ADR Labor arbitration
obligation on which it is based, as either compulsory or
G.R. No. 120319 October 6, 1995, LUZON
DEVELOPMENT BANK, petitioner, vs. ASSOCIATION OF
LUZON DEVELOPMENT BANK EMPLOYEES and ATTY.
ESTER S. GARCIA in her capacity as VOLUNTARY
ARBITRATOR, respondents.
From a submission agreement of the Luzon Development
Bank (LDB) and the Association of Luzon Development
Bank Employees (ALDBE) arose an arbitration case to
resolve the following issue:
Whether or not the company has violated the Collective
Bargaining Agreement provision and the Memorandum
of Agreement dated April 1994, on promotion.
At a conference, the parties agreed on the submission of
their respective Position Papers on December 1-15, 1994.
Atty. Ester S. Garcia, in her capacity as Voluntary
Arbitrator, received ALDBE's Position Paper on January
18, 1995. LDB, on the other hand, failed to submit its
Position Paper despite a letter from the Voluntary
Arbitrator reminding them to do so. As of May 23, 1995
no Position Paper had been filed by LDB.
On May 24, 1995, without LDB's Position Paper, the
Voluntary Arbitrator rendered a decision disposing as
follows:
WHEREFORE, finding is hereby made that the Bank has
not adhered to the Collective Bargaining Agreement
provision nor the Memorandum of Agreement on
promotion.
Hence, this petition for certiorari and prohibition seeking
to set aside the decision of the Voluntary Arbitrator and
to prohibit her from enforcing the same.
In labor law context, arbitration is the reference of a
labor dispute to an impartial third person for
determination on the basis of evidence and arguments
presented by such parties who have bound themselves to
accept the decision of the arbitrator as final and binding.
Arbitration may be classified, on the basis of the
voluntary.
Compulsory arbitration is a system whereby the parties
to a dispute are compelled by the government to forego
their right to strike and are compelled to accept the
resolution of their dispute through arbitration by a third
party.1 The essence of arbitration remains since a
resolution of a dispute is arrived at by resort to a
disinterested third party whose decision is final and
binding on the parties, but in compulsory arbitration,
such a third party is normally appointed by the
government.
Under voluntary arbitration, on the other hand, referral
of a dispute by the parties is made, pursuant to a
voluntary arbitration clause in their collective agreement,
to an impartial third person for a final and binding
resolution.2 Ideally, arbitration awards are supposed to
be complied with by both parties without delay, such
that once an award has been rendered by an arbitrator,
nothing is left to be done by both parties but to comply
with the same. After all, they are presumed to have
freely chosen arbitration as the mode of settlement for
that particular dispute. Pursuant thereto, they have
chosen a mutually acceptable arbitrator who shall hear
and decide their case. Above all, they have mutually
agreed to de bound by said arbitrator's decision.
In the Philippine context, the parties to a Collective
Bargaining Agreement (CBA) are required to include
therein provisions for a machinery for the resolution of
grievances arising from the interpretation or
implementation of the CBA or company personnel
policies.3 For this purpose, parties to a CBA shall name
and designate therein a voluntary arbitrator or a panel of
arbitrators, or include a procedure for their selection,
preferably from those accredited by the National
Conciliation and Mediation Board (NCMB). Article 261 of
the Labor Code accordingly provides for exclusive original
jurisdiction of such voluntary arbitrator or panel of
arbitrators over (1) the interpretation or implementation
Page 1 of 18
of the CBA and (2) the interpretation or enforcement of
company personnel policies. Article 262 authorizes them,
but only upon agreement of the parties, to exercise
jurisdiction over other labor disputes.
On the other hand, a labor arbiter under Article 217 of
the Labor Code has jurisdiction over the following
enumerated cases:
. . . (a) Except as otherwise provided under this Code the
Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar
days after the submission of the case by the parties for
decision without extension, even in the absence of
stenographic notes, the following cases involving all
workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay,
hours of work and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this
Code, including questions involving the legality of strikes
and lockouts;
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other
claims, arising from employer-employee relations,
including those of persons in domestic or household
service, involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied
with a claim for reinstatement.
It will thus be noted that the jurisdiction conferred by law
on a voluntary arbitrator or a panel of such arbitrators is
quite limited compared to the original jurisdiction of the
labor arbiter and the appellate jurisdiction of the
National Labor Relations Commission (NLRC) for that
matter.4 The state of our present law relating to
voluntary arbitration provides that "(t)he award or
decision of the Voluntary Arbitrator . . . shall be final and
executory after ten (10) calendar days from receipt of the
copy of the award or decision by the parties,"5 while the
"(d)ecision, awards, or orders of the Labor Arbiter are
final and executory unless appealed to the Commission
by any or both parties within ten (10) calendar days from
receipt of such decisions, awards, or orders."6 Hence,
while there is an express mode of appeal from the
decision of a labor arbiter, Republic Act No. 6715 is silent
with respect to an appeal from the decision of a
voluntary arbitrator.
Yet, past practice shows that a decision or award of a
voluntary arbitrator is, more often than not, elevated to
the Supreme Court itself on a petition for certiorari,7 in
effect equating the voluntary arbitrator with the NLRC or
the Court of Appeals. In the view of the Court, this is
illogical and imposes an unnecessary burden upon it.
In Volkschel Labor Union, et al. v. NLRC, et al.,8 on the
settled premise that the judgments of courts and awards
of quasi-judicial agencies must become final at some
definite time, this Court ruled that the awards of
voluntary arbitrators determine the rights of parties;
hence, their decisions have the same legal effect as
judgments of a court. In Oceanic Bic Division (FFW), et
al. v. Romero, et al.,9 this Court ruled that "a voluntary
arbitrator by the nature of her functions acts in a quasi-
judicial capacity." Under these rulings, it follows that the
voluntary arbitrator, whether acting solely or in a panel,
enjoys in law the status of a quasi-judicial agency but
independent of, and apart from, the NLRC since his
decisions are not appealable to the latter.10
Section 9 of B.P. Blg. 129, as amended by Republic Act
No. 7902, provides that the Court of Appeals shall
exercise:
(B) 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 Employees
Page 2 of 18
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.
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,11 that
the broader term "instrumentalities" was purposely
included in the above-quoted provision.
An "instrumentality" is anything used as a means or
agency.12 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.13 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.14 An individual person, like an
administrator or executor, is a judicial instrumentality in
the settling of an estate,15 in the same manner that a
sub-agent appointed by a bankruptcy court is an
instrumentality of the court,16and a trustee in bankruptcy
of a defunct corporation is an instrumentality of the
state.17
The voluntary arbitrator no less performs a state function
pursuant to a governmental power delegated to him
under the provisions therefor in the Labor Code and he
falls, therefore, within the contemplation of the term
"instrumentality" in the aforequoted Sec. 9 of B.P. 129.
The fact that his functions and powers are provided for in
the Labor Code does not place him within the exceptions
to said Sec. 9 since he is a quasi-judicial instrumentality
as contemplated therein. It will be noted that, although
the Employees Compensation Commission is also
provided for in the Labor Code, Circular No. 1-91, which
is the forerunner of the present Revised Administrative
Circular No. 1-95, laid down the procedure for the
appealability of its decisions to the Court of Appeals
under the foregoing rationalization, and this was later
adopted by Republic Act No. 7902 in amending Sec. 9 of
B.P. 129.
A fortiori, the decision or award of the voluntary
arbitrator or panel of arbitrators should likewise be
appealable to the Court of Appeals, in line with the
procedure outlined in Revised Administrative Circular No.
1-95, just like those of the quasi-judicial agencies, boards
and commissions enumerated therein.
This would be in furtherance of, and consistent with, the
original purpose of Circular No. 1-91 to provide a uniform
procedure for the appellate review of adjudications of all
quasi-judicial entities18 not expressly excepted from the
coverage of Sec. 9 of B.P. 129 by either the Constitution
or another statute. Nor will it run counter to the
legislative intendment that decisions of the NLRC be
reviewable directly by the Supreme Court since,
precisely, the cases within the adjudicative competence
of the voluntary arbitrator are excluded from the
jurisdiction of the NLRC or the labor arbiter.
In the same vein, it is worth mentioning that under
Section 22 of Republic Act No. 876, also known as the
Arbitration Law, arbitration is deemed a special
proceeding of which the court specified in the contract or
submission, or if none be specified, the Regional Trial
Court for the province or city in which one of the parties
resides or is doing business, or in which the arbitration is
held, shall have jurisdiction. A party to the controversy
may, at any time within one (1) month after an award is
made, apply to the court having jurisdiction for an order
confirming the award and the court must grant such
Page 3 of 18
order unless the award is vacated, modified or
corrected.19
In effect, this equates the award or decision of the
voluntary arbitrator with that of the regional trial court.
Consequently, in a petition for certiorari from that award
or decision, the Court of Appeals must be deemed to
have concurrent jurisdiction with the Supreme Court. As
a matter of policy, this Court shall henceforth remand to
the Court of Appeals petitions of this nature for proper
disposition.
ACCORDINGLY, the Court resolved to REFER this case to
the Court of Appeals.
SO ORDERED.
[G.R. No. 145800. January 22, 2003] CENTRAL
PANGASINAN ELECTRIC COOPERATIVE, INC., petitioner,
vs. GERONIMA MACARAEG and MARIBETH DE
VERA, respondents.
FACTS:
Petitioner is an electric cooperative duly organized and
existing under Philippine laws. Respondent Geronima
Macaraeg and Maribeth de Vera are employees of
petitioner at its office in Area V, Bayambang, Pangasinan.
Respondent de Vera was employed as teller whose
primary duty was to accept payments from petitioners
consumers in Bayambang and remit her collections to the
cashier, herein co-respondent Geronima
Macaraeg. Respondent Macaraegs duty was to deposit
the daily collections of the office to petitioners account
at the Rural Bank of Central Pangasinan in Bayambang.
From January 1998 to January 1999, respondent de Vera
accommodated and encashed the crossed checks of her
sister, Evelyn Joy Estrada. Evelyn issued two hundred
eleven (211) crossed checks amounting to P6,945,128.95
payable to petitioner cooperative despite the absence of
any transaction or any outstanding obligation with
petitioner. In turn, respondent de Vera, with the
knowledge and consent of respondent Macaraeg, paid
the full value of these checks from the cash collections of
petitioner. At the end of the day, respondents credited
the checks as part of their collection and deposited the
same together with their cash collection to the account
of petitioner at the Rural Bank of Central Pangasinan.
Sometime in January 1999, petitioner, through its
Finance Department, noticed that several checks payable
to petitioner from the collections in the Area V office
were returned due to insufficiency of funds.
On January 19, 1999, Josefina Mandapat, Sandra Frias
and Marites Radac, petitioners Finance Manager, Chief
Accountant and Legal Assistant, respectively, confronted
respondents with their discovery. Respondent de Vera
admitted that the checks were issued by her sister and
that she encashed them from the money collected from
petitioners customers.
On January 21, 1999, Mrs. Josefina Mandapat submitted
a memorandum to petitioners General Manager,
Salvador M. de Guzman, detailing their findings about
the bounced checks.On February 2, 1999, she submitted
an addendum to her memorandum.
On February 4, 1999, petitioner, through de Guzman,
issued a memorandum to respondents placing them
under preventive suspension and requiring them to
explain in writing within forty-eight (48) hours why they
misappropriated cooperative funds. In the same
communication, a hearing was set on February 13, 1999
at 9:30 a.m. at the Board Room of petitioner before Atty.
Teodoro Fernandez.
In their respective Answers/Explanations, respondents
denied having misappropriated the funds of petitioner
cooperative. They alleged that: (1) the checks that
bounced were redeposited with the Rural Bank of Central
Pangasinan; (2) the amount representing the face value
of the checks had been used by petitioner as of
December 15, 1998; (3) there was never any shortage in
the cooperative money or funds in their possession; and
(4) they never violated any policy of the cooperative and
Page 4 of 18
on the contrary, they have been very religious in
remitting the funds and money of petitioner.[1]
At the scheduled hearing on February 13, 1999,
respondents, with assistance of counsel, appeared before
Atty. Teodoro Fernandez. Respondent de Vera testified
and admitted that she encashed the checks of Evelyn Joy
Estrada because the latter is her older sister and that she
has a soft spot for her; that Mrs. Estrada owns a sash
factory and that she merely wanted to help her sister
meet her business obligations; that sometime in
November 1998, Mrs. Marites Radoc, Chief Accountant
of petitioner, called her attention to one check which
bounced thrice; that this check was eventually replaced
by her sister with cash; that despite the bouncing of
some other checks, all checks were eventually funded
and paid to petitioner, hence, petitioner incurred no
losses in its collections; that she has worked for
petitioner for nineteen (19) years and this is the first time
she has been charged administratively by petitioner.
Respondent Macaraeg admitted that she knew of the
accommodations given by respondent de Vera to her
sister; that she allowed her subordinate to do it because
respondent de Vera is her kumare, and that she knew
that Mrs. Estradas checks were sufficiently funded. She
worked for petitioner for twenty-two (22) years and has
never had an administrative charge.
Mrs. Josefina Mandapat, Finance Manager of petitioner,
testified as petitioners witness. She stated that she
prepared a report on the findings of their accountant
regarding the encashment of Evelyn Joy Estradas checks,
and that the encashment of said checks is prohibited
under an office memorandum.
On March 10, 1999, Atty. Fernandez submitted his
findings to the General Manager of petitioner. On March
19, 1999, on the basis of said findings and
recommendation, the General Manager issued to
respondents separate notices of termination, effective
April 9, 1999, for serious misconduct, and breach of trust
and confidence reposed on them by management.[2]
Respondents, with the help of the President and
representative of the Union, Central Pangasinan Electric
Cooperative (CENPELCO) Employees Association-Tupas
Local Chapter No. R01-0012, questioned their dismissal
before the National Conciliation and Mediation Board
(NCMB). They claimed that their dismissal was without
just cause and in violation of the Collective Bargaining
Agreement (CBA), which requires that the case should
first be brought before a grievance
committee. Eventually, the parties agreed to submit the
case to a voluntary arbitrator for arbitration.
On August 12, 1999, the voluntary arbitrator rendered a
decision in favor of respondents, viz.:
WHEREFORE, in view of the foregoing, the undersigned
arbitrator finds and so holds:
(1) That the parties failed to comply with the provisions
of the GRIEVANCE PROCEDURE of the Collective
Bargaining Agreement;
(2) Reinstate immediately upon receipt of the Decision
complainants GERONIMA MACARAEG and MARIBETH DE
VERA to their former positions without loss of seniority
rights;
(3) Pay complainants their backwages to be reckoned
from the time their employment has been [sic] illegally
terminated up to their actual reinstatement based on
their last salary.
Parties are hereby enjoined to be faithful with their
commitment to abide by this Decision which under their
Collective Bargaining Agreement is final, executory and
not subject to appeal.
RULING:
The petition is impressed with merit.
At the outset, we hold that the first issue raised in the
petition pertaining to the alleged violation of the CBA
grievance procedure is moot and academic. The parties
active participation in the voluntary arbitration
proceedings, and their failure to insist that the case be
remanded to the grievance machinery, shows a clear
Page 5 of 18
intention on their part to have the issue of respondents
illegal dismissal directly resolved by the voluntary
arbitrator. We therefore find it unnecessary to rule on
the matter in light of their preference to bring the illegal
dismissal dispute to voluntary arbitration without passing
through the grievance machinery.
G.R. No. 138094 May 29, 2003
MARILOU GUANZON APALISOK, petitioner, vs. RADIO
PHILIPPINES NETWORK RADIO STATION DYKC and
STATION MANAGER GEORGE SUAZO, respondents.
FACTS:
On May 15, 1995, Marilou Gaunzon Apalisok (petitioner),
then Production Chief of Radio Philippines Network (RPN)
Station DYKC, received a Memorandum3 from Branches
Operations Manager Gilito Datoc asking her to submit a
written explanation why no disciplinary action should be
taken against her for performance of acts hostile to RPN,
and arrogant, disrespectful and defiant behavior towards
her superior Station Manager George Suazo.
Complying, petitioner submitted on May 16, 1995 her
Answer4 to the memorandum.
On May 31, 1995, petitioner received another
memorandum from the Administrative Manager of RPN,
informing her of the termination of her services effective
the close of regular office hours of June 15, 1995.
By letter of June 5, 1995, petitioner informed RPN, by
letter of June 5, 1995, of her decision to waive her right
to resolve her case through the grievance machinery of
RPN as provided for in the Collective Bargaining
Agreement (CBA) and to lodge her case before the
proper government forum. She thereafter filed a
complaint against RPN DYKC and Suazo (respondents) for
illegal dismissal before the National Labor Relations
Commission, Regional Arbitration Branch of Region 7
which referred it to the National Conciliation and
Mediation Board.
By Submission Agreement5 dated June 20, 1995 signed by
their respective counsels, petitioner and respondents
agreed to submit for voluntary arbitration the issue of
whether petitioner's dismissal was valid and to abide by
the decision of the voluntary arbitrator.
In her position paper6 submitted before the voluntary
arbitrator, petitioner prayed that her dismissal be
declared invalid and that she be awarded separation pay,
backwages and other benefits granted to her by the
Labor Code since reinstatement is no longer feasible due
to strained relations. She also prayed that she be
awarded P2,000,000.00 for moral damages and
P500,000.00 for exemplary damages.
Respondents on the other hand prayed for the dismissal
of the complaint, arguing that the voluntary arbitrator
had no jurisdiction over the case and, assuming that he
had, the complaint is dismissible for lack of merit as
petitioner was not illegally dismissed.7
On October 18, 1995, the voluntary arbitrator rendered
an Award8 in favor of petitioner
ISSUE:
Whether or not the Voluntary Arbitrator had jurisdiction
over petitioner's complaint
RULING:
The above quoted Article 262 of the Labor Code provides
that upon agreement of the parties, the voluntary
arbitrator can hear and decide all other labor disputes.
Contrary to the finding of the Court of Appeals, voluntary
arbitration as a mode of settling the dispute was not
forced upon respondents. Both parties indeed agreed to
submit the issue of validity of the dismissal of petitioner
to the jurisdiction of the voluntary arbitrator by the
Submission Agreement duly signed by their respective
counsels.
As the voluntary arbitrator had jurisdiction over the
parties' controversy, discussion of the second issue is no
longer necessary.
Page 6 of 18

Telefunken Semiconductors Employees Union-FFw vs.
CA, 348 Scra 565
FACTS:
The labor dispute started on August 25, 1995 when the
Company and the Union reached a deadlock in their
negotiations for a new collective bargaining
agreement. On August 28, 1995, the Union filed a Notice
of Strike with the National Conciliation and Mediation
Board (NCMB).
[3]
On September 8, 1995, the then Acting Secretary of the
Department of Labor and Employment, Jose S. Brillantes,
intervened and assumed jurisdiction over the dispute
[4]
pursuant to Art. 263, par. (g), of the Labor Code, as
[5]
amended. Thus, the Order of the said Acting Secretary
of Labor enjoined any strike or lockout, whether actual or
intended, between the parties.His Notice of the
Assumption Order[6]was personally served on the
representatives of the Company, namely, on Atty. Allan
Montao, counsel of the Union-FFW, on September 9,
1995 at 1:25 p.m. and twice on Ms. Liza Dimaano, Union
President, first on September 8, 1995 at 7:15 p.m. and
again on September 11, 1995 at 9:30 a.m. but both union
representatives refused to acknowledge receipt thereof.
Despite the assumption Order, the Union struck on
September 14, 1995. Two (2) days later, the Acting
Secretary of Labor issued an Order[7]directing the striking
workers to return to work within twenty-four (24) hours
and for the Company to admit them back to work under
the terms and conditions prevailing prior to the
strike. Notice[8] of the Return-to-Work Order[9]dated
September 16, 1995 of the Acting Secretary of Labor was
sent to the striking Union members but still some of
them refused to heed the order and continued with their
picket. The Federation of Free Workers (FFW) received
and acknowledged receipt of the said Return to Work
Order on September 18, 1995. On September 23, 1995,
violence erupted in the picket lines. The service bus
ferrying non-striking workers was stoned, causing injuries
to its passengers. Thereafter, complaints for threats,
defamation, illegal detention and physical injuries were
filed against the strikers.
On October 2, 1995, the Company issued letters of
termination for cause to the workers who did not report
back to work despite the Notice of Assumption and
Return-to-Work Orders issued by the Acting Secretary
Jose S. Brillantes of the Department of Labor and
Employment (DOLE).
On October 27, 1995, the Acting Secretary of Labor
issued another Order[10] directing the Company to
reinstate all striking workers except the Union Officers,
shop stewards, and those with pending criminal charges,
x x x while the resolution of the legality of the strike was
pending. This exclusion Order was reaffirmed with some
modifications in an Order[11] dated November 24, 1995.
On December 5, 1995, the Union filed with this Court a
petition for certiorari, docketed as G.R. No. 122743,
questioning the exclusions made in the aforesaid Orders.
On June 27, 1996, while the said petition in G.R. No.
122743 was pending, then Secretary of Labor Leonardo
A. Quisumbing issued a Writ of Execution[12] for the
physical reinstatement of the remaining striking workers
who were not reinstated as contained in the thirty-two
(32) page list[13] attached to the aforesaid writ.
Accordingly, on July 3, 1996, the Company filed a Motion
to Quash, Recall or Suspend the Writ of
Execution[14] issued by Secretary Quisumbing. This
motion was denied[15] by the Department of Labor and
Employment (DOLE, for brevity) for lack of merit and, in
the same Order, the DOLE directed the issuance of an
Alias Writ to enforce the actual and physical
reinstatement of the workers, or in case the same was
not feasible, to effect payroll reinstatement. On
November 21, 1996, the Companys motion for
reconsideration was also denied.[16]
On December 9, 1996, the Company filed with this Court
a petition for certiorari, docketed as G.R. No. 127215,
Page 7 of 18
questioning the denial of its motion for reconsideration
and the Alias Writ issued by the DOLE to enforce the
actual and physical reinstatement or the payroll
reinstatement of the workers (including the Original Writ
of Execution of June 27, 1996).
After we consolidated[17] the petitions for certiorari of the
Company and the Union in G.R. Nos. 122743 and 127215,
respectively, we rendered a Decision therein
on December 12, 1997.The Companys petition
for certiorari in G.R. No. 127215 was dismissed for lack of
merit. In G.R. No. 122743, we granted the Unions
petition and ordered the reinstatement of all striking
workers without exception. We also directed the
Secretary of Labor and Employment to determine with
dispatch the legality of the strike as well as the liability of
the individual strikers, if any.
After receipt of our said Decision in G.R. Nos. 122743 and
127215, the DOLE issued an Alias Writ of Execution on
August 26, 1998. Thereafter, the Company moved to
quash the Alias Writ which was, however, denied[18] by
the DOLE. The motion for reconsideration filed by the
Company was similarly denied.[19] Aggrieved by the
preceding rulings of the DOLE, the Company elevated this
case to this Court via another petition
for certiorari docketed as G.R. No. 135788.
On December 7, 1998, we resolved[20] to dismiss the said
petition in G.R. No. 135788 for (a) failing to state the
place of service by registered mail on the adverse
party; (b) failing to submit a certification duly executed
by the president of the petitioning Company or by its
representative which shows its authority to represent
and act on behalf of the Company; and (c) for lack of the
requisite certificate of non-forum shopping. We denied
this petition with finality on our March 15, 1999
Resolution[21] where we held that the Secretary of Labor
did not abuse his discretion in denying the Companys
motion to quash the execution of our Decision dated
December 12, 1997.
In compliance with our order to the Secretary of Labor
and Employment to determine with dispatch the legality
of the strike, marathon hearings were conducted[22] at
the DOLE Office with Atty. Lita V. Aglibut as hearing
officer. On September 22, 1998, both the Union and the
Company complied with the order to submit their
respective position papers. The Company adduced
evidence and submitted its case for decision. The Union
did not adduce evidence. Instead, the Union manifested
that it would file a motion to dismiss for failure of the
Company to prove its case with the request that it be
allowed to present evidence should its motion be denied.
During the subsequent hearings[23] conducted by the
hearing officer of DOLE, the Union insisted that a ruling
should first be made on the Demurrer to Evidence it
previously filed notwithstanding repeated reminders by
the Hearing Officer that the technical rules of evidence
and procedure do not apply to proceedings before
DOLE. Thereafter, an exchange of pleadings, reiterating
their respective positions, ensued between the Company
and the Union.
On May 19, 1999, the Union filed a motion before the
DOLE praying for the issuance of another Alias Writ of
Execution in connection with our March 15, 1999
Resolution in G.R. No. 135788. The Union contended that
this Resolution has declared the dismissals of the striking
workers as illegal and therefore a writ should be issued
for the physical reinstatement of the workers with full
backwages and other benefits reckoned from June 27,
1996.
On May 28, 1999, the Secretary of Labor and
Employment resolved the matter in a Decision.[24] The
Secretary of Labor declared therein that in hearings and
resolutions of labor disputes, before the DOLE, his Office
is not governed by the strict and technical rules of
evidence and procedure observed in the regular courts of
law, and that it will resolve the issues based on the
pleadings, the documentary evidence and other records
of the case.
On January 24, 2000, only the Union sought
reconsideration[27] of the said Decision of the appellate
Page 8 of 18
court. However, it was denied for lack of merit by the
Court of Appeals on April 19, 2000 in its Resolution
RULING:
The herein petitioners dismally failed to show that there
really existed certain issues which would necessitate the
remand of this case at bar, or that the appellate court
misapprehended certain facts when it dismissed their
petition for certiorari.
The need to determine the individual liabilities of the
striking workers, the union officers and members alike,
was correctly dispensed with by the Secretary of Labor
after he gave sufficient opportunity to the striking
workers to cease and desist from continuing with their
picket. Ensconced in the Labor Code of the Philippines, as
amended, is the rule that:
Art. 263. Strikes, picketing and lockouts.
(g) When, in his opinion, there exists a labor dispute
causing or likely to cause a strike or lockout in an industry
indispensable to the national interest, the Secretary of
Labor and Employmentmay assume jurisdiction over the
dispute and decide it or certify the same to the
Commission for compulsory arbitration. Such
assumption per certification shall have the effect of
automatically enjoining the intended or impending
strike or lockout as specified in the assumption or
certification order. If one had already taken place at the
time of assumption or certification, all striking or locked
out employees shall immediately return to work and
the employer shall immediately resume operations
and re-admit all workers under the same terms and
conditions prevailing before the strike or lockout. The
Secretary of Labor and Employment or the Commission
may seek the assistance of law enforcement agencies to
ensure the compliance with this provision as well as with
such orders as he may issue to enforce the same.
(Emphasis Ours)
It is clear from the foregoing legal provision that the
moment the Secretary of Labor assumes jurisdiction over
a labor dispute in an industry indispensable to national
interest, such assumption shall have the effect of
automatically enjoining the intended or impending
strike. It was not even necessary for the Secretary of
Labor to issue another order directing them to return to
work. The mere issuance of an assumption order by the
Secretary of Labor automatically carries with it a return-
to-work order, even if the directive to return to work is
not expressly stated in the assumption
order.[40] However, petitioners refused to acknowledge
this directive of the Secretary of Labor on September 8,
1995 thereby necessitating the issuance of another
order expressly directing the striking workers to cease
and desist from their actual strike, and to immediately
return to work but which directive the herein petitioners
opted to ignore. In this connection, Article 264(a) of the
Labor Code clearly provides that:
Article 264. Prohibited Activities.
(a) x x x
No strike or lock out shall be declared after the
assumption of jurisdiction by the President or the
Secretary or after certification or submission of the
dispute to compulsory or voluntary arbitration or during
the pendency of cases involving the same grounds for the
strike or lockout.
x x x. Any union officer who knowingly participates in
illegal strike and any worker or union officer who
knowingly participates in the commission of illegal acts
during a strike may be declared to have lost his
employment status: Provided, that mere participation of
a worker in a lawful strike shall not constitute sufficient
ground for termination of his employment even if a
replacement had been hired by the employer during such
lawful strike. (Emphasis Ours)
The rationale of this prohibition is that once jurisdiction
over the labor dispute has been properly acquired by the
competent authority, that jurisdiction should not be
Page 9 of 18
interfered with by the application of the coercive
processes of a strike.[41] We have held in a number of
cases that defiance to the assumption and return-to-
work orders of the Secretary of Labor after he has
assumed jurisdiction is a valid ground for loss of the
employment status of any striking union officer or
member.[42]
Furthermore, the claim of petitioners that the
assumption and return-to-work Orders issued by the
Secretary of Labor were allegedly inadequately served
upon them is untenable in the light of what have already
been clearly established in this case, to wit:
x x x, the reports of the DOLE process server, shows that
the Notice of Order of 8 September 1995 was actually
served on the Union President. The latter,
however, refused to acknowledge receipt of the same on
two separate occasions (on 8 September 1995 at 7:15
p.m. and on 11 September 1995 at 9:30 a.m.). The
Unions counsel of record, Atty. Allan Montano, similarly
refused to acknowledge receipt of the 8 September 1995
Order on 9 September 1995 at 1:25 p.m.
Records also show that the Order of 16 September 1995
was served at the strike area with copies left with the
striking workers, per the process servers return,
although a certain Virgie Cardenas also refused to
acknowledge receipt. The Federation of Free Workers
officially received a copy as acknowledged by a certain
Lourdes at 3:40 p.m. of 18 September 1995.
The foregoing clearly negate the Unions contention of
inadequate service of the Orders dated 8 and 16
September 1995 of Acting Secretary
Brillantes. Furthermore, the DOLE process servers
discharge of his function is an official act carrying the
presumption of regularity in its performance which the
Union has not disproved, much less disputed with clear
and convincing evidence.
Likewise, it would be stretching the limits of credibility if
We were to believe that the Union was unaware of the
said Orders during all the conciliation conferences
conducted by the NCMB-DOLE. Specifically, in the
conciliation meetings after the issuance of the Order of 8
September 1995 to settle the unresolved CBA issues and
after the issuance of the Order of 16 September 1995 to
establish the mechanics for a smooth implementation of
this Offices return-to-work directive, the Union with its
officers and members in attendance never questioned
the propriety or adequacy by which these Orders were
served upon them.
We are not unaware of the difficulty of serving
assumption and return-to-work orders on striking unions
and their members who invariably view the DOLEs
process servers with suspicion and hostility. The refusal
to receive such orders and other processes is, as
described by the Supreme Court in an analogous case, an
apparent attempt to frustrate the ends of justice.(Navale,
et al. v. Court of Appeals, 253 SCRA 705)
Such being the case, We cannot allow the Union to
thwart the efficacy of the assumption and return to work
orders, issued in the national interest, through the simple
expediency of refusing to acknowledge receipt thereof.
Having thus resolved the threshold issue as hereinabove
discussed, it necessarily follows that the strike of the
Union cannot be viewed as anything but illegal for
having been staged in open and knowing defiance of
the assumption and return-to-work orders. The
necessary consequence thereof are also detailed by the
Supreme Court in its various rulings. In Marcopper
Mining Corp. v. Brillantes (254 SCRA 595), the High
Tribunal stated in no uncertain terms that -
by staging a strike after the assumption of jurisdiction
or certification for arbitration, workers forfeited their
right to; be readmitted to work, having abandoned their
employment, and so could be validly replaced.
Again, in Allied Banking Corporation v. NLRC (258 SCRA
724), the Supreme Court ruled that:
xxx. However, private respondents failed to take into
consideration the cases recently decided by this Court
which emphasized on the strict adherence to the rule
Page 10 of 18
that defiance of the return-to-work order of the
Secretary of Labor would constitute a valid ground for
dismissal. The respective liabilities of striking union
officers and members who failed to immediately comply
with the return-to-work order, are clearly spelled out in
Article 264 of the Labor Code which provides that any
declaration of a strike or lock out after the Secretary of
Labor and Employment has assumed jurisdiction over the
labor dispute is considered an illegal act. Therefore, any
worker or union officer who knowingly participates in a
strike defying a return-to-work order may as a result
thereof be considered to have lost his employment
status.
Viewed in the light of the foregoing, We have no
alternative but to confirm the loss of employment status
of all those who participated in the strike in defiance of
the assumption order dated 8 September 1995 and did
not report back to work as directed in the Order of 16
September 1995.[43]
To cast doubt on the regularity of the aforesaid service of
the two Orders issued by the Secretary of Labor,
petitioners cite Section 1, Rule IX of the NLRC Manual on
Execution of Judgment which provides that:
Section 1. Hours and Days When Writ Shall Be Served.
Writ of Execution shall be served at any day, except
Saturdays, Sundays and holidays, between the hours of
eight in the morning and five in the afternoon. x x x
However, the above-cited rule is not applicable to the
[44] [45]
case at bar inasmuch as Sections 1 and 4,
the same NLRC Manual provide that such Execution shall
issue only upon a judgment or order that finally disposes
of an action or proceeding. The assumption and return-
to-work Orders issued by the Secretary of Labor in the
case at bar are not the kind of orders contemplated in
the immediately cited rule of the NLRC because such
Orders of the Secretary of Labor did not yet finally
dispose of the labor dispute. As pointed out by the
Secretary of Labor in his Decision, petitioners cannot now
feign ignorance of his official intervention, to wit:
The admissibility of the evidence presented by the
Company, however, has been questioned. The Unions
arguments are less than convincing. The numerous
publications of the subject DOLE Orders in various
newspapers, tabloids, radio and television cannot be
considered hearsay and subject to authentication
considering that the subject thereof were the lawful
Orders of a competent government authority. In the case
of the announcements posted on the Unions bulletin
board, pictures of which were presented by the Company
in evidence, suffice it for us to state that the bulletin
board belonged to the Union. Since the veracity of the
contents of the announcements on the bulletin board
were never denied by the Union except to claim that
these were self-serving, unverified/unverifiable and thus
utterly inadmissible, We cannot but admit the same for
the purpose for which it was presented.[46]
As regards the third assigned error, petitioners contend
that a resolution of a petition for certiorari under Rule 65
of the Rules of Court should include the correction of the
Secretary of Labors evaluation of the evidence and
factual findings thereon pursuant to the doctrine laid
down in Meralco v. The Honorable Secretary of Labor
Leonardo A. Quisumbing.[47] That contention is
misplaced. In that case, we ruled that:
The extent of judicial review over the Secretary of Labors
arbitral award is not limited to a determination of grave
abuse in the manner of the secretarys exercise of his
statutory powers.This Court is entitled to, and must in
Rule III of the exercise of its judicial power review the substance of
the Secretarys award when grave abuse of discretion is
alleged to exist in the award, i.e., in the appreciation of
and the conclusions the Secretary drew from the
evidence presented.
However, this Courts review (of) the substance does not
mean a re-calibration of the evidence presented before
the DOLE but only a determination of whether the
Secretary of Labors award passed the test of
reasonableness when he arrived at his conclusions made
thereon. Thus, we declared in Meralco, that:
Page 11 of 18
In this case we believe that the more appropriate and
available standard and one does not require a
constitutional interpretationis simply the standard of
reasonableness. In laymans terms, reasonableness
implies the absence of arbitrariness; in legal parlance,
this translates into the exercise of proper discretion and
to the observance of due process. Thus, the question we
have to answer in deciding this case is whether the
Secretarys actions have been reasonable in light of the
parties positions and the evidence they presented.[48]
Thus, notwithstanding any allegation of grave abuse of
discretion, unless it can be amply demonstrated that the
Secretary of Labors arbitral award did not pass the test of
reasonableness, his conclusions thereon shall not be
disturbed, as in the case at bar.
The main thrust of a petition for certiorari under Rule 65
of the Rules of Court is only the correction of errors of
jurisdiction including the commission of grave abuse of
discretion amounting to lack or excess of
jurisdiction. However, for this Court to properly exercise
the power of judicial review over a decision of an
administrative agency, such as the DOLE, it must first be
shown that the tribunal, board or officer exercising
judicial or quasi-judicial functions has indeed acted
without or in excess of its or his jurisdiction, and that
there is no appeal, or any plain, speedy and adequate
remedy in the ordinary course of law.[49] In the absence
of any showing of lack of jurisdiction or grave abuse
tantamount to lack or excess of jurisdiction, judicial
review may not be had over an administrative agencys
decision. We have gone over the records of the case at
bar and we see no cogent basis to hold that the Secretary
of Labor has abused his discretion.
In the fourth and fifth assignment of errors, petitioners
would have us believe that the Court of Appeals, in its
assailed Decision ruled in a manner absolute that
prevailing technical rules of evidence in the courts of law
and equity have no room in administrative and/or quasi-
judicial proceedings; and that the non-application of
technical rules of procedure in proceedings before the
Office of the Secretary of Labor should not have barred
herein petitioners from adducing evidence after their
demurrer to evidence was denied.
We do not agree. That declaration of the Court of
Appeals should be taken in the context of the whole
paragraph and the law and the jurisprudence cited in the
assailed portion of its decision. We do not sanction the
piecemeal interpretation of a decision to advance ones
case. To get the true intent and meaning of a decision, no
specific portion thereof should be isolated and resorted
to but the decision must be considered in its
entirety.[50] The portion of the Court of Appeals assailed
Decision reads, to wit:
x x x, it cannot be gainsaid that technical rules of
evidence prevailing in courts of law and equity have no
room in administrative and/or quasi-judicial proceedings
(Lawin Security Services, Inc. v. National Labor Relations
Commission, 273 SCRA 132; Valderama v. National Labor
Relations Commission, 256 SCRA 466; De Ysasi III v.
National Labor Relations Commission, 231 SCRA 173). In
fact, Article 221 of the Labor Code expressly mandates
that in proceedings before the (National Labor Relations)
Commission or any of the Labor Arbiters, the rules of
evidence prevailing in courts of law or equity shall not be
controlling x x x. This provision is also applicable to
proceedings before the Office of the Secretary of Labor
and Employment which, under the said Code, is
empowered to hear and resolve matters arising from the
exercise of its plenary power to issue assumption or (sic)
jurisdiction and return-to-work orders, all in keeping with
the national interest (Article 263(g) and Article 264 of the
Labor Code).
G.R. No. L-8933, February 28, 1957, SILVERIO
UMBAO, plaintiff-appellee, vs. SANTIAGO
YAP, defendant-appellant.
This is an appeal from the judgment of the Manila Court
of First Instance "ordering the defendant to pay to the
plaintiff the sum of P2,298.97, representing plaintiff's
unpaid overtime pay while in defendant's employ, plus
Page 12 of 18
P300 as attorney's fees, with interest on the amount first
mentioned at the rate of 6 per cent per annum from the
date of the filing of the complaint on November 4, 1954,
until said amount has been paid in full. With costs against
the defendant."
The complaint sought enforcement of an arbitration
award rendered by the Wage Administration Service in
pursuance of the arbitration agreement signed by Silverio
Umbao and Santiago Yap to settle their dispute regarding
unpaid wages claimed by the first as employee from the
second as employer.
The complaint alleged that in June 1954 both had agreed
in writing to "submit their case to the Wage
Administration Service for investigation" and "to abide by
whatever decision (said) office may render on the case"
which "they recognized . . . to be final and conclusive." It
also alleged, that proper investigation had been
conducted by Severo Puncan of the same Service, who
after hearing the parties and considering their evidence,
declared in a written report, respondent Yap to be liable
for unpaid wages in the amount of P2,998.97; that the
award had been approved by Ruben Santos, Acting Chief
of the Service; and that Yap had refused to abide by and
comply with it. The pleading included a copy of the
arbitration agreement and of the award.
The defendant's answer did not deny the existence of the
covenant and of the award. But it questioned the
enforceability of both, 1 contending mainly that the
Service had no legal authority to act as arbitration, that
the procedural requirements of Republic Act No. 602 had
not been followed, and that the provisions of Republic
Act No. 876 known as the Arbitration Law had been
disregarded.
In view of the answer, the plaintiff asked for judgment on
the pleadings. And the Court, nothing non-observance of
the procedure outlined in Republic Act No. 876, gave
judgment for defendant. However upon motion to
reconsider, the judge seeing differently, held the
arbitration agreements to be a contract obligatory on the
parties under the provisions of the New Civil Code Arts.
2042 et seq. Consequently he rendered judgment against
defendant, the dispositive part of which has been quoted
above. Hence this appeal.
Defendant argues that the New Civil Code does not
apply, because arbitration only takes place where a
covenant is entered into "whereby parties litigant by
making reciprocal concessions or agreements of facts,
avoid a litigation or put an end to one already
commenced" which was not the case at bar. The
argument evidently assumes that a compromise
agreement is the same as an arbitration agreement. Such
assumption is error: one is different from the other; they
are treated in two separate chapters of the Code.
Again appellant argues that the award should not be
executed because the arbitration had not been
appointed in accordance with rules promulgated by the
Supreme Court, pursuant to Article 2046 of the New Civil
Code.
ART. 2046. The appointment of arbitrators and the
procedure for arbitration shall be governed by the
provisions of such rules of court as the Supreme Court
shall promulgate.
No rules have been promulgated by this Court. However
the Legislature adopted such rules in Republic Act No.
876 known as "The Arbitration Law' effective December
1953.
The question then is: has this arbitration by the Service
conformed with the Act? This brings up the appellant's
first assignment of error he points out that no application
had been filed in court for the appointment of the
arbitrator under Republic Act No. 876, and the court had
appointed Severo Puncan as such.
Said act was obviously adopted to supplement-not to
supplant-the New Civil Code on arbitration. It expressly
declares that "the provisions of chapters one and two,
Title XIV, Book of the Civil Code the parties may select
the arbitrator without court intervention. And section 8
of the Act impliedly permits them to do so. There is
nothing in Republic Act 876 requiring court permission of
Page 13 of 18
knowledge or intervention before the arbitrator selected
by the parties may perform his assigned work.
True, there is section 5 of the Act which provides:
SEC. 5. Preliminary procedure. — An arbitration shall be
instituted by:
(a) In the case of a contract to arbitrate future
controversies by the service by either party upon the
other of a demand for arbitration in accordance with the
contract. Such demand shall set forth the nature of the
controversy, the amount involved, if any, and the relief
sought, together with a true copy of the contract
providing for arbitration. . . .
(b) In the event that one party defaults in answering the
demand, the aggrieved party may file with the Clerk of
Court of First Instance having jurisdiction over the
parties, a copy of the demand for arbitration under the
contract to arbitrate, . . . .
(c) In the case of the submission of an existing
controversy by the filing with the clerk of the Court of
First Instance having jurisdiction, of the submission
agreement, setting forth the nature of the controversy,
and the amount involved, if any. Such submission may be
filed by any party and shall be duly executed by both
parties.
(d) In the event that one party neglets, fails or refuses to
arbitrate under a submission agreement, the aggrieved
party shall follow the procedure prescribed in
subparagraphs (a) and (b) of this section.
Paragraph (c) seems, at first glance, to require the
institution of court proceedings. But on second thought it
will be preceived that court action is needed when one
party, after entering into the contract to arbitrate,
neglets, fails or refuses to arbitrate as provided in
paragraph (d) It may also be applied where the arbitrator
has not been selected by the parties who have agreed to
arbitrate. The section does not mean there can be no
arbitration without a previous court actuation.
The case between herein litigants has not required court
intervention from the beginning, because they had
named the arbitrator: the Administration Service2 and
necessarily the proper officer, thereof, Severo Puncan.
And this defendant should not be permitted to question
the authority of said officer now, because he voluntarily
submitted his evidence to him; and he only turned
around to deny such authority when the resultant verdict
adversely affected his pocket. He even appealed to the
Secretary of Labor, and without questioning Puncan's
authority, pleaded for exoneration on the merits.3
So much for court initiative, and arbitrator's
appointment. As to the arbitration proceedings, Republic
Act No. 876 contains provisions about the procedure to
be adopted by arbitrators, their oath, the hearings, and
the form and content of the award. Even so, herein
appellant asserted no prejudicial departure therefrom.
As already stated. Republic Act No. 876 did not require
court intervention (in the case at bar) prior to the award
of the arbitrator, no ground for it having arisen, as the
parties voluntarily took steps to carry out the settlement
process down to the arbiter's decision. It was only after
such award, when defendant refused to comply that
judicial action became necessary, thru the means
afforded by the statute:
SEC. 23. Confirmation of award. — At any time within
one month after the award is made, any party to the
controversy which was arbitrated may apply to the court
having jurisdiction, as provided thereupon the court must
grant such order unless the award is vacated, modified or
corrected, as prescribed herein. . . .
SEC. 27. Judgment. — Upon the granting of an order
confirming, modifying or correcting an award, judgment
maybe entered in conformity therewith in the court
wherein said application was filed. . . . (Republic Act 876.)
.
These provisions, we believe, apply whether or not the
court intervened from the very beginning.
Page 14 of 18
Now then, examining the complaint and the judgment
entered herein in the light of the above directions, we
find substantial conformity therewith; so much so that
defendant raised no issue on the same.
Wherefore, the judgment should be, and is hereby
affirmed, with costs. So ordered.
G.R. No. 156660 ORMOC SUGARCANE PLANTERS’
ASSOCIATION, INC. (OSPA),OCCIDENTAL LEYTE
FARMERS MULTI-PURPOSE COOPERATIVE, INC.
(OLFAMCA), UNIFARM MULTI-PURPOSE COOPERATIVE,
INC. (UNIFARM) and ORMOC NORTH DISTRICT
IRRIGATION MULTI-PURPOSE COOPERATIVE, INC.
(ONDIMCO), Petitioners, v. THE COURT OF APPEALS
(Special Former Sixth Division), HIDECO SUGAR MILLING
CO., INC., and ORMOC SUGAR MILLING CO., INC.,
Respondents.
FACTS:
The relationship between respondents and the individual
sugar planters is governed by milling contracts. Article VII
of the milling contracts provides that 34% of the sugar
and molasses produced from milling the Planter’s
sugarcane shall belong to the centrals (respondents) as
compensation, 65% thereof shall go to the Planter and
the remaining 1% shall go the association to which the
Planter concerned belongs, as aid to the said association.
The 1% aid shall be used by the association for any
purpose that it may deem fit for its members, laborers
and their dependents. If the Planter was not a member of
any association, then the said 1% shall revert to the
centrals. Petitioners claimed that respondents violated
the Milling Contract when they gave to independent
planters who do not belong to any association the 1%
share, instead of reverting said share to the centrals.
Petitioners contended that respondents unduly accorded
the independent Planters more benefits and thus prayed
that an order be issued directing the parties to
commence with arbitration in accordance with the terms
of the milling contracts. Petitioners, without impleading
any of their individual members, filed twin petitions with
the RTC for Arbitration under R.A. 87. Respondents filed
a motion to dismiss on ground of lack of cause of action
because petitioners had no milling contract with
respondents. RTC denying the motion to dismiss,
declaring the existence of a milling contract between the
parties, and directing respondents to nominate two
arbitrators to the Board of Arbitrators
ISSUE:
Whether or not petitioners ― sugar planters’
associations ― are clothed with legal personality to file a
suit against, or demand arbitration from, respondents in
their own name without impleading the individual
Planters.
RULING:
Section 2 of R.A. No. 876 provides: Sec. 2. Persons and
matters subject to arbitration. – Two or more persons or
parties may submit to the arbitration of one or more
arbitrators any controversy existing between them at the
time of the submission and which may be the subject of
an action, or the parties to any contract may in such
contract agree to settle by arbitration a controversy
thereafter arising between them. Such submission or
contract shall be valid, enforceable and irrevocable, save
upon such grounds as exist at law for the revocation of
any contract. The first step toward the settlement of a
difference by arbitration is the entry by the parties into a
valid agreement to arbitrate. An agreement to arbitrate
is a contract – the relation of the parties is contractual-
and the rights and liabilities of the parties are controlled
by the law of contracts. In an agreement for arbitration,
the ordinary elements of a valid contract must appear –
including an agreement to arbitrate some specific thing
and an agreement to abide by the award either in
express language or by implication. It was decreed in B.F.
Corporation v. CA that an arbitration agreement must be
written and subscribed by the parties thereto. None of
the petitioners were parties or signatories to the milling
contracts. This is fatal to their cause since they anchor
their right to demand arbitration upon the arbitration
clause on the milling contracts. There is no legal basis for
petitioners’ purported right to demand arbitration when
Page 15 of 18
they are not parties to the milling contracts, especially
when the language of the arbitration clause expressly
grants the right to demand arbitration only to the parties
of the contract.
HOME BANKERS SAVINGS AND TRUST COMPANY V. CA
(G.R. NO. 115412)
FACTS:
Victor Tancuan issued Petitioner Home Bankers Savings
and Trust Company a check while Eugene Arriesgado
issued Private Respondent Far East Bank and Trust
Company three checks; both checks totaling the amount
of P25,250,000.00. Tancuan and Arriesgado exchanged
each other’s checks and deposited them with their
respective banks for collection. When FEBTC presented
Tancuan’s HBSTC check for clearing, it was dishonored
for being DAIF. Meanwhile, HBSTC sent Arriesgado’s 3
FEBTC checks through the Philippine Clearing House
Corporation (PCHC) to FEBTC but was returned for being
DAIF. HBSTC receive the notice of dishonor but refused
to accept the checks and returned them to FEBTC
through the PCHC for the reason “Beyond Reglementary
Period,” implying that HBSTC already treated the 3
checks as cleared and allowed the proceeds thereof to be
withdrawn. FEBTC demanded reimbursement for the
returned checks and inquired from HBSTC whether it had
permitted any withdrawal of funds against the unfunded
checks. HBSTC, however refused to make any
reimbursement and to provide FEBTC with the needed
information. Thus, FEBTC submitted the dispute for
arbitration before the PCHC Arbitration Committee,
under its Supplementary Rules on Regional Clearing to
which FEBTC and HBSTC are bound as participants in the
regional clearing operations administered by the PCHC.
While the arbitration proceeding was still pending, FEBTC
filed an action for sum of money and damages with
preliminary attachment against HBSTC. HBSTC moved to
dismiss on the ground that there is no cause of action
and because it seeks to enforce an arbitral award which
as yet does not exist. The trial court denied the motion to
dismiss and the motion for reconsideration. Petitioner
then filed a petition for certiorari with respondent CA to
which it had dismissed.
ISSUE:
Whether or not private respondent which commenced
an arbitration proceeding under the auspices of the PCHC
may subsequently file a separate case in court over the
same subject matter despite the pendency of that
arbitration, simply to obtain the provisional remedy of
attachment against the adverse party in the arbitration
proceeding.
RULING:
We find no merit in the petition. Section 14 of Republic
Act 876, otherwise known as the Arbitration Law, allows
any party to the arbitration proceeding to petition the
court to take measures to safeguard and/or conserve any
matter which is the subject of the dispute in arbitration.
Petitioner’s exposition of the foregoing provision
deserves scant consideration. Section 14 simply grants an
arbitrator the power to issue subpoena and
subpoena duces tecum at any time before rendering the
award. The exercise of such power is without prejudice
to the right of a party to file a petition in court to
safeguard any matter which is the subject of the dispute
in arbitration. In the case at bar, private respondent filed
an action for a sum of money with prayer for a writ of
preliminary attachment. Undoubtedly, such action
involved the same subject matter as that in
arbitration, i.e., the sum of P25,200,000.00 which was
allegedly deprived from private respondent in what is
known in banking as a “kiting scheme.” However, the civil
action was not a simple case of a money claim since
private respondent has included a prayer for a writ of
preliminary attachment, which is sanctioned by section
14 of the Arbitration Law.
Simply put, participants in the regional clearing
operations of the Philippine Clearing House
Corporation cannot bypass the arbitration process laid
out by the body and seek relief directly from the courts. In
Page 16 of 18
the case at bar, undeniably, private respondent has
initiated arbitration proceedings as required by the PCHC
rules and regulations, and pending arbitration has sought
relief from the trial court for measures to safeguard
and/or conserve the subject of the dispute under
arbitration, as sanctioned by section 14 of the Arbitration
Law, and otherwise not shown to be contrary to the
PCHC rules and regulations.
At this point, we emphasize that arbitration, as an
alternative method of dispute resolution, is encouraged
by this Court. Aside from unclogging judicial dockets, it
also hastens solutions especially of commercial disputes.
The Court looks with favor upon such amicable
arrangement and will only interfere with great reluctance
to anticipate or nullify the action of the arbitrator.
Wherefore, premises considered, the petition is hereby
dismissed and the decision of the court a quo is affirmed.
Transfield Philippines vs Luzon Hydro Electric Corp. GR
No 146717, Nov 22, 2004
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.
RULING:
The pendency of the arbitration proceedings would
not per se make LHCs draws on the Securities wrongful or
fraudulent for there was nothing in the Contract which
would indicate that the parties intended that all disputes
regarding delay should first be settled through
arbitration before LHC would be allowed to call upon the
Securities. It is therefore premature and absurd to
conclude that the draws on the Securities were outright
fraudulent given the fact that the ICC and CIAC have not
ruled with finality on the existence of default.
Nowhere in its complaint before the trial court or in its
pleadings filed before the appellate court, did petitioner
invoke the fraud exception rule as a ground to justify the
issuance of an injunction.[58] What petitioner did assert
before the courts below was the fact that LHCs draws on
the Securities would be premature and without basis in
view of the pending disputes between them. Petitioner
should not be allowed in this instance to bring into play
the fraud exception rule to sustain its claim for the
issuance of an injunctive relief. Matters, theories or
arguments not brought out in the proceedings below will
ordinarily not be considered by a reviewing court as they
cannot be raised for the first time on appeal.[59] The
lower courts could thus not be faulted for not applying
the fraud exception rule not only because the existence
of fraud was fundamentally interwoven with the issue of
default still pending before the arbitral tribunals, but
more so, because petitioner never raised it as an issue in
its pleadings filed in the courts below. At any rate,
petitioner utterly failed to show that it had a clear and
unmistakable right to prevent LHCs call upon the
Securities.
Of course, prudence should have impelled LHC to await
resolution of the pending issues before the arbitral
tribunals prior to taking action to enforce the Securities.
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But, as earlier stated, the Turnkey Contract did not
require LHC to do so and, therefore, it was merely
enforcing its rights in accordance with the tenor thereof.
Obligations arising from contracts have the force of law
between the contracting parties and should be complied
with in good faith.[60] More importantly, pursuant to the
principle of autonomy of contracts embodied in Article
1306 of the Civil Code,[61] petitioner could have
incorporated in its Contract with LHC, a proviso that only
the final determination by the arbitral tribunals that
default had occurred would justify the enforcement of
the Securities. However, the fact is petitioner did not do
so; hence, it would have to live with its inaction.

With respect to the issue of whether the respondent

banks were justified in releasing the amounts due under
the Securities, this Court reiterates that pursuant to the
independence principle the banks were under no
obligation to determine the veracity of LHCs certification
that default has occurred. Neither were they bound by
petitioners declaration that LHCs call thereon was
wrongful. To repeat, respondent banks undertaking was
simply to pay once the required documents are
presented by the beneficiary.

At any rate, should petitioner finally prove in the pending

arbitration proceedings that LHCs draws upon the
Securities were wrongful due to the non-existence of the
fact of default, its right to seek indemnification for
damages it suffered would not normally be foreclosed
pursuant to general principles of law.

Page 18 of 18