOR IMPROPER VENUE.
VI.
RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN IT FAILED TO DISMISS THE AMENDED COMPLAINT FOR LACK OF THE
REQUISITE CERTIFICATION OF NON-FORUM SHOPPING.
Court of Appeals Decision, pp. 5-6; Rollo, pp. 316-317.
[22]
Ibid., pp. 329-330.
[23]
Annex A, RTC Decision, pp. 72-73.
[24]
Rollo, pp. 571-573.
[25]
Now Associate Justice of this Court.
[26]
Court of Appeals Decision, p. 16; Rollo, p. 321.
[27]
Loevillo C. Agustin vs. Court of Appeals and Filinvest Finance Corporation, 271 SCRA 457 [1997].
[28]
Rollo, p. 350.
[29]
Congregation of the Religious of the Virgin Mary vs. CA, 291 SCRA 385 [1998].
[30]
Rollo, pp. 71-72.
[31]
Casolita, Sr. vs. Court of Appeals, 275 SCRA 257 [1997]; Manalili vs. Court of Appeals, 280 SCRA 400
[1997].
[32]
G.R. No. 121071, December 11, 1998.
 SECOND DIVISION

[G.R. No. 136154. February 7, 2001]

DEL MONTE CORPORATION-USA, PAUL E. DERBY, JR., DANIEL

COLLINS and LUIS HIDALGO, petitioners, vs. COURT OF
APPEALS, JUDGE BIENVENIDO L. REYES in his capacity as
Presiding Judge, RTC-Br. 74, Malabon, Metro Manila,
MONTEBUENO MARKETING, INC., LIONG LIONG C. SY and
SABROSA FOODS, INC., respondents.

DECISION
BELLOSILLO, J.:

This Petition for Review on certiorari assails the 17 July 1998 Decision[1] of the Court of
Appeals affirming the 11 November 1997 Order[2] of the Regional Trial Court which denied
petitioners Motion to Suspend Proceedings in Civil Case No. 2637-MN. It also questions the
appellate courts Resolution[3] of 30 October 1998 which denied petitioners Motion for
Reconsideration.
On 1 July 1994, in a Distributorship Agreement, petitioner Del Monte Corporation-USA
(DMC-USA) appointed private respondent Montebueno Marketing, Inc. (MMI) as the sole and
exclusive distributor of its Del Monte products in the Philippines for a period of five (5) years,
renewable for two (2) consecutive five (5) year periods with the consent of the parties. The
Agreement provided, among others, for an arbitration clause which states -

12. GOVERNING LAW AND ARBITRATION[4]

This Agreement shall be governed by the laws of the State of California and/or, if
applicable, the United States of America. All disputes arising out of or relating to
this Agreement or the parties relationship, including the termination thereof, shall
be resolved by arbitration in the City of San Francisco, State of California, under
the Rules of the American Arbitration Association. The arbitration panel shall
consist of three members, one of whom shall be selected by DMC-USA, one of
whom shall be selected by MMI, and third of whom shall be selected by the other
two members and shall have relevant experience in the industry x x x x

In October 1994 the appointment of private respondent MMI as the sole and exclusive
distributor of Del Monte products in the Philippines was published in several newspapers in
the country. Immediately after its appointment, private respondent MMI appointed Sabrosa
Foods, Inc. (SFI), with the approval of petitioner DMC-USA, as MMIs marketing arm to
concentrate on its marketing and selling function as well as to manage its critical relationship
with the trade.
On 3 October 1996 private respondents MMI, SFI and MMIs Managing Director Liong
Liong C. Sy (LILY SY) filed a Complaint[5] against petitioners DMC-USA, Paul E. Derby,
Jr.,[6] Daniel Collins[7] and Luis Hidalgo,[8] and Dewey Ltd.[9] before the Regional Trial Court of
Malabon, Metro Manila. Private respondents predicated their complaint on the alleged
violations by petitioners of Arts. 20,[10] 21[11] and 23[12] of the Civil Code. According to private
respondents, DMC-USA products continued to be brought into the country by parallel
importers despite the appointment of private respondent MMI as the sole and exclusive
distributor of Del Monte products thereby causing them great embarrassment and substantial
damage. They alleged that the products brought into the country by these importers were aged,
damaged, fake or counterfeit, so that in March 1995 they had to cause, after prior consultation
with Antonio Ongpin, Market Director for Special Markets of Del Monte Philippines, Inc., the
publication of a "warning to the trade" paid advertisement in leading newspapers. Petitioners
DMC-USA and Paul E. Derby, Jr., apparently upset with the publication, instructed private
respondent MMI to stop coordinating with Antonio Ongpin and to communicate directly
instead with petitioner DMC-USA through Paul E. Derby, Jr.
Private respondents further averred that petitioners knowingly and surreptitiously
continued to deal with the former in bad faith by involving disinterested third parties and by
proposing solutions which were entirely out of their control. Private respondents claimed that
they had exhausted all possible avenues for an amicable resolution and settlement of their
grievances; that as a result of the fraud, bad faith, malice and wanton attitude of petitioners,
they should be held responsible for all the actual expenses incurred by private respondents in
the delayed shipment of orders which resulted in the extra handling thereof, the actual expenses
and cost of money for the unused Letters of Credit (LCs) and the substantial opportunity losses
due to created out-of-stock situations and unauthorized shipments of Del Monte-USA products
to the Philippine Duty Free Area and Economic Zone; that the bad faith, fraudulent acts and
willful negligence of petitioners, motivated by their determination to squeeze private
respondents out of the outstanding and ongoing Distributorship Agreement in favor of another
party, had placed private respondent LILY SY on tenterhooks since then; and, that the shrewd
and subtle manner with which petitioners concocted imaginary violations by private respondent
MMI of the Distributorship Agreement in order to justify the untimely termination thereof was
a subterfuge.For the foregoing, private respondents claimed, among other reliefs, the payment
of actual damages, exemplary damages, attorneys fees and litigation expenses.
On 21 October 1996 petitioners filed a Motion to Suspend Proceedings[13] invoking the
arbitration clause in their Agreement with private respondents.
In a Resolution[14] dated 23 December 1996 the trial court deferred consideration of
petitioners Motion to Suspend Proceedings as the grounds alleged therein did not constitute the
suspension of the proceedings considering that the action was for damages with prayer for the
issuance of Writ of Preliminary Attachment and not on the Distributorship Agreement.
On 15 January 1997 petitioners filed a Motion for Reconsideration to which private
respondents filed their Comment/Opposition. On 31 January 1997 petitioners filed
their Reply. Subsequently, private respondents filed an Urgent Motion for Leave to Admit
Supplemental Pleading dated 2 April 1997. This Motion was admitted, over petitioners
opposition, in an Order of the trial court dated 27 June 1997.
 As a result of the admission of the Supplemental Complaint, petitioners filed on 22 July
1997 a Manifestation adopting their Motion to Suspend Proceedings of 17 October 1996
and Motion for Reconsideration of 14 January 1997.
On 11 November 1997 the Motion to Suspend Proceedings was denied by the trial court
on the ground that it "will not serve the ends of justice and to allow said suspension will only
delay the determination of the issues, frustrate the quest of the parties for a judicious
determination of their respective claims, and/or deprive and delay their rights to seek
redress."[15]
On appeal, the Court of Appeals affirmed the decision of the trial court. It held that the
alleged damaging acts recited in the Complaint, constituting petitioners causes of action,
required the interpretation of Art. 21 of the Civil Code[16] and that in determining whether
petitioners had violated it "would require a full blown trial" making arbitration "out of the
question."[17]Petitioners Motion for Reconsideration of the affirmation was denied. Hence,
this Petition for Review.
The crux of the controversy boils down to whether the dispute between the parties warrants
an order compelling them to submit to arbitration.
Petitioners contend that the subject matter of private respondents causes of action arises
out of or relates to the Agreement between petitioners and private respondents. Thus,
considering that the arbitration clause of the Agreement provides that all disputes arising out
of or relating to the Agreement or the parties relationship, including the termination thereof,
shall be resolved by arbitration, they insist on the suspension of the proceedings in Civil Case
No. 2637-MN as mandated by Sec. 7 of RA 876[18] -

Sec. 7. Stay of Civil Action. If any suit or proceeding be brought upon an issue
arising out of an agreement providing for arbitration thereof, the court in which
such suit or proceeding is pending, upon being satisfied that the issue involved in
such suit or proceeding is referable to arbitration, shall stay the action or
proceeding until an arbitration has been had in accordance with the terms of the
agreement. Provided, That the applicant for the stay is not in default in proceeding
with such arbitration.

Private respondents claim, on the other hand, that their causes of action are rooted in Arts.
20, 21 and 23 of the Civil Code,[19]the determination of which demands a full blown trial, as
correctly held by the Court of Appeals. Moreover, they claim that the issues before the trial
court were not joined so that the Honorable Judge was not given the opportunity to satisfy
himself that the issue involved in the case was referable to arbitration. They submit that,
apparently, petitioners filed a motion to suspend proceedings instead of sending a written
demand to private respondents to arbitrate because petitioners were not sure whether the case
could be a subject of arbitration. They maintain that had petitioners done so and private
respondents failed to answer the demand, petitioners could have filed with the trial court their
demand for arbitration that would warrant a determination by the judge whether to refer the
case to arbitration. Accordingly, private respondents assert that arbitration is out of the
question.
Private respondents further contend that the arbitration clause centers more on venue rather
than on arbitration. They finally allege that petitioners filed their motion for extension of time
to file this petition on the same date[20] petitioner DMC-USA filed a petition to compel private
respondent MMI to arbitrate before the United States District Court in Northern California,
docketed as Case No. C-98-4446. They insist that the filing of the petition to compel arbitration
in the United States made the petition filed before this Court an alternative remedy and, in a
way, an abandonment of the cause they are fighting for here in the Philippines, thus warranting
the dismissal of the present petition before this Court.
There is no doubt that arbitration is valid and constitutional in our jurisdiction.[21] Even
before the enactment of RA 876, this Court has countenanced the settlement of disputes
through arbitration. Unless the agreement is such as absolutely to close the doors of the courts
against the parties, which agreement would be void, the courts will look with favor upon such
amicable arrangement and will only interfere with great reluctance to anticipate or nullify the
action of the arbitrator.[22] Moreover, as RA 876 expressly authorizes arbitration of domestic
disputes, foreign arbitration as a system of settling commercial disputes was likewise
recognized when the Philippines adhered to the United Nations "Convention on the
Recognition and the Enforcement of Foreign Arbitral Awards of 1958" under the 10 May 1965
Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and allowing
enforcement of international arbitration agreements between parties of different nationalities
within a contracting state.[23]
A careful examination of the instant case shows that the arbitration clause in the
Distributorship Agreement between petitioner DMC-USA and private respondent MMI is valid
and the dispute between the parties is arbitrable. However, this Court must deny the petition.
The Agreement between petitioner DMC-USA and private respondent MMI is a
contract. The provision to submit to arbitration any dispute arising therefrom and the
relationship of the parties is part of that contract and is itself a contract. As a rule, contracts are
respected as the law between the contracting parties and produce effect as between them, their
assigns and heirs.[24]Clearly, only parties to the Agreement, i.e., petitioners DMC-USA and its
Managing Director for Export Sales Paul E. Derby, Jr., and private respondents MMI and its
Managing Director LILY SY are bound by the Agreement and its arbitration clause as they are
the only signatories thereto. Petitioners Daniel Collins and Luis Hidalgo, and private
respondent SFI, not parties to the Agreement and cannot even be considered assigns or heirs
of the parties, are not bound by the Agreement and the arbitration clause therein. Consequently,
referral to arbitration in the State of California pursuant to the arbitration clause and the
suspension of the proceedings in Civil Case No. 2637-MN pending the return of the arbitral
award could be called for[25] but only as to petitioners DMC-USA and Paul E. Derby, Jr., and
private respondents MMI and LILY SY, and not as to the other parties in this case, in
accordance with the recent case of Heirs of Augusto L. Salas, Jr. v. Laperal Realty
Corporation,[26] which superseded that of Toyota Motor Philippines Corp. v. Court of
Appeals.[27]
In Toyota, the Court ruled that "[t]he contention that the arbitration clause has become
dysfunctional because of the presence of third parties is untenable ratiocinating that
"[c]ontracts are respected as the law between the contracting parties"[28] and that "[a]s such, the
parties are thereby expected to abide with good faith in their contractual
commitments."[29] However, in Salas, Jr., only parties to the Agreement, their assigns or heirs
have the right to arbitrate or could be compelled to arbitrate. The Court went further by
declaring that in recognizing the right of the contracting parties to arbitrate or to compel
arbitration, the splitting of the proceedings to arbitration as to some of the parties on one hand
and trial for the others on the other hand, or the suspension of trial pending arbitration between
some of the parties, should not be allowed as it would, in effect, result in multiplicity of suits,
duplicitous procedure and unnecessary delay.[30]
 The object of arbitration is to allow the expeditious determination of a dispute.[31] Clearly,
the issue before us could not be speedily and efficiently resolved in its entirety if we allow
simultaneous arbitration proceedings and trial, or suspension of trial pending
arbitration. Accordingly, the interest of justice would only be served if the trial court hears and
adjudicates the case in a single and complete proceeding.[32]
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals affirming
the Order of the Regional Trial Court of Malabon, Metro Manila, in Civil Case No. 2637-MN,
which denied petitioners Motion to Suspend Proceedings, is AFFIRMED. The Regional Trial
Court concerned is directed to proceed with the hearing of Civil Case No. 2637-MN with
dispatch. No costs.
SO ORDERED.
Mendoza, Buena, and De Leon, Jr., JJ., concur.
Quisumbing, J., no part, related to counsel of a party.

[1]
Penned by Associate Justice Demetrio G. Demetria, concurred in by Associate Justices Ramon A. Barcelona
and Omar U. Amin.
[2]
Penned by Judge Bienvenido L. Reyes (now Associate Justice of the Court of Appeals), RTC-Br. 74, Malabon,
Metro Manila.
[3]
See Note 1.
[4]
Rollo, p. 68.
[5]
Id., pp. 40-82.
[6]
Managing Director of Del Monte Corporations Export Sales Department.
[7]
Regional Director of Del Monte Corporations Export Sales Department.
[8]
Head of Credit Services Department of Del Monte Corporation.
[9]
Owner by assignment of Del Monte Trademarks in the Philippines.
[10]
Art. 20. Every person who, contrary to law, willfully and negligently causes damage to another, shall
indemnify the latter for the same.
[11]
Art. 21. Any person who willfully causes loss or damage to another in a manner that is contrary to morals,
good custom or public policy shall compensate the latter for damages.
[12]
Art. 23. Even when an act or event causing damage to anothers property was not due to the fault or negligence
of the defendant, the latter shall be liable to indemnity, if through the act or event, he was benefited.
[13]
Rollo, pp. 83-88.
[14]
Penned by Presiding Judge Amanda Valera Cabigao, RTC-Br. 73, Malabon, Metro Manila.
[15]
See Note 2.
[16]
See Note 10.
[17]
See Note 1.
[18]
The Arbitration Law.
[19]
See Notes 9, 10 and 11.
[20]
18 November 1998.
[21]
Chapter 2, Title XIV, Book IV, New Civil Code of the Philippines.
[22]
Puromines, Inc. v. Court of Appeals, G.R. No. 91228, 22 March 1993, 220 SCRA 281.
[23]
National Union Fire Insurance Company of Pittsburg v. Stolt-Nielsen Philippines, Inc., G.R. No. 87958, 26
April 1990.
[24]
Art. 1311, New Civil Code of the Philippines.
[25]
See Note 22.
[26]
G.R. No. 135362, 13 December 1999, 320 SCRA 610.
[27]
G.R. No. 102881, 7 December 1992, 216 SCRA 236.
[28]
Citing Mercantile Ins. Co., Inc. v. Felipe Ysmael, Jr. & Co., Inc., G.R. No. 43862, 13 January 1989, 169 SCRA
66.
[29]
Citing Quillian v. Court of Appeals, G.R. No. 55457, 20 January 1989, 169 SCRA 279.
[30]
Ibid.
[31]
Coquia, Jorge R., Annotation, Arbitration as a Means of Reducing Court Congestion, 29 July 1977, 78 SCRA
121.
[32]
See Note 26.

SECOND DIVISION

[G.R. No. 136154. February 7, 2001]

DEL MONTE CORPORATION-USA, PAUL E. DERBY, JR., DANIEL

COLLINS and LUIS HIDALGO, petitioners, vs. COURT OF
APPEALS, JUDGE BIENVENIDO L. REYES in his capacity as
Presiding Judge, RTC-Br. 74, Malabon, Metro Manila,
MONTEBUENO MARKETING, INC., LIONG LIONG C. SY and
SABROSA FOODS, INC., respondents.

DECISION
BELLOSILLO, J.:

This Petition for Review on certiorari assails the 17 July 1998 Decision[1] of the Court of
Appeals affirming the 11 November 1997 Order[2] of the Regional Trial Court which denied
petitioners Motion to Suspend Proceedings in Civil Case No. 2637-MN. It also questions the
appellate courts Resolution[3] of 30 October 1998 which denied petitioners Motion for
Reconsideration.
On 1 July 1994, in a Distributorship Agreement, petitioner Del Monte Corporation-USA
(DMC-USA) appointed private respondent Montebueno Marketing, Inc. (MMI) as the sole and
exclusive distributor of its Del Monte products in the Philippines for a period of five (5) years,
renewable for two (2) consecutive five (5) year periods with the consent of the parties. The
Agreement provided, among others, for an arbitration clause which states -

12. GOVERNING LAW AND ARBITRATION[4]

This Agreement shall be governed by the laws of the State of California and/or, if
applicable, the United States of America. All disputes arising out of or relating to
this Agreement or the parties relationship, including the termination thereof, shall
be resolved by arbitration in the City of San Francisco, State of California, under
the Rules of the American Arbitration Association. The arbitration panel shall
consist of three members, one of whom shall be selected by DMC-USA, one of
whom shall be selected by MMI, and third of whom shall be selected by the other
two members and shall have relevant experience in the industry x x x x

In October 1994 the appointment of private respondent MMI as the sole and exclusive
distributor of Del Monte products in the Philippines was published in several newspapers in
the country. Immediately after its appointment, private respondent MMI appointed Sabrosa
Foods, Inc. (SFI), with the approval of petitioner DMC-USA, as MMIs marketing arm to
concentrate on its marketing and selling function as well as to manage its critical relationship
with the trade.
On 3 October 1996 private respondents MMI, SFI and MMIs Managing Director Liong
Liong C. Sy (LILY SY) filed a Complaint[5] against petitioners DMC-USA, Paul E. Derby,
Jr.,[6] Daniel Collins[7] and Luis Hidalgo,[8] and Dewey Ltd.[9] before the Regional Trial Court of
Malabon, Metro Manila. Private respondents predicated their complaint on the alleged
violations by petitioners of Arts. 20,[10] 21[11] and 23[12] of the Civil Code. According to private
respondents, DMC-USA products continued to be brought into the country by parallel
importers despite the appointment of private respondent MMI as the sole and exclusive
distributor of Del Monte products thereby causing them great embarrassment and substantial
damage. They alleged that the products brought into the country by these importers were aged,
damaged, fake or counterfeit, so that in March 1995 they had to cause, after prior consultation
with Antonio Ongpin, Market Director for Special Markets of Del Monte Philippines, Inc., the
publication of a "warning to the trade" paid advertisement in leading newspapers. Petitioners
DMC-USA and Paul E. Derby, Jr., apparently upset with the publication, instructed private
respondent MMI to stop coordinating with Antonio Ongpin and to communicate directly
instead with petitioner DMC-USA through Paul E. Derby, Jr.
Private respondents further averred that petitioners knowingly and surreptitiously
continued to deal with the former in bad faith by involving disinterested third parties and by
proposing solutions which were entirely out of their control. Private respondents claimed that
they had exhausted all possible avenues for an amicable resolution and settlement of their
grievances; that as a result of the fraud, bad faith, malice and wanton attitude of petitioners,
they should be held responsible for all the actual expenses incurred by private respondents in
the delayed shipment of orders which resulted in the extra handling thereof, the actual expenses
and cost of money for the unused Letters of Credit (LCs) and the substantial opportunity losses
due to created out-of-stock situations and unauthorized shipments of Del Monte-USA products
to the Philippine Duty Free Area and Economic Zone; that the bad faith, fraudulent acts and
willful negligence of petitioners, motivated by their determination to squeeze private
respondents out of the outstanding and ongoing Distributorship Agreement in favor of another
party, had placed private respondent LILY SY on tenterhooks since then; and, that the shrewd
and subtle manner with which petitioners concocted imaginary violations by private respondent
MMI of the Distributorship Agreement in order to justify the untimely termination thereof was
a subterfuge.For the foregoing, private respondents claimed, among other reliefs, the payment
of actual damages, exemplary damages, attorneys fees and litigation expenses.
 On 21 October 1996 petitioners filed a Motion to Suspend Proceedings[13] invoking the
arbitration clause in their Agreement with private respondents.
In a Resolution[14] dated 23 December 1996 the trial court deferred consideration of
petitioners Motion to Suspend Proceedings as the grounds alleged therein did not constitute the
suspension of the proceedings considering that the action was for damages with prayer for the
issuance of Writ of Preliminary Attachment and not on the Distributorship Agreement.
On 15 January 1997 petitioners filed a Motion for Reconsideration to which private
respondents filed their Comment/Opposition. On 31 January 1997 petitioners filed
their Reply. Subsequently, private respondents filed an Urgent Motion for Leave to Admit
Supplemental Pleading dated 2 April 1997. This Motion was admitted, over petitioners
opposition, in an Order of the trial court dated 27 June 1997.
As a result of the admission of the Supplemental Complaint, petitioners filed on 22 July
1997 a Manifestation adopting their Motion to Suspend Proceedings of 17 October 1996
and Motion for Reconsideration of 14 January 1997.
On 11 November 1997 the Motion to Suspend Proceedings was denied by the trial court
on the ground that it "will not serve the ends of justice and to allow said suspension will only
delay the determination of the issues, frustrate the quest of the parties for a judicious
determination of their respective claims, and/or deprive and delay their rights to seek
redress."[15]
On appeal, the Court of Appeals affirmed the decision of the trial court. It held that the
alleged damaging acts recited in the Complaint, constituting petitioners causes of action,
required the interpretation of Art. 21 of the Civil Code[16] and that in determining whether
petitioners had violated it "would require a full blown trial" making arbitration "out of the
question."[17]Petitioners Motion for Reconsideration of the affirmation was denied. Hence,
this Petition for Review.
The crux of the controversy boils down to whether the dispute between the parties warrants
an order compelling them to submit to arbitration.
Petitioners contend that the subject matter of private respondents causes of action arises
out of or relates to the Agreement between petitioners and private respondents. Thus,
considering that the arbitration clause of the Agreement provides that all disputes arising out
of or relating to the Agreement or the parties relationship, including the termination thereof,
shall be resolved by arbitration, they insist on the suspension of the proceedings in Civil Case
No. 2637-MN as mandated by Sec. 7 of RA 876[18] -

Sec. 7. Stay of Civil Action. If any suit or proceeding be brought upon an issue
arising out of an agreement providing for arbitration thereof, the court in which
such suit or proceeding is pending, upon being satisfied that the issue involved in
such suit or proceeding is referable to arbitration, shall stay the action or
proceeding until an arbitration has been had in accordance with the terms of the
agreement. Provided, That the applicant for the stay is not in default in proceeding
with such arbitration.

Private respondents claim, on the other hand, that their causes of action are rooted in Arts.
20, 21 and 23 of the Civil Code,[19]the determination of which demands a full blown trial, as
correctly held by the Court of Appeals. Moreover, they claim that the issues before the trial
court were not joined so that the Honorable Judge was not given the opportunity to satisfy
himself that the issue involved in the case was referable to arbitration. They submit that,
apparently, petitioners filed a motion to suspend proceedings instead of sending a written
demand to private respondents to arbitrate because petitioners were not sure whether the case
could be a subject of arbitration. They maintain that had petitioners done so and private
respondents failed to answer the demand, petitioners could have filed with the trial court their
demand for arbitration that would warrant a determination by the judge whether to refer the
case to arbitration. Accordingly, private respondents assert that arbitration is out of the
question.
Private respondents further contend that the arbitration clause centers more on venue rather
than on arbitration. They finally allege that petitioners filed their motion for extension of time
to file this petition on the same date[20] petitioner DMC-USA filed a petition to compel private
respondent MMI to arbitrate before the United States District Court in Northern California,
docketed as Case No. C-98-4446. They insist that the filing of the petition to compel arbitration
in the United States made the petition filed before this Court an alternative remedy and, in a
way, an abandonment of the cause they are fighting for here in the Philippines, thus warranting
the dismissal of the present petition before this Court.
There is no doubt that arbitration is valid and constitutional in our jurisdiction.[21] Even
before the enactment of RA 876, this Court has countenanced the settlement of disputes
through arbitration. Unless the agreement is such as absolutely to close the doors of the courts
against the parties, which agreement would be void, the courts will look with favor upon such
amicable arrangement and will only interfere with great reluctance to anticipate or nullify the
action of the arbitrator.[22] Moreover, as RA 876 expressly authorizes arbitration of domestic
disputes, foreign arbitration as a system of settling commercial disputes was likewise
recognized when the Philippines adhered to the United Nations "Convention on the
Recognition and the Enforcement of Foreign Arbitral Awards of 1958" under the 10 May 1965
Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and allowing
enforcement of international arbitration agreements between parties of different nationalities
within a contracting state.[23]
A careful examination of the instant case shows that the arbitration clause in the
Distributorship Agreement between petitioner DMC-USA and private respondent MMI is valid
and the dispute between the parties is arbitrable. However, this Court must deny the petition.
The Agreement between petitioner DMC-USA and private respondent MMI is a
contract. The provision to submit to arbitration any dispute arising therefrom and the
relationship of the parties is part of that contract and is itself a contract. As a rule, contracts are
respected as the law between the contracting parties and produce effect as between them, their
assigns and heirs.[24]Clearly, only parties to the Agreement, i.e., petitioners DMC-USA and its
Managing Director for Export Sales Paul E. Derby, Jr., and private respondents MMI and its
Managing Director LILY SY are bound by the Agreement and its arbitration clause as they are
the only signatories thereto. Petitioners Daniel Collins and Luis Hidalgo, and private
respondent SFI, not parties to the Agreement and cannot even be considered assigns or heirs
of the parties, are not bound by the Agreement and the arbitration clause therein. Consequently,
referral to arbitration in the State of California pursuant to the arbitration clause and the
suspension of the proceedings in Civil Case No. 2637-MN pending the return of the arbitral
award could be called for[25] but only as to petitioners DMC-USA and Paul E. Derby, Jr., and
private respondents MMI and LILY SY, and not as to the other parties in this case, in
accordance with the recent case of Heirs of Augusto L. Salas, Jr. v. Laperal Realty
Corporation,[26] which superseded that of Toyota Motor Philippines Corp. v. Court of
Appeals.[27]
 In Toyota, the Court ruled that "[t]he contention that the arbitration clause has become
dysfunctional because of the presence of third parties is untenable ratiocinating that
"[c]ontracts are respected as the law between the contracting parties"[28] and that "[a]s such, the
parties are thereby expected to abide with good faith in their contractual
commitments."[29] However, in Salas, Jr., only parties to the Agreement, their assigns or heirs
have the right to arbitrate or could be compelled to arbitrate. The Court went further by
declaring that in recognizing the right of the contracting parties to arbitrate or to compel
arbitration, the splitting of the proceedings to arbitration as to some of the parties on one hand
and trial for the others on the other hand, or the suspension of trial pending arbitration between
some of the parties, should not be allowed as it would, in effect, result in multiplicity of suits,
duplicitous procedure and unnecessary delay.[30]
The object of arbitration is to allow the expeditious determination of a dispute.[31] Clearly,
the issue before us could not be speedily and efficiently resolved in its entirety if we allow
simultaneous arbitration proceedings and trial, or suspension of trial pending
arbitration. Accordingly, the interest of justice would only be served if the trial court hears and
adjudicates the case in a single and complete proceeding.[32]
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals affirming
the Order of the Regional Trial Court of Malabon, Metro Manila, in Civil Case No. 2637-MN,
which denied petitioners Motion to Suspend Proceedings, is AFFIRMED. The Regional Trial
Court concerned is directed to proceed with the hearing of Civil Case No. 2637-MN with
dispatch. No costs.
SO ORDERED.
Mendoza, Buena, and De Leon, Jr., JJ., concur.
Quisumbing, J., no part, related to counsel of a party.

[1]
Penned by Associate Justice Demetrio G. Demetria, concurred in by Associate Justices Ramon A. Barcelona
and Omar U. Amin.
[2]
Penned by Judge Bienvenido L. Reyes (now Associate Justice of the Court of Appeals), RTC-Br. 74, Malabon,
Metro Manila.
[3]
See Note 1.
[4]
Rollo, p. 68.
[5]
Id., pp. 40-82.
[6]
Managing Director of Del Monte Corporations Export Sales Department.
[7]
Regional Director of Del Monte Corporations Export Sales Department.
[8]
Head of Credit Services Department of Del Monte Corporation.
[9]
Owner by assignment of Del Monte Trademarks in the Philippines.
[10]
Art. 20. Every person who, contrary to law, willfully and negligently causes damage to another, shall
indemnify the latter for the same.
[11]
Art. 21. Any person who willfully causes loss or damage to another in a manner that is contrary to morals,
good custom or public policy shall compensate the latter for damages.
[12]
Art. 23. Even when an act or event causing damage to anothers property was not due to the fault or negligence
of the defendant, the latter shall be liable to indemnity, if through the act or event, he was benefited.
[13]
Rollo, pp. 83-88.
[14]
Penned by Presiding Judge Amanda Valera Cabigao, RTC-Br. 73, Malabon, Metro Manila.
[15]
See Note 2.
[16]
See Note 10.
[17]
See Note 1.
[18]
The Arbitration Law.
[19]
See Notes 9, 10 and 11.
[20]
18 November 1998.
[21]
Chapter 2, Title XIV, Book IV, New Civil Code of the Philippines.
[22]
Puromines, Inc. v. Court of Appeals, G.R. No. 91228, 22 March 1993, 220 SCRA 281.
[23]
National Union Fire Insurance Company of Pittsburg v. Stolt-Nielsen Philippines, Inc., G.R. No. 87958, 26
April 1990.
[24]
Art. 1311, New Civil Code of the Philippines.
[25]
See Note 22.
[26]
G.R. No. 135362, 13 December 1999, 320 SCRA 610.
[27]
G.R. No. 102881, 7 December 1992, 216 SCRA 236.
[28]
Citing Mercantile Ins. Co., Inc. v. Felipe Ysmael, Jr. & Co., Inc., G.R. No. 43862, 13 January 1989, 169 SCRA
66.
[29]
Citing Quillian v. Court of Appeals, G.R. No. 55457, 20 January 1989, 169 SCRA 279.
[30]
Ibid.
[31]
Coquia, Jorge R., Annotation, Arbitration as a Means of Reducing Court Congestion, 29 July 1977, 78 SCRA
121.
[32]
See Note 26.