STRONGHOLD INSURANCE

vs. SPOUSES STROEM

G.R. No. 204689              
January 21, 2015
FACTS of the case
Spouses Rune and Lea Stroem entered into an
Owners-Contractor Agreement with Asis-Leif
& Company Inc. for the construction of a 2-
storey house on their lot in Antipolo, Rizal.
FACTS of the case

Pursuant to their agreement, ASEIS-LEIF

secured a Performance Bond in the amount of
P4.5M from STRONGHOLD Insurance
Company Inc.

STRONGHOLD and ASEIS-LEIF bound

themselves jointly and severally to pay the
spouses STROEM the agreed amount in the
event the construction project is not completed.
FACTS of the case

ASEIS-LEIF failed to finish the project on time

despite repeated demands of the Spouses Stroem.

Spouses STROEM filed a complaint with a prayer

for preliminary attachment for breach of contract
and for sum of money with a claim for damages
against ASEIS-LEIF and STRONGHOLD.

Only Stronghold was served summons. Aseis-Leif

allegedly absconded and moved out of the country.
FACTS of the case

RTC rendered in favor of Spouses Stroem and

ordered Stronghold to pay.

CA affirmed with modification the RTC’s

ruling (re: higher attorney’s fees).

Stronghold filed a Petition for Review under

Rule 45 of ROC assailing the decision of CA
ISSUE

Whether or not the liability of a surety under

a performance bond —which is connected to
a construction contract — falls under the
exclusive jurisdiction of the CIAC
(Construction Industry Arbitration
Commission)
 RULING of the Court:
Petitioner is Estopped
Yes. The case should have been within the jurisdiction of
the CIAC.

However, the Court did not allow the petitioner

STRONGHOLD in invoking arbitration at this late stage
of the proceedings since to do so would go against the
law’s goal of prompt resolution of cases in the
construction industry.

Furthermore, where a surety in a construction contract

actively participates in a collection suit, it is estopped
from raising jurisdiction.
RULING:
Why case is under CIAC’s Jurisdiction

The performance bond, which is meant “to

guarantee the supply of labor, materials,
tools, equipment, and necessary supervision
to complete the project” is significantly and
substantially connected to the construction
contract, and therefore, falls under the
jurisdiction of the CIAC.
 CIAC’S Jurisdiction:
E.O. 1008
Sec. 4 of the Executive Order No. 1008 defines the jurisdiction
of CIAC:

“The CIAC shall have original and exclusive jurisdiction over

disputes arising from, or connected with, contracts entered
into by parties involved in construction in the Philippines,
whether the dispute arises before or after the completion of
the contract, or after the abandonment or breach thereof.

These disputes may involve government or private contracts.

For the Board to acquire jurisdiction, the parties to a dispute
must agree to submit the same voluntary arbitration.
 CIAC’s Jurisdiction:
E.O. 1008
The jurisdiction of the CIAC may include but is not limited to:

1. violation of specifications for materials and workmanship

2. violations of the terms of agreement;

3. interpretation and/or application of contractual time and

delays;

4. maintenance and defects;

5. payment, default of employer or contractor and

6. changes in contract cost.

CIAC’s Jurisdiction: Continued…

Excluded from the coverage of this law are

disputes arising from employer-employee
relationship covered by the Labor Code of the
Phils.
DEL MONTE CORP-USA et al
vs. CA, et al
G.R. 136154
February 7, 2001
FACTS of the case
DEL MONTE entered into a Distributorship
Agreement with Montebueno Marketing Inc
(MMI) as the sole and exclusive distributor of
its Del Monte products in the Philippines
FACTS of the Case
Agreement provided for an arbitration clause:

“This Agreement shall be governed by the laws of the

State of California and/or, if applicable, the United
States of America.

All disputes arising out of or relating to this Agreement

or the parties’ relationship, including the termination
thereof, shall be resolved by arbitration in the City of
San Francisco, State of California, under the Rules of the
American Arbitration Association. “
FACTS of the Case

APPOINTED
MMI SFI (Sabrosa Foods,
Inc.) with the approval of Del Monte, as
MMI’s marketing arm to concentrate on its
marketing and selling function as well as to
manage its critical relationship with the
trade.
FACTS of the Case : COMPLAINT
MMI, MMI’s Managing Director, and SFI (Note: SFI is a third party to the
agreement between Del Monte and MMI) filed a complaint against Del Monte.

MMI et al. predicated their complaint on the alleged violations by Del Monte et al.
of Articles 20, 21, and 23 of the Civil Code.

According to them, DMC-USA products continued to be brought into the

country by parallel importers despite the appointment of MMI as the sole and
exclusive distributor of Del Monte products thereby causing them great
embarrassment and substantial damage.

They alleged that the products brought into the country by these importers were
aged, damaged, fake or counterfeit, so that in March 1995 they had to cause the
publication of a "warning to the trade" paid advertisement in leading newspapers.
DMC-USA, apparently upset with the publication, instructed private respondent
MMI to stop coordinating with Antonio Ongpin and to communicate directly
instead with DMC-USA through Paul E. Derby, Jr.
FACTS of the Case

DMC-USA et al. filed a Motion to Suspend Proceedings,

invoking the arbitration clause.

The Motion to Suspend Proceedings was denied by the trial

court on the ground that it "will not serve the ends of justice
and to allow said suspension will only delay the
determination of the issues, frustrate the quest of the parties
for a judicious determination of their respective claims,
and/or deprive and delay their rights to seek redress

On appeal, the CA affirmed the RTC decision

ISSUE

Whether or not the dispute between the

parties warrants an order compelling them to
submit to arbitration
HELD: NO
There is no doubt that arbitration is valid and constitutional
in our jurisdiction.

RA 876 expressly authorizes arbitration of domestic

disputes, foreign arbitration as a system of settling
commercial disputes was likewise recognized when the
Philippines adhered to the United Nations "Convention on
the Recognition and the Enforcement of Foreign Arbitral
Awards of 1958" under the 10 May 1965 Resolution No. 71
of the Philippine Senate, giving reciprocal recognition and
allowing enforcement of international arbitration
agreements between parties of different nationalities within
a contracting state.
RULING:

However, referral to arbitration in the State

of California pursuant to the arbitration
clause and the suspension of the proceedings
in Civil Case No. 2637-MN pending the
return of the arbitral award could be called
for but only as to DMC-USA and MMI , and
NOT as to the other parties in this case [i.e.
Sabrosa Foods (SFI)]
RULING

In recognizing the right of the contracting parties

to arbitrate or to compel arbitration, the splitting
of the proceedings to arbitration as to some of
the parties on one hand and trial for the others
on the other hand, or the suspension of trial
pending arbitration between some of the
parties, should NOT be allowed as it would, in
effect, result in multiplicity of suits, duplicitous
procedure and unnecessary delay.