19.

Gonzales vs Climax Mining LTD

DOCTRINE OF SEPARABILITY
Facts:
Jorge Gonzales, as claimowner of mineral deposits, entered into a co-production, joint venture and/or
production-sharing letter-agreement with Geophilippines, Inc, and Inmex Ltd. Under the agreement,
Petitioner granted to Geophilippines, Inc. and Inmex Ltd. collectively, the exclusive right to explore and survey
the mining claims for a period of 36 months within which the latter could decide to take an operating
agreement on the mining claims and/or develop, operate, mine and otherwise exploit the mining claims and
market any and all minerals that may be derived therefrom. The exploration of the mining claims extended for
another period of three years.

Gonzales, Arimco Mining Corporation, Geophilippines Inc., Inmex Ltd., and Aumex
Philippines, Inc. signed a document designated as the Addendum to the May 14, 1987 Letter of Intent and
February 28, 1989 Agreement with Express Adhesion Thereto (hereafter, the Addendum Contract).
Under the Addendum Contract, Arimco Mining Corporation would apply to the Government of the Philippines
for permission to mine the claims as the Government’s contractor under a Financial and Technical Assistance
Agreement (FTAA). Arimco Mining Corporation obtained the FTAA and carried out work under the FTAA.

Gonzales filed before the Panel of Arbitrators, Region II, Mines and Geosciences Bureau of the DENR,
against respondents Climax-Arimco Mining Corporation (Climax-Arimco), Climax, and APMI, a Complaint
seeking the declaration of nullity or termination of the Addendum Contract, the FTAA, the Operating and
Financial Accommodation Contract, the Assignment, Accession Agreement, and the Memorandum of
Agreement. Petitioner Gonzales prayed for an unspecified amount of actual and exemplary damages plus
attorney’s fees and for the issuance of a temporary restraining order and/or writ of preliminary
injunction to restrain or enjoin respondents from further implementing the questioned agreements. He
sought said reliefs on the grounds of "FRAUD, OPPRESSION and/or VIOLATION of Section 2, Article XII of the
CONSTITUTION perpetrated by these foreign RESPONDENTS, conspiring and confederating with one another
and with each other…."
The Panel of Arbitrators dismissed the Complaint for lack of jurisdiction. Petitioner moved for
reconsideration and this was granted, the Panel believing that the case involved a dispute involving rights to
mining areas and a dispute involving surface owners, occupants and claim owners/concessionaires.
According to the Panel, although the issue raised in the Complaint appeared to be purely civil in nature and
should be within the jurisdiction of the regular courts, a ruling on the validity of the assailed contracts would
result to the grant or denial of mining rights over the properties; therefore, the question on the validity of the
contract amounts to a mining conflict or dispute. Hence, the Panel granted the Motion for Reconsideration
with regard to the issues of nullity, termination, withdrawal or damages, but with regard to the
constitutionality of the Addendum Agreement and FTAA, it held that it had no jurisdiction. Respondents
assailed the orders of the Panel of Arbitrators via a petition for certiorari before the Court of Appeals. The
Court of Appeals granted the petition, declaring that the Panel of Arbitrators did not have jurisdiction over the
complaint filed by petitioner. The jurisdiction of the Panel of Arbitrators, said the Court of Appeals, is limited
only to the resolution of mining disputes, defined as those which raise a question of fact or matter requiring
the technical knowledge and experience of mining authorities. It was found that the complaint alleged fraud,
oppression and violation of the Constitution, which called for the interpretation and application of laws, and
did not involve any mining dispute. The Court of Appeals also observed that there were no averments relating
to particular acts constituting fraud and oppression. Also, the Court of Appeals noted that fraud and duress
only make a contract voidable, not inexistent, hence the contract remains valid until annulled. The Court of
Appeals was of the opinion that the petition should have been settled through arbitration under Republic
Act No. 876 (The Arbitration Law) as stated in the Addendum Contract.
Petitioner filed this Petition for Review on Certiorari Under Rule 45 assailing the decision and
resolution of the Court of Appeals.
Issue:
WON the dispute between the parties should be brought for arbitration under Rep. Act No. 876.
Held:
No.
Arbitration before the Panel of Arbitrators is proper only when there is a disagreement between the parties as
to some provisions of the contract between them, which needs the interpretation and the application of that
particular knowledge and expertise possessed by members of that Panel. It is not proper when one of the
parties repudiates the existence or validity of such contract or agreement on the ground of fraud or
oppression as in this case. The validity of the contract cannot be subject of arbitration proceedings.
Allegations of fraud and duress in the execution of a contract are matters within the jurisdiction of the
ordinary courts of law. These questions are legal in nature and require the application and
interpretation of laws and jurisprudence which is necessarily a judicial function.
The case should not be brought under the ambit of the Arbitration Law. The question of validity of the
contract containing the agreement to submit to arbitration will affect the applicability of the arbitration clause
itself. A party cannot rely on the contract and claim rights or obligations under it and at the same time impugn
its existence or validity. Indeed, litigants are enjoined from taking inconsistent positions. As previously
discussed, the complaint should have been filed before the regular courts as it involved issues which are
judicial in nature.
20. Agan vs Laperal Realty Corp.
PARTIES NOT BOUND IN THE ARBITRATION AGREEMENT

Facts:
On October 5, 1994, Asia's Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal to the
Government for the development of Ninoy Aquino International Airport International Passenger Terminal III
(NAIA IPT III) under a build-operate-and-transfer arrangement pursuant to RA 6957, as amended.
It was endorsed to the National Economic Development Authority (NEDA), which, in turn, reviewed
and approved it for bidding. The Paircargo Consortium was the only company that submitted a competitive
proposal. AEDC questioned, among others, the financial capability of Paircargo Consortium. However, the Pre-
Qualification Bids and Awards Committee (PBAC) had prequalified the Paircargo Consortium to undertake the
project. Later, Paircargo Consortium incorporated into Philippine International Airport Terminals Co.,
(PIATCO). And for failure of AEDC to match the price proposal submitted by PIATCO, the project was awarded
to PIATCO. On July 12, 1997, the Government signed the 1997 Concession Agreement.
Thereafter, the Amended and Restated Concession Agreement (ARCA) and three Supplements thereto
were signed by the Government and PIATCO. Consequently, the workers of the international airline service
providers, claiming that they stand to lose their employment upon the implementation of the said
agreements, filed before this Court a petition for prohibition docketed as G.R. No. 155001.
Later, the service providers joined their cause. Congressmen Salacnib Baterina, Clavel Martinez and
Constantino Jaraula, alleging that the said contracts compelled government expenditure without
appropriation, filed a similar petition docketed as G.R. No. 155547. And several employees of the MIAA
likewise filed a petition docketed as G.R. No. 155661 assailing the legality of these agreements.

Issue: Whether or not the petitioners are bound with the arbitration clause.

Held: NO. It is established that petitioners in the present cases who have presented legitimate interests in the
resolution of the controversy are not parties to the PIATCO Contracts. Accordingly, they cannot be bound by the
arbitration clause provided for in the ARCA and hence, cannot be compelled to submit to arbitration
proceedings. A speedy and decisive resolution of all the critical issues in the present controversy, including those
raised by petitioners, cannot be made before an arbitral tribunal. The object of arbitration is precisely to allow
an expeditious determination of a dispute. This objective would not be met if this Court were to allow the
parties to settle the cases by arbitration as there are certain issues involving non-parties to the PIATCO
Contracts which the arbitral tribunal will not be equipped to resolve.
21. Salas Jr. vs. Laperal Realty Corp.
PARTIES TO AN ARBITRATION AGREEMENT

FACTS:
Augusto Salas, Jr. was the registered owner of a vast tract of land in Lipa City, Batangas. He entered into
an Owner-Contractor Agreement with Respondent Laperal Realty Corporation to render and provide complete
(horizontal) construction services on his land. Said agreement contains an arbitration clause, to wit:
“ARTICLE VI. ARBITRATION.
All cases of dispute between CONTRACTOR and OWNER’S representative shall be referred to the committee
represented by:
1. One representative of the OWNER;
2. One representative of the CONTRACTOR;
3. One representative acceptable to both OWNER and CONTRACTOR.”
Salas, Jr. then executed a Special Power of Attorney (SPA)in favor of Respondent Laperal Realty to exercise
general control, supervision and management of the sale of his land, for cash or on installment basis. By virtue
thereof, Respondent Laperal Realty subdivided said land and sold portions thereof to Respondents Rockway
Real Estate Corporation and South Ridge Village, Inc. in 1990; to Respondent spouses Abrajano and Lava and
Oscar Dacillo in 1991; and to Respondents Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capalan in
1996 (Respondent Lot Buyers hereinafter).
Back in 1989, Salas, Jr. left his home in the morning for a business trip to Nueva Ecija. He, however,
never returned on that unfaithful morning. Seven years later or in 1996, his wife, Teresita Diaz-Salas filed with
the RTC of Makati City a verified Petition for the Declaration of Presumptive Death, which Petition was granted.
In 1998, Petitioners, as heirs of Salas, Jr. filed in the RTC of Lipa City a Complaint for Declaration of
Nullity of Sale, Reconveyance, Cancellation of Contract, Accounting and Damages against Respondents.
Respondent Laperal Realty filed a Motion to Dismiss on the ground that Petitioners failed to submit their
grievance to arbitration as required under Article VI of the Owner-Contractor Agreement. Respondent spouses
Abrajano and Lava and Respondent Dacillo filed a Joint Answer with Counterclaim and Crossclaim praying for
dismissal of Petitioners’ Complaint for the same reason.
The RTC then issued the herein assailed Order dismissing Petitioners’ Complaint for non-compliance
with the foregoing arbitration clause.
Hence the present Petition for Review on Certiorari under Rule 45.
ARGUMENTS:
Petitioners argue that (1) their causes of action did not emanate from the Owner-Contractor Agreement, (2)
that their causes of action for cancellation of contract and accounting are covered by the exception under the
Arbitration Law, and (3) that failure to arbitrate is not a ground for dismissal.
Petitioners claim that they suffered lesion of more than one-fourth (1/4) of the value of Salas, Jr.’s land when
Respondent Laperal Realty subdivided it and sold portions thereof to Respondent Lot Buyers. Thus, they
instituted action against both Respondent Laperal Realty and Respondent Lot Buyers for rescission of the sale
transactions and reconveyance to them of the subdivided lots. They argue that rescission, being their cause of
action, falls under the exception clause in Sec. 2 ofRepublic Act No. 876 which provides that “such submission
[to] or contract [of arbitration] shall be valid, enforceable and irrevocable, save upon such grounds as exist at
law for the revocation of any contract”.

ISSUE:

Whether or not the arbitration clause under Article VI of the Owner-Contractor Agreement is binding upon
the Respondent Lot Buyers?

RULING:
NO. Respondent Lot Buyers are neither parties to the Agreement nor the latter’s assigns or heirs.
Consequently, the right to arbitrate as provided in Article VI of the Agreement was never vested in
Respondent Lot Buyers.Respondent Laperal Realty, on the other hand, as a contracting party to the
Agreement, has the right to compel Petitioners to first arbitrate before seeking judicial relief. However, to
split the proceedings into arbitration for Respondent Laperal Realty and trial for the Respondent Lot Buyers,
or to hold trial in abeyance pending arbitration between Petitioners and Respondent Laperal Realty, would in
effect result in multiplicity of suits, duplicitous procedure and unnecessary delay. On the other hand, it would
be in the interest of justice if the trial court hears the complaint against all herein Respondents and
adjudicates Petitioners’ rights as against theirs in a single and complete proceeding.
RATIO DECIDENDI:
In a catena of cases inspired by Justice Malcolm’s provocative dissent in Vega v. San Carlos Milling Co. [1924],
the SC has recognized arbitration agreements as valid, binding, enforceable and not contrary to public policy
so much so that when there obtains a written provision for arbitration which is not complied with, the trial
court should suspend the proceedings and order the parties to proceed to arbitration in accordance with the
terms of their agreement. Arbitration is the “wave of the future” in dispute resolution. To brush aside a
contractual agreement calling for arbitration in case of disagreement between parties would be a step
backward.
A submission to arbitration is a contract. As such, the Agreement, containing the stipulation on arbitration,
binds the parties thereto, as well as their assigns and heirs. But only they. Petitioners, as heirs of Salas, Jr., and
Respondent Laperal Realty are certainly bound by the Agreement. If Respondent Laperal Realty, had assigned
its rights under the Agreement to a third party, making the former, the assignor, and the latter, the assignee,
such assignee would also be bound by the arbitration provision since assignment involves such transfer of
rights as to vest in the assignee the power to enforce them to the same extent as the assignor could have
enforced them against the debtor or, in this case, against the heirs of the original party to the Agreement.
However, Respondent Lot Buyers are NOT assignees of the rights of Respondent Laperal Realty under the
Agreement to develop Salas, Jr.’s land and sell the same. They are, rather, buyers of the land that Respondent
Laperal Realty was given the authority to develop and sell under the Agreement. As such, they are NOT
“assigns” contemplated in Art. 1311 of the New Civil Code which provides that “contracts take effect only
between the parties, their assigns and heirs”.
In the same vein, Petitioners’ contention that rescission, being their cause of action, falls under the exception
clause in Sec. 2 of Republic Act No. 876 is without merit. For while rescission, as a general rule, is an
arbitrable issue, they impleaded in the suit for rescission the Respondent Lot Buyers who are neither parties
to the Agreement nor the latter’s assigns or heirs. Consequently, the right to arbitrate as provided in Article VI
of the Agreement was never vested in Respondent Lot Buyers.
22. Transfield Philippines Inc. vs. Luzon Hydro Corporation
INDEPENDENCE DOCTRINE

Facts:
Transfield Philippines (Transfield) entered into a turn-key contract with Luzon Hydro Corp.
(LHC).Under the contract, Transfield were to construct a hydro-electric plants in Benguet and Ilocos.
Transfield was given the sole responsibility for the design, construction, commissioning, testing and
completion of the Project. The contract provides for a period for which the project is to be completed and also
allows for the extension of the period provided that the extension is based on justifiable grounds such as
fortuitous event. In order to guarantee performance by Transfield, two stand-by letters of credit were
required to be opened. During the construction of the plant, Transfield requested for extension of time citing
typhoon and various disputes delaying the construction. LHC did not give due course to the extension of the
period prayed for but referred the matter to arbitration committee. Because of the delay in the construction of
the plant, LHC called on the stand-by letters of credit because of default. However, the demand was objected
by Transfield on the ground that there is still pending arbitration on their request for extension of time.

Issue:

Whether or not LHC can collect from the letters of credit despite the pending arbitration case

Held:
YES. Transfield’s argument that any dispute must first be resolved by the parties, whether through
negotiations or arbitration, before the beneficiary is entitled to call on the letter of credit in essence would
convert the letter of credit into a mere guarantee.
The independent nature of the letter of credit may be: (a) independence in toto where the credit is
independent from the justification aspect and is a separate obligation from the underlying agreement like for
instance a typical standby; or (b) independence may be only as to the justification aspect like in a commercial
letter of credit or repayment standby, which is identical with the same obligations under the underlying
agreement. In both cases the payment may be enjoined if in the light of the purpose of the credit the payment
of the credit would constitute fraudulent abuse of the credit.
Jurisprudence has laid down a clear distinction between a letter of credit and a guarantee in that the
settlement of a dispute between the parties is not a pre-requisite for the release of funds under a letter of
credit. In other words, the argument is incompatible with the very nature of the letter of credit. If a letter of
credit is drawable only after settlement of the dispute on the contract entered into by the applicant and the
beneficiary, there would be no practical and beneficial use for letters of credit in commercial transactions.
The engagement of the issuing bank is to pay the seller or beneficiary of the credit once the draft and the
required documents are presented to it. The so-called “independence principle” assures the seller or the
beneficiary of prompt payment independent of any breach of the main contract and precludes the issuing
bank from determining whether the main contract is actually accomplished or not. Under this principle, banks
assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect
of any documents, or for the general and/or particular conditions stipulated in the documents or
superimposed thereon, nor do they assume any liability or responsibility for the description, quantity, weight,
quality, condition, packing, delivery, value or existence of the goods represented by any documents, or for the
good faith or acts and/or omissions, solvency, performance or standing of the consignor, the carriers, or the
insurers of the goods, or any other person whomsoever.

23. EQUITABLE PCI BANKING CORPORATION,

SETTING ASIDE AN ARBITRAL AWARD

FACTS:

Petitioners Equitable PCI Bank, Inc. (EPCIB) and the individual shareholders of Bankard, Inc., as sellers, and
respondent RCBC Capital Corporation (RCBC), as buyer, executed a Share Purchase Agreemen t (SPA) for the
purchase of petitioners’ interests in Bankard, representing 226,460,000 shares, for the price of PhP
1,786,769,400. To expedite the purchase, RCBC agreed to dispense with the conduct of a due diligence audit
on the financial status of Bankard. RCBC deposited the stipulated down payment amount in an escrow
account after which it was given full management and operational control of Bankard. June 2, 2000 is also
considered by the parties as the Closing Date referred to in the SPA.
Sometime in September 2000, RCBC had Bankard’s accounts audited, creating for the purpose an audit team
and the conclusion was that the warranty, as contained in Section 5(h) of the SPA (simply Sec. 5[h]
hereinafter), was correct. RCBC paid the balance of the contract price. The corresponding deeds of sale for the
shares in question were executed inJanuary 2001. Thereafter RCBC informed petitioners of its having
overpaid the purchase price of the subject shares, claiming that there was an overstatement of valuation of
accounts amounting to PhP 478 million, resulting in theover payment of over PhP 616 million. Thus, RCBC
claimed that petitioners violated their warranty, as sellers, embodied in Sec. 5(g) of the SPA (Sec. 5[g]
hereinafter).RCBC, in accordance with Sec. 10 of the SPA, filed a Request for Arbitration dated May 12, 2004
with the International Chamber of Commerce-International Court of Arbitration (ICC-ICA). In the request,
RCBC charged Bankard with deviating from, contravening and not following generally accepted accounting
principles and practices in maintaining their books. Arbitration in the ICC-ICA proceeded after the formation
of the arbitration tribunal consisting of retired Justice Santiago M. Kapunan, nominated by petitioners; Neil
Kaplan, RCBC’s nominee; and Sir Ian Barker, appointed by the ICC-ICA. After drawn out proceedings with each
party alleging deviation and non-compliance by the other with arbitration rules, the tribunal, with Justice
Kapunan dissenting, rendered a Partial Award . On the matter of prescription, the tribunal held that
RCBC’s claim is not time -barred, the claim properly falling under the contemplation of Sec. 5(g) and not Sec.
5(h).
As such, the tribunal concluded, RCBC’s claim was filed within the three (3)-year period under Sec. 5(g) and
that the six (6)-month period under Sec. 5(h) did not apply. The tribunal also exonerated RCBC from laches,
the latter having sought relief within the three (3)-year period prescribed in the SPA. Notably, the tribunal
considered the rescission of the SPA and ASPA as impracticable and "totally out of the question." RCBC filed
with the RTC a Motion to Confirm Partial Award. The RTC issued the first assailed order confirming the
Partial Award and denying the adverted separate motions to vacate and to suspend and inhibit. From this
order, petitioners sought reconsideration, but their motion was denied by the RTC .

Issue:
Whether or Not there is manifest disregard of the law by the ICC-ICA

Held:
NO. The petition must be denied. This is a procedural miscue for petitioners who erroneously bypassed the
Court of Appeals (CA) in pursuit of its appeal. While this procedural gaffe has not been raised by RCBC, still we
would be remiss in not pointing out the proper mode of appeal from a decision of the RTC confirming,
vacating, setting aside, modifying, or correcting an arbitral award.
Rule 45 is not the remedy available to petitioners as the proper mode of appeal assailing the decision of the
RTC confirming as arbitral award is an appeal before the CA pursuant to Sec. 46 of Republic Act No. (RA)
9285, otherwiseknown as the Alternative Dispute Resolution Act of 2004, or completely, An Act to
Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to Establish the
Office for Alternative Dispute Resolution, and for other Purposes , promulgated on April 2, 2004 and became
effective on April 28, 2004 after its publication on April 13, 2004.
A party asking for the vacation of an arbitral award must show that any of the grounds for vacating,
rescinding, or modifying an award are present or that the arbitral award was made in manifest disregard of
the law. Otherwise, the Court is duty-bound to uphold an arbitral award

24. NATIONAL POWER CORPORATION V. HON. ROSE MARIE ALONZO-LEGASTO

SETTING ASIDE AN ARBITRAL AWARD
FACTS:
National Power Corporation( NPC) and FIRST UNITED CONSTRUCTORS CORPORATION(FUCC) Entered into a
project for excavation. FUCC needed to do blasting works to continue with the project. NPC agreed that it will
issue an extra work order for the blasting works and subsequently pay FUCC but this did not happen. The two
entered into a compromise agreement and agreed that NPC will pay the undisputed unpaid claims and that
they will submit the agreement to an arbitration board to settle the amount to be paid. After the arbitration
issued its ruling, NPC questioned the award which included the blasting works (no extra work order issued
for it) allegedly due to promissory estoppel.

1. NPC and First United Constructors Corporation (FUCC) entered into a construction of power facilities,
one in Cawayan area and the other in Bacon, Sorsogon. The price for grading excavation was P76.00
per cubic meter.
2. After commencement of the excavation, FUCC requested that it be allowed to blast to the design grade
of 495 meters above sea level as its dozers and rippers could no longer excavate. It also requested
that it be paid P1346 per cubic meter
3. NPC, after creating a task force to review the blasting works, offered to pay P458.07 per cubic meter,
which FUCC accepted in a letter.
4. FUCC eventually abandoned the project. NPC decided to take over the project to stave-off huge
pecuniary and non-monetary losses. FUCC, in order to prevent this filed an action for specific
performance and damages with preliminary injunction and TRO against NPC.
5. RTC qc issued a TRO and later a writ of preliminary injunction.
a. NPC filed a petition for certiorari before the CA. CA granted petition and set aside the lower
court’s order
6. FUCC filed before the SC a petition for review assailing the decision of the CA but pending the
resolution of the SC, NPC and FUCC entered into a compromise agreement.
a. In the compromise agreement, NPC shall pay the undisputed unpaid billings of FUCC in
connection with the project; that NPC shall have the right to preceed with the works by re-
bidding it; upon final resolution of the arbitration, the parties shall mutually terminate the
contract among others
b. That the claims will be settled through 2 stages
i. One is the signing of the compromise agreement which they whill submit for
approval by this court
ii. It shall submit by arbitration to settle the price of the blasting, damages and all other
unresolved claims by the parties. The 3-man commission was headed by Mr.
Carmelo Sison
7. The compromise agreement was approved by the court and the case was then referred to arbitration
where it was held that an award of P118,681,328.28 as just compensation plus 10% thereof for
attorney’s fees and expenses of litigation was due. (NPC already paid 36,550,000 so they only owe
FUCC P82,131,328.28)
8. FUCC filed a motion for execution while NPC filed a motion to vacate award by the arbitration board.
Judge Alonzo-Legasto approved the motion for execution.
9. NPC went to the CA alleging grave abuse of discretion(GAD).
a. CA: no GAD. The arbitration board acted pursuant to its powers under the compromise
agreement. That NPC failed to prove by evidence that Mr. Sison was biased. That although the
blasting was not part of the unit price for the project and that there was no perfected
contract for it, FUCC relied on the representation of NPC’s officials that the extra work order
should be submitted to its board of directors for approval and that the blasting works would
be paid. CA ruled that
FUCC is entitled to just compensation on grounds of equity and promissory estoppel
10. NPC went up to the SC with basically the same arguments before the CA. one of these arguments is
that the claim for blasting works was not approved by authorized officials, that the approval of extra
work by authorized officials is required for an extra work order is issued.

ISSUE: Whether or not the arbitral award should be vacated

 HELD:
NO. NPC’s only ground was the alleged bias of Mr. Sison, which it failed to prove by evidence at the
lower court. Hence they cannot depart from the ruling upholding the award.

Petitioner contends that the Arbitration Board, trial court and the appellate court unduly relied on the
memorandum of Mr. Umali which was allegedly not marked as an exhibit. We note, however, that this
memorandum actually forms part of the record of the case as Exhibit "DDD." Moreover, both the Arbitration
Board and the Court of Appeals found that Mr. Umali's proposal is the best evidence on record as it is
supported by detailed cost estimates that will serve as basis to determine just compensation.
While the Arbitration Board found that FUCC did not present evidence showing the amount it paid to its
blasting sub-contractor, it did present testimony to the effect that it incurred other costs and expenses on top
of the actual blasting cost. Hence, the amount of P430.00 per cubic meter indicated in FUCC's Contract of
Agreement with Dynamic is not controlling.
Moreover, FUCC presented evidence showing that in two (2) other projects where blasting works were
undertaken, petitioner paid the contractors P1,346 per cubic meter for blasting and disposal of solid rocks in
the Palinpinon project and P1,144.51 per cubic meter for rock excavation in the Hermosa Balintawak project.
Besides, while petitioner claims that in a contract with Wilper Construction for the construction of the
Tayabas sub-station, the price agreed for blasting was only P96.13, petitioner itself did not present evidence
in support of this claim.
Parenthetically, the point raised by petitioner that its subsequent contractor, Phesco, did not undertake
blasting works in excavating the same rock formation is extraneous and irrelevant. The fact is that petitioner
allowed FUCC to blast and undertook to pay for the blasting works.
At this point, we hearken to the rule that the findings of the Arbitration Board, affirmed by the trial court
and the Court of Appeals and supported as they are by substantial evidence, should be accorded not only
respect but finality. Accordingly, the amount of P763.00 per cubic meter fixed by the Arbitration Board and
affirmed by the appellate court as just compensation should stand.

25. Cargill Philippines Inc vs San Fernando Regala Trading

DOCTRINE OF SEPARABILITY
Facts:

San Fernando Regala Trading filed before the trial court a complaint for rescission of contract with damages
against Cargill Philippines, Inc. In its complaint, San Fernando Regala Trading alleged that it was engaged in
buying and selling molasses and that Cargill was one of its suppliers.

San Fernando Regala Trading alleged that it purchased from Cargill, and the latter had agreed to sell, 12,000
tons of cane blackstrap molasses originating from Thailand at the price of $192 per metric ton, and that
delivery would be made in April or May 1997.

After San Fernando Regala Trading delivered the letter of credit, it claimed that Cargill failed to comply with
its obligations under the contract, which included an arbitration clause as follows:
"Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be settled by
arbitration in the City of New York before the American Arbitration Association. The Arbitration Award shall be
final and binding on both parties."
Cargill moved to dismiss and/or suspend the court proceedings citing the arbitration clause. San Fernando
Regala Trading argued that since it was seeking rescission of the contract, it was in effect repudiating the
contract which included the arbitration clause. Further, it argued that rescission constitutes a judicial issue,
which requires the exercise of judicial function and cannot be the subject of arbitration.

Issue: Whether or not the Arbitration Clause is a separate contract?

Held:
YES. The provision to submit to arbitration any dispute arising between the parties is part of the contract and
is itself a contract. The arbitration agreement is to be treated as a separate agreement and does not
automatically terminate when the contract of which it is a part comes to an end. To reiterate a contrary ruling
would suggest that a party's mere repudiation of the main contract is sufficient to avoid arbitration; that is
exactly the situation that the separability doctrine seeks to avoid.

San Fernando Regala Trading filed a complaint for rescission of contract and damages with the trial court. In
so doing, it alleged that a contract existed. It was that contract which provided for an arbitration clause which
expressed the parties' intention that any dispute to arise between them, as buyer and seller, should be
referred to arbitration. It is for the arbitrator and not the court to decide whether a contract between the
parties exists or is valid. Under the circumstances, the argument that rescission is judicial in nature is
misplaced.