Professional Documents
Culture Documents
SUPREME COURT
Manila
THIRD DIVISION
vs.
ROMERO, J.:
This is a special civil action for certiorari seeking to annul the Resolutions of the Court of
Appeals* dated October 22, 1990 and December 3, 1990 upholding the Orders of July 31,
1990 and August 23, 1990 of the Regional Trial Court of Makati, Branch 57, in Civil Case
No. 90-1335. Respondent Court of Appeals affirmed the ruling of the trial court that herein
petitioners, after submitting themselves for arbitration and agreeing to the terms and
conditions thereof, providing that the arbitration award shall be final and unappealable,
are precluded from seeking judicial review of subject arbitration award.
It appears that on May 17, 1989, petitioner Chung Fu Industries (Philippines) (Chung Fu
for brevity) and private respondent Roblecor Philippines, Inc. (Roblecor for short) forged a
construction agreement whereby respondent contractor committed to construct and finish
1
Apart from the aforesaid construction agreement, Chung Fu and Roblecor entered into
two (2) other ancillary contracts, to wit: one dated June 23, 1989, for the construction of a
dormitory and support facilities with a contract price of P3,875,285.00, to be completed on
or before October 31, 1989; and the other dated August 12, 1989, for the installation of
2
electrical, water and hydrant systems at the plant site, commanding a price of P12.1
million and requiring completion thereof one month after civil works have been finished. 3
However, respondent Roblecor failed to complete the work despite the extension of time
allowed it by Chung Fu. Subsequently, the latter had to take over the construction when it
had become evident that Roblecor was not in a position to fulfill its obligation.
2. The parties mutually agree that the arbitration shall proceed in accordance with the
following terms and conditions: —
d. The parties mutually agree that they will abide by the decision of the arbitrator including
any amount that may be awarded to either party as compensation, consequential damage
and/or interest thereon;
e. The parties mutually agree that the decision of the arbitrator shall be final and
unappealable. Therefore, there shall be no further judicial recourse if either party
disagrees with the whole or any part of the arbitrator's award.
f. As an exception to sub-paragraph (e) above, the parties mutually agree that either party
is entitled to seek judicial assistance for purposes of enforcing the arbitrator's award;
Only for this purpose
xxx xxx xxx 4
(Emphasis supplied)
Respondent Regional Trial Court approved the arbitration agreement thru its Order of May
30, 1990. Thereafter, Engr. Willardo Asuncion was appointed as the sole arbitrator.
On June 30, 1990, Arbitrator Asuncion ordered petitioners to immediately pay respondent
contractor, the sum of P16,108,801.00. He further declared the award as final and
unappealable, pursuant to the Arbitration Agreement precluding judicial review of the
award.
Consequently, Roblecor moved for the confirmation of said award. On the other hand,
Chung Fu moved to remand the case for further hearing and asked for a reconsideration
of the judgment award claiming that Arbitrator Asuncion committed twelve (12) instances
of grave error by disregarding the provisions of the parties' contract.
Respondent lower court denied Chung Fu's Motion to Remand thus compelling it to seek
reconsideration therefrom but to no avail. The trial court granted Roblecor's Motion for
Confirmation of Award and accordingly, entered judgment in conformity therewith.
Moreover, it granted the motion for the issuance of a writ of execution filed by respondent.
Chung Fu elevated the case via a petition for certiorari to respondent Court of Appeals.
On October 22,1990 the assailed resolution was issued. The respondent appellate court
concurred with the findings and conclusions of respondent trial court resolving that Chung
Fu and its officers, as signatories to the Arbitration Agreement are bound to observe the
stipulations thereof providing for the finality of the award and precluding any appeal
therefrom.
A motion for reconsideration of said resolution was filed by petitioner, but it was similarly
denied by respondent Court of Appeals thru its questioned resolution of December 3,
1990.
First
Respondents Court of Appeals and trial Judge gravely abused their discretion and/or
exceeded their jurisdiction, as well as denied due process and substantial justice to
petitioners, — (a) by refusing to exercise their judicial authority and legal duty to review
the arbitration award, and (b) by declaring that petitioners are estopped from questioning
the arbitration award allegedly in view of the stipulations in the parties' arbitration
agreement that "the decision of the arbitrator shall be final and unappealable" and that
"there shall be no further judicial recourse if either party disagrees with the whole or any
part of the arbitrator's award."
Second
Respondent Court of Appeals and trial Judge gravely abused their discretion and/or
exceeded their jurisdiction, as well as denied due process and substantial justice to
petitioner, by not vacating and annulling the award dated 30 June 1990 of the Arbitrator, on
the ground that the Arbitrator grossly departed from the terms of the parties' contracts and
misapplied the law, and thereby exceeded the authority and power delegated to him.
(Rollo, p. 17)
Allow us to take a leaf from history and briefly trace the evolution of arbitration as a mode
of dispute settlement.
Because conflict is inherent in human society, much effort has been expended by men
and institutions in devising ways of resolving the same. With the progress of civilization,
physical combat has been ruled out and instead, more specific means have been evolved,
such as recourse to the good offices of a disinterested third party, whether this be a court
or a private individual or individuals.
Legal history discloses that "the early judges called upon to solve private conflicts were
primarily the arbiters, persons not specially trained but in whose morality, probity and
good sense the parties in conflict reposed full trust. Thus, in Republican
Rome, arbiter and judge(judex) were synonymous. The magistrate or praetor, after noting
down the conflicting claims of litigants, and clarifying the issues, referred them for decision
to a private person designated by the parties, by common agreement, or selected by them
from an apposite listing (the album judicium) or else by having the arbiter chosen by lot.
The judges proper, as specially trained state officials endowed with own power and
jurisdiction, and taking cognizance of litigations from beginning to end, only appeared
under the Empire, by the so-called cognitio extra ordinem." 5
Such means of referring a dispute to a third party has also long been an accepted
alternative to litigation at common law. 6
Sparse though the law and jurisprudence may be on the subject of arbitration in the
Philippines, it was nonetheless recognized in the Spanish Civil Code; specifically, the
provisions on compromises made applicable to arbitrations under Articles 1820 and
1821. Although said provisions were repealed by implication with the repeal of the
7
Spanish Law of Civil Procedure, 8 these and additional ones were reinstated in the present Civil Code.
9
That there was a growing need for a law regulating arbitration in general was
acknowledged when Republic Act No. 876 (1953), otherwise known as the Arbitration Law,
was passed. "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 IV of the Civil Code shall
remain in force." 11
In recognition of the pressing need for an arbitral machinery for the early and expeditious
settlement of disputes in the construction industry, a Construction Industry Arbitration
Commission (CIAC) was created by Executive Order No. 1008, enacted on February 4,
1985.
In practice nowadays, absent an agreement of the parties to resolve their disputes via a
particular mode, it is the regular courts that remain the fora to resolve such matters.
However, the parties may opt for recourse to third parties, exercising their basic freedom
to "establish such stipulation, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order or public
policy." In such a case, resort to the arbitration process may be spelled out by them in a
12
contract in anticipation of disputes that may arise between them. Or this may be stipulated
in a submission agreement when they are actually confronted by a dispute. Whatever be
the case, such recourse to an extrajudicial means of settlement is not intended to
completely deprive the courts of jurisdiction. In fact, the early cases on arbitration carefully
spelled out the prevailing doctrine at the time, thus: ". . . a clause in a contract providing
that all matters in dispute between the parties shall be referred to arbitrators and to them
alone is contrary to public policy and cannot oust the courts of Jurisdiction." 13
But certainly, the stipulation to refer all future disputes to an arbitrator or to submit an
ongoing dispute to one is valid. Being part of a contract between the parties, it is binding
and enforceable in court in case one of them neglects, fails or refuses to arbitrate. Going a
step further, in the event that they declare their intention to refer their differences to
arbitration first before taking court action, this constitutes a condition precedent, such that
where a suit has been instituted prematurely, the court shall suspend the same and the
parties shall be directed forthwith to proceed to arbitration.14
A court action may likewise be proven where the arbitrator has not been selected by the
parties.15
Issue
Under present law, may the parties who agree to submit their disputes to arbitration
further provide that the arbitrators' award shall be final, unappealable and executory?
Article 2044 of the Civil Code recognizes the validity of such stipulation, thus:
Any stipulation that the arbitrators' award or decision shall be final is valid, without
prejudice to Articles 2038, 2039 and 2040.
Similarly, the Construction Industry Arbitration Law provides that the arbitral award "shall
be final and inappealable except on questions of law which shall be appealable to the
Supreme Court." 16
Under the original Labor Code, voluntary arbitration awards or decisions were final,
unappealable and executory. "However, voluntary arbitration awards or decisions on
money claims, involving an amount exceeding One Hundred Thousand Pesos
(P100,000.00) or forty-percent (40%) of the paid-up capital of the respondent employer,
whichever is lower, maybe appealed to the National Labor Relations Commission on any
of the following grounds: (a) abuse of discretion; and (b) gross incompetence." It is to be 17
noted that the appeal in the instances cited were to be made to the National Labor
Relations Commission and not to the courts.
With the subsequent deletion of the above-cited provision from the Labor Code, the
voluntary arbitrator is now mandated to render an award or decision within twenty (20)
calendar days from the date of submission of the dispute and such decision shall be final
and executory after ten (10) calendar days from receipt of the copy of the award or
decision by the parties. 18
Where the parties agree that the decision of the arbitrator shall be final and unappealable
as in the instant case, the pivotal inquiry is whether subject arbitration award is indeed
beyond the ambit of the court's power of judicial review.
No, the arbitration award is not beyond the ambit of the court’s
power of judicial review.
We rule in the negative. It is stated explicitly under Art. 2044 of the Civil Code that the
finality of the arbitrators' award is not absolute and without exceptions. Where the
conditions described in Articles 2038, 2039 and 2040 applicable to both compromises and
arbitrations are obtaining, the arbitrators' award may be annulled or
rescinded. Additionally, under Sections 24 and 25 of the Arbitration Law, there are
19
grounds for vacating, modifying or rescinding an arbitrator's award. Thus, if and when the
20
factual circumstances referred to in the above-cited provisions are present, judicial review
of the award is properly warranted.
What if courts refuse or neglect to inquire into the factual milieu of an arbitrator's award to
determine whether it is in accordance with law or within the scope of his authority? How
may the power of judicial review be invoked?
This is where the proper remedy is certiorari under Rule 65 of the Revised Rules of Court.
It is to be borne in mind, however, that this action will lie only where a grave abuse of
discretion or an act without or in excess of jurisdiction on the part of the voluntary
arbitrator is clearly shown. For "the writ of certiorari is an extra-ordinary remedy and that
certiorari jurisdiction is not to be equated with appellate jurisdiction. In a special civil action
of certiorari, the Court will not engage in a review of the facts found nor even of the law as
interpreted or applied by the arbitrator unless the supposed errors of fact or of law are so
patent and gross and prejudicial as to amount to a grave abuse of discretion or an exces
de pouvoir on the part of the arbitrator." 21
Even decisions of administrative agencies which are declared "final" by law are not
exempt from judicial review when so warranted. Thus, in the case of Oceanic Bic Division
(FFW), et al. v. Flerida Ruth P. Romero, et al., this Court had occasion to rule that:
22
ours).
It should be stressed, too, that voluntary arbitrators, by the nature of their functions, act in
a quasi-judicial capacity. It stands to reason, therefore, that their decisions should not be
24
In the case at bar, petitioners assailed the arbitral award on the following grounds, most of
which allege error on the part of the arbitrator in granting compensation for various items
which apparently are disputed by said petitioners:
1. The Honorable Arbitrator committed grave error in failing to apply the terms and
conditions of the Construction Agreement, Dormitory Contract and Electrical Contract,
and in using instead the "practices" in the construction industry;
7. The Honorable Arbitrator committed grave error in granting to Roblecor the amount
representing the alleged extended overhead expenses;
8. The Honorable Arbitrator committed grave error in granting to Roblecor the amount
representing expenses for change order for site development outside the area of
responsibility of Roblecor;
9. The Honorable Arbitrator committed grave error in granting to Roblecor the cost of
warehouse No. 2;
10. The Honorable Arbitrator committed grave error in granting to Roblecor extra
compensation for airduct change in dimension;
11. The Honorable Arbitrator committed grave error in granting to Roblecor extra
compensation for airduct plastering; and
12. The Honorable Arbitrator committed grave error in awarding to Roblecor attorney's
fees.
After closely studying the list of errors, as well as petitioners' discussion of the same in
their Motion to Remand Case For Further Hearing and Reconsideration and Opposition to
Motion for Confirmation of Award, we find that petitioners have amply made out a case
where the voluntary arbitrator failed to apply the terms and provisions of the Construction
Agreement which forms part of the law applicable as between the parties, thus committing
a grave abuse of discretion. Furthermore, in granting unjustified extra compensation to
respondent for several items, he exceeded his powers — all of which would have
constituted ground for vacating the award under Section 24 (d) of the Arbitration Law.
But the respondent trial court's refusal to look into the merits of the case, despite prima
facie showing of the existence of grounds warranting judicial review, effectively deprived
petitioners of their opportunity to prove or substantiate their allegations. In so doing, the
trial court itself committed grave abuse of discretion. Likewise, the appellate court, in not
giving due course to the petition, committed grave abuse of discretion. Respondent courts
should not shirk from exercising their power to review, where under the applicable laws
and jurisprudence, such power may be rightfully exercised; more so where the objections
raised against an arbitration award may properly constitute grounds for annulling, vacating
or modifying said award under the laws on arbitration.
WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals dated
October 22, 1990 and December 3, 1990 as well as the Orders of respondent Regional
Trial Court dated July 31, 1990 and August 23, 1990, including the writ of execution issued
pursuant thereto, are hereby SET ASIDE. Accordingly, this case is REMANDED to the
court of origin for further hearing on this matter. All incidents arising therefrom are
reverted to the status quo ante until such time as the trial court shall have passed upon
the merits of this case. No costs.
SO ORDERED.
EN BANC
MONTEMAYOR, J.:
In 1950 defendant Petronilo del Rosario, Jr., owner of twenty-five taxi cabs or cars,
operated a taxi business under the name of "Waval Taxi." He employed among others
three mechanics and 49 chauffeurs or drivers, the latter having worked for periods ranging
from 2 to 37 months. On September 4, 1950, without giving said mechanics and chauffeurs
30 days advance notice, Del Rosario sold his 25 units or cabs to La Mallorca, a
transportation company, as a result of which, according to the mechanics and chauffeurs
above-mentioned they lost their jobs because the La Mallorca failed to continue them in
their employment. They brought this action against Del Rosario to recover compensation
for overtime work rendered beyond eight hours and on Sundays and legal holidays, and
one month salary (mesada) provided for in article 302 of the Code of Commerce because
the failure of their former employer to give them one month notice. Subsequently, the
three mechanics unconditionally withdrew their claims. So only the 49 drivers remained as
plaintiffs. The defendant filed a motion for dismissal of the complaint on the ground that it
stated no cause of action and the trial court for the time being denied the motion saying
that it will be considered when the case was heard on the merits. After trial the complaint
was dismissed. Plaintiffs appealed from the order of dismissal to the Court of Appeals
which Tribunal after finding only questions of law are involved, certified the case to us.
The parties are agreed that the plaintiffs as chauffeurs received no fixed compensation
based on the hours or the period of time that they worked. Rather, they were paid on the
commission basis, that is to say, each driver received 20 per cent of the gross returns or
earnings from the operation of his taxi cab. Plaintiffs claim that as a rule, each drive
operated a taxi 12 hours a day with gross earnings ranging from P20 to P25, receiving
therefrom the corresponding 20 per cent share ranging from P4 to P5, and that in some
cases, especially during Saturdays, Sundays, and holidays when a driver worked 24 hours
a day he grossed from P40 to P50, thereby receiving a share of from P8 to P10 for the
period of twenty-four hours.
The reason given by the trial court in dismissing the complaint is that the defendant being
engaged in the taxi or transportation business which is a public utility, came under the
exception provided by the Eight-Hour Labor Law (Commonwealth Act No. 444); and
because plaintiffs did not work on a salary basis, that is to say, they had no fixed or
regular salary or remuneration other than the 20 per cent of their gross earnings "their
situation was therefore practically similar to piece workers and hence, outside the ambit of
article 302 of the Code of Commerce."
For purposes of reference we are reproducing the pertinent provisions of the Eight-Hour
Labor Law, namely, sections 1 to 4.
SECTION 1. The legal working day for any person employed by another shall not be more
than eight hours daily. When the work is not continuous, the time during which the laborer
is not working and can leave his working place and can rest completely shall not be
counted.
SEC. 2. This Act shall apply to all persons employed in any industry or occupation,
whether public or private, with the exception of farm laborers, laborers who prefer to be
paid on piece work basis, domestic servants and persons in the personal service of
another and members of the family of the employer working for him.
SEC. 3. Work may be performed beyond eight hours a day in case of actual or impending
emergencies, caused by serious accidents, fire flood, typhoon, earthquakes, epidemic, or
other disaster or calamity in order to prevent loss of life and property or imminent danger
to public safety; or in case of urgent work to be performed on the machines, equipment, or
installations in order to avoid a serious loss which the employer would otherwise suffer, or
some other just cause of a similar nature; but in all cases the laborers and the employees
shall be entitled to receive compensation for the overtime work performed at the same
rate as their regular wages or salary, plus at least twenty-five per centum additional.
In case of national emergency the Government is empowered to establish rules and
regulations for the operation of the plants and factories and to determine the wages to be
paid the laborers.
Under section 4, as a public utility, the defendant could have his chauffeurs work on
Sundays and legal holidays without paying them an additional sum of at least 25 per cent
of their regular remuneration: but that with reference only to work performed on Sundays
and holidays. If the work done on such days exceeds 8 hours a day, then the Eight-Hour
Labor Law would operate, provided of course that plaintiffs came under section 2 of the
said law. So that the question to be decided here is whether or not plaintiffs are entitled to
extra compensation for work performed in excess of 8 hours a day, Sundays and holidays
included.
It will be noticed that the last part of section 3 of Commonwealth Act 444 provides for extra
compensation for over-time work "at the same rate as their regular wages or salary, plus
at least twenty-five per centum additional'" and that section 2 of the same act excludes
application thereof laborers who preferred to be on piece work basis. This connotes that a
laborer or employee with no fixed salary, wages or remuneration but receiving as
compensation from his employer uncertain and variable amount depending upon the work
done or the result of said work (piece work) irrespective of the amount of time employed,
is not covered by the Eight-Hour Labor Law and is not entitled to extra compensation
should he work in excess of 8 hours a day. And this seems to be the condition of
employment of the plaintiffs. A driver in the taxi business of the defendant, like the
plaintiffs, in one day could operate his taxi cab eight hours, or less than eight hours or in
excess of 8 hours, or even 24 hours on Saturdays, Sundays, and holidays, with no limit or
restriction other than his desire, inclination and state of health and physical endurance. He
could drive continuously or intermittently, systematically or haphazardly, fast or slow, etc.
depending upon his exclusive wish or inclination. One day when he feels strong, active
and enthusiastic he works long, continuously, with diligence and industry and makes
considerable gross returns and receives as much as his 20 per cent commission. Another
day when he feels despondent, run down, weak or lazy and wants to rest between trips
and works for less number of hours, his gross returns are less and so is his commission.
In other words, his compensation for the day depends upon the result of his work, which in
turn depends on the amount of industry, intelligence and experience applied to it, rather
than the period of time employed. In short, he has no fixed salary or wages. In this we
agree with the learned trial court presided by Judge Felicisimo Ocampo which makes the
following findings and observations of this point.
. . . As already stated, their earnings were in the form of commission based on the gross
receipts of the day. Their participation in most cases depended upon their own industry.
So much so that the more hours they stayed on the road, the greater the gross returns
and the higher their commissions. They have no fixed hours of labor. They can retire at
pleasure, they not being paid a fixed salary on the hourly, daily, weekly or monthly basis.
It results that the working hours of the plaintiffs as taxi drivers were entirely characterized
by its irregularity, as distinguished from the specific regular remuneration predicated on
specific and regular hours of work of factories and commercial employees.
In the case of the plaintiffs, it is the result of their labor, not the labor itself, which
determines their commissions. They worked under no compulsion of turning a fixed
income for each given day. . . ..
In an opinion dated June 1, 1939 (Opinion No. 115) modified by Opinion No. 22, series
1940, dated June 11, 1940, the Secretary of Justice held that chauffeurs of the Manila
Yellow Taxicab Co. who "observed in a loose way certain working hours daily," and "the
time they report for work as well as the time they leave work was left to their discretion.,"
receiving no fixed salary but only 20 per cent of their gross earnings, may be considered
as piece workers and therefore not covered by the provisions of the Eight-Hour Labor
Law.
The Wage Administration Service of the Department of Labor in its Interpretative Bulletin
No. 2 dated May 28, 1953, under "Overtime Compensation," in section 3 thereof entitled
Coverage, says:
The provisions of this bulletin on overtime compensation shall apply to all persons
employed in any industry or occupation, whether public or private, with the exception of
farm laborers, non-agricultural laborers or employees who are paid on piece work,
contract, pakiao, task or commission basis, domestic servants and persons in the
personal service of another and members of the family of the employer working for him.
From all this, to us it is clear that the claim of the plaintiffs-appellants for overtime
compensation under the Eight-Hour Labor Law has no valid support.
As to the month pay (mesada) under article 302 of the Code of Commerce, article 2270 of
the new Civil Code (Republic Act 386) appears to have repealed said Article 302 when it
repealed the provisions of the Code of Commerce governing Agency. This repeal took
place on August 30, 1950, when the new Civil Code went into effect, that is, one year after
its publication in the Official Gazette. The alleged termination of services of the plaintiffs
by the defendant took place according to the complaint on September 4, 1950, that is to
say, after the repeal of Article 302 which they invoke. Moreover, said Article 302 of the
Code of Commerce, assuming that it were still in force speaks of "salary corresponding to
said month." commonly known as "mesada." If the plaintiffs herein had no fixed salary
either by the day, week or month, then computation of the month's salary payable would
be impossible. Article 302 refers to employees receiving a fixed salary. Dr. Arturo M.
Tolentino in his book entitled "Commentaries and Jurisprudence on the Commercial Laws
of the Philippines," Vol. 1, 4th edition, p. 160, says that article 302 is not applicable to
employees without fixed salary. We quote —
Employees not entitled to indemnity. — This article refers only to those who are engaged
under salary basis, and not to those who only receive compensation equivalent to
whatever service they may render. (1 Malagarriga 314, citing decision of Argentina Court
of Appeals on Commercial Matters.)
In view of the foregoing, the order appealed from is hereby affirmed, with costs against
appellants.
Pablo, Bengzon, Padilla, Reyes, Jugo, Bautista Angelo, Labrador, Concepcion, and
Diokno, JJ., concur.
Paras, C.J., concurs in the result.
EN BANC
BENGZON, J.:
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 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 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.
Defendant’s contention
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’s contention
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.
Issue
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 knowledge or intervention before the arbitrator selected by
the parties may perform his assigned work.
(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.
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.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Reyes, J.B.L.,
Endencia and Felix, JJ., concur.
SECOND DIVISION
DECISION
BELLOSILLO, J.:
This Petition for Review on certiorari assails the 17 July 1998 Decision [1] of the
Court of Appeals affirming the 11 November 1997 Order [2] of the Regional Trial Court
which denied petitioners Motion to Suspend Proceedings in Civil Case No.
2637-MN. It also questions the appellate courts Resolution[3] of 30 October 1998 which
denied petitioners Motion for Reconsideration.
On 1 July 1994, in a Distributorship Agreement, petitioner Del Monte
Corporation-USA (DMC-USA) appointed private respondent Montebueno Marketing,
Inc. (MMI) as the sole and exclusive distributor of its Del Monte products in the
Philippines for a period of five (5) years, renewable for two (2) consecutive five (5)
year periods with the consent of the parties. The Agreement provided, among others,
for an arbitration clause which states -
In October 1994 the appointment of private respondent MMI as the sole and
exclusive distributor of Del Monte products in the Philippines was published in
several newspapers in the country. Immediately after its appointment, private
respondent MMI appointed Sabrosa Foods, Inc. (SFI), with the approval of petitioner
DMC-USA, as MMIs marketing arm to concentrate on its marketing and selling
function as well as to manage its critical relationship with the trade.
On 3 October 1996 private respondents MMI, SFI and MMIs Managing Director
Liong Liong C. Sy (LILY SY) filed a Complaint [5] against petitioners DMC-USA,
Paul E. Derby, Jr., [6] Daniel Collins[7] and Luis Hidalgo, [8] and Dewey Ltd. [9] before the
Regional Trial Court of Malabon, Metro Manila. Private respondents predicated their
complaint on the alleged violations by petitioners of Arts. 20, [10] 21[11] and 23[12] of the
Civil Code.According to private respondents, DMC-USA products continued to be
brought into the country by parallel importers despite the appointment of private
respondent MMI as the sole and exclusive distributor of Del Monte products thereby
causing them great embarrassment and substantial damage. They alleged that the
products brought into the country by these importers were aged, damaged, fake or
counterfeit, so that in March 1995 they had to cause, after prior consultation with
Antonio Ongpin, Market Director for Special Markets of Del Monte Philippines, Inc.,
the publication of a "warning to the trade" paid advertisement in leading
newspapers. Petitioners DMC-USA and Paul E. Derby, Jr., apparently upset with the
publication, instructed private respondent MMI to stop coordinating with Antonio
Ongpin and to communicate directly instead with petitioner DMC-USA through Paul
E. Derby, Jr.
Private respondents further averred that petitioners knowingly and surreptitiously
continued to deal with the former in bad faith by involving disinterested third parties
and by proposing solutions which were entirely out of their control. Private
respondents claimed that they had exhausted all possible avenues for an amicable
resolution and settlement of their grievances; that as a result of the fraud, bad faith,
malice and wanton attitude of petitioners, they should be held responsible for all the
actual expenses incurred by private respondents in the delayed shipment of orders
which resulted in the extra handling thereof, the actual expenses and cost of money
for the unused Letters of Credit (LCs) and the substantial opportunity losses due to
created out-of-stock situations and unauthorized shipments of Del Monte-USA
products to the Philippine Duty Free Area and Economic Zone; that the bad faith,
fraudulent acts and willful negligence of petitioners, motivated by their determination
to squeeze private respondents out of the outstanding and ongoing Distributorship
Agreement in favor of another party, had placed private respondent LILY SY on
tenterhooks since then; and, that the shrewd and subtle manner with which petitioners
concocted imaginary violations by private respondent MMI of the Distributorship
Agreement in order to justify the untimely termination thereof was a subterfuge. For
the foregoing, private respondents claimed, among other reliefs, the payment of actual
damages, exemplary damages, attorneys fees and litigation expenses.
On 21 October 1996 petitioners filed a Motion to Suspend Proceedings[13] invoking
the arbitration clause in their Agreement with private respondents.
In a Resolution[14] dated 23 December 1996 the trial court deferred consideration of
petitioners Motion to Suspend Proceedings as the grounds alleged therein did not
constitute the suspension of the proceedings considering that the action was for
damages with prayer for the issuance of Writ of Preliminary Attachment and not on
the Distributorship Agreement.
On 15 January 1997 petitioners filed a Motion for Reconsideration to which
private respondents filed their Comment/Opposition. On 31 January 1997 petitioners
filed their Reply. Subsequently, private respondents filed an Urgent Motion for Leave
to Admit Supplemental Pleading dated 2 April 1997. This Motion was admitted, over
petitioners opposition, in an Order of the trial court dated 27 June 1997.
As a result of the admission of the Supplemental Complaint, petitioners filed on
22 July 1997 a Manifestation adopting their Motion to Suspend Proceedings of 17
October 1996 and Motion for Reconsideration of 14 January 1997.
On 11 November 1997 the Motion to Suspend Proceedings was denied by the trial
court on the ground that it "will not serve the ends of justice and to allow said
suspension will only delay the determination of the issues, frustrate the quest of the
parties for a judicious determination of their respective claims, and/or deprive and
delay their rights to seek redress."[15]
On appeal, the Court of Appeals affirmed the decision of the trial court. It held
that the alleged damaging acts recited in the Complaint, constituting petitioners causes
of action, required the interpretation of Art. 21 of the Civil Code[16] and that in
determining whether petitioners had violated it "would require a full blown trial"
making arbitration "out of the question." [17] Petitioners Motion for Reconsideration of
the affirmation was denied. Hence, this Petition for Review.
The crux of the controversy boils down to whether the dispute between the
parties warrants an order compelling them to submit to arbitration.
Petitioner’s Contention
Petitioners contend that the subject matter of private respondents causes of action
arises out of or relates to the Agreement between petitioners and private
respondents. Thus, considering that the arbitration clause of the Agreement provides
that all disputes arising out of or relating to the Agreement or the parties relationship,
including the termination thereof, shall be resolved by arbitration, they insist on the
suspension of the proceedings in Civil Case No. 2637-MN as mandated by Sec. 7 of
RA 876[18] -
Sec. 7. Stay of Civil Action. If any suit or proceeding be brought upon an
issue arising out of an agreement providing for arbitration thereof, the court
in which such suit or proceeding is pending, upon being satisfied that the
issue involved in such suit or proceeding is referable to arbitration, shall stay
the action or proceeding until an arbitration has been had in accordance with
the terms of the agreement. Provided, That the applicant for the stay is not
in default in proceeding with such arbitration.
Private Respondents’ Claim
Private respondents claim, on the other hand, that their causes of action are rooted
in Arts. 20, 21 and 23 of the Civil Code,[19] the determination of which demands a full
blown trial, as correctly held by the Court of Appeals. Moreover, they claim that the
issues before the trial court were not joined so that the Honorable Judge was not given
the opportunity to satisfy himself that the issue involved in the case was referable to
arbitration. They submit that, apparently, petitioners filed a motion to suspend
proceedings instead of sending a written demand to private respondents to arbitrate
because petitioners were not sure whether the case could be a subject of
arbitration. They maintain that had petitioners done so and private respondents failed
to answer the demand, petitioners could have filed with the trial court their demand
for arbitration that would warrant a determination by the judge whether to refer the
case to arbitration. Accordingly, private respondents assert that arbitration is out of
the question.
Private respondents further contend that the arbitration clause centers more on
venue rather than on arbitration. They finally allege that petitioners filed their motion
for extension of time to file this petition on the same date [20] petitioner DMC-USA
filed a petition to compel private respondent MMI to arbitrate before the United States
District Court in Northern California, docketed as Case No. C-98-4446. They insist
that the filing of the petition to compel arbitration in the United States made the
petition filed before this Court an alternative remedy and, in a way, an abandonment
of the cause they are fighting for here in the Philippines, thus warranting the dismissal
of the present petition before this Court.
There is no doubt that arbitration is valid and constitutional in our
jurisdiction. [21] Even before the enactment of RA 876, this Court has countenanced the
settlement of disputes through arbitration. Unless the agreement is such as absolutely
to close the doors of the courts against the parties, which agreement would be void,
the courts will look with favor upon such amicable arrangement and will only
interfere with great reluctance to anticipate or nullify the action of the
arbitrator. [22] Moreover, as RA 876 expressly authorizes arbitration of domestic
disputes, foreign arbitration as a system of settling commercial disputes was likewise
recognized when the Philippines adhered to the United Nations "Convention on the
Recognition and the Enforcement of Foreign Arbitral Awards of 1958"under the 10
May 1965 Resolution No. 71 of the Philippine Senate, giving reciprocal recognition
and allowing enforcement of international arbitration agreements between parties of
different nationalities within a contracting state. [23]
A careful examination of the instant case shows that the arbitration clause in the
Distributorship Agreement between petitioner DMC-USA and private respondent
MMI is valid and the dispute between the parties is arbitrable. However, this Court
must deny the petition.
The Agreement between petitioner DMC-USA and private respondent MMI is a
contract.The provision to submit to arbitration any dispute arising therefrom and the
relationship of the parties is part of that contract and is itself a contract. As a rule,
contracts are respected as the law between the contracting parties and produce effect
as between them, their assigns and heirs. [24] Clearly, only parties to the Agreement, i.e.,
petitioners DMC-USA and its Managing Director for Export Sales Paul E. Derby, Jr.,
and private respondents MMI and its Managing Director LILY SY are bound by the
Agreement and its arbitration clause as they are the only signatories
thereto. Petitioners Daniel Collins and Luis Hidalgo, and private respondent SFI, not
parties to the Agreement and cannot even be considered assigns or heirs of the parties,
are not bound by the Agreement and the arbitration clause therein.Consequently,
referral to arbitration in the State of California pursuant to the arbitration clause and
the suspension of the proceedings in Civil Case No. 2637-MN pending the return of
the arbitral award could be called for [25] but only as to petitioners DMC-USA and Paul
E. Derby, Jr., and private respondents MMI and LILY SY, and not as to the other
parties in this case, in accordance with the recent case of Heirs of Augusto L. Salas, Jr.
v. Laperal Realty Corporation,[26] which superseded that of Toyota Motor Philippines
Corp. v. Court of Appeals.[27]
In Toyota, the Court ruled that "[t]he contention that the arbitration clause has
become dysfunctional because of the presence of third parties is untenable
ratiocinating that "[c]ontracts are respected as the law between the contracting
parties" [28] and that "[a]s such, the parties are thereby expected to abide with good faith
in their contractual commitments."[29] However, in Salas, Jr., only parties to the
Agreement, their assigns or heirs have the right to arbitrate or could be compelled to
arbitrate. The Court went further by declaring that in recognizing the right of the
contracting parties to arbitrate or to compel arbitration, the splitting of the
proceedings to arbitration as to some of the parties on one hand and trial for the others
on the other hand, or the suspension of trial pending arbitration between some of the
parties, should not be allowed as it would, in effect, result in multiplicity of suits,
duplicitous procedure and unnecessary delay. [30]
The object of arbitration is to allow the expeditious determination of a
dispute. [31] Clearly, the issue before us could not be speedily and efficiently resolved in
its entirety if we allow simultaneous arbitration proceedings and trial, or suspension
of trial pending arbitration. Accordingly, the interest of justice would only be served
if the trial court hears and adjudicates the case in a single and complete proceeding. [32]
WHEREFORE , the petition is DENIED. The Decision of the Court of Appeals
affirming the Order of the Regional Trial Court of Malabon, Metro Manila, in Civil
Case No. 2637-MN, which denied petitioners Motion to Suspend Proceedings, is
AFFIRMED.The Regional Trial Court concerned is directed to proceed with the
hearing of Civil Case No. 2637-MN with dispatch. No costs.
SO ORDERED.
Mendoza, Buena, and De Leon, Jr., JJ., concur.
Quisumbing, J., no part, related to counsel of a party.
EN BANC
VITUG, J.:
In an effort to declog the courts of an increasing volume of work load and, most
importantly, in order to accord contending parties with expenditious alternatives for
settling disputes, the law authorities, indeed encourages, out of court settlements or
adjudications. Compromises and arbitration are widely known and used as such
acceptable methods of resolving adversarial claims.
The court shall decide all motions, petitions or application filed under the provisions of this
Act, within ten days after such motions, petitions, or applications have been heard by it.
In chronology, the events that have led to the case at bench are detailed in the appealed
decision of respondent appellate court, which we here reproduce in toto.
Original action for Certiorari and Prohibition for Annulment of the Orders, dated April 26,
1990 and June 22, 1990, respectively, of Branch LXI, Regional Trial Court, Angeles City, in
Special Case No. 6024 for Enforcement of ARBITRATION Agreement with Damages.
Petitioner assails that portion of subject Order of April 26, 1990, stating as follows:
(1) Petitioner's claim for damages predicated on alleged tortuous acts of respondents La
Naval Drug corporation such as their alleged interference and dilatory tactics, etc. in the
implementation of the Arbitration Agreement in the Contract of Lease, thereby compelling
among others the petitioner to go to Court for redress; and respondent La Naval Drug
Corporation's counterclaim for damages may be entertained by this Court in a hearing —
not summary — for the purpose, under the Rules of Court.
(2) A preliminary hearing of the special and affirmative defense to show that Petitioner has
not cause of action against respondent's claim for damages is denied; a resolution on this
issue is deferred after the trial of the case on the merits.
And challenges the Order of June 22, 1990 denying its motion for reconsideration of the
said earlier Order.
From the petition below of respondent Yao, it appears that he is the present owner of a
commercial building a portion of which is leased to petitioner under a contract of lease
executed on December 23, 1993 with the former owner thereof, La Proveedora, Inc., which
contract expired on April 30, 1989. However, petitioner exercised its option to lease the
same building for another five years. But petitioner and respondent Yao disagreed on the
rental rate, and to resolve the controversy, the latter, thru written notices to the former,
expressed his intention to submit their disagreement to arbitration, in accordance with
Republic Act 876, otherwise known as the Arbitration Law, and paragraph 7 of their lease
contract, providing that:
7. . . . Should the parties fail to agree on the rate of rentals, the same shall be submitted to
a group of Arbitrators composed of three (3) members, one to be appointed by LESSOR,
another by LESSEE and the third one to be agreed upon by the two arbitrators previously
chosen and the parties hereto shall submit to the decision of the arbitrators.
Thus, on May 6, 1989, respondent Yao appointed Domingo Alamarez, Jr. as his arbitrator,
while on June 5, 1989, petitioner chose Atty. Casiano Sabile as its arbitrator. The
confirmation of the appointment of Aurelio Tupang, as third arbitrator, was held in
abeyance because petitioner instructed Atty. Sabile to defer the same until its Board of
Directors could convene and approve Tupang's appointment. Respondent Yao theorizes
that this was petitioner's design to delay the arbitration proceedings, in violation of the
Arbitration Law, and the governing stipulation of their contract of lease.
On the basis of the aforesaid allegations, respondent Yao prayed that after summary
hearing pursuant to Section 6 of the Arbitration Law, Atty. Casiano Sabile and Domingo
Alamarez be directed to proceed with the arbitration in accordance with Section 7 of
subject Contract of Lease and the applicable provisions of the Arbitration law, by
appointing and confirming the appointment of the Third Arbitrator; and that the Board of
Three Arbitrators be ordered to immediately convene and resolve the controversy before it,
pursuant to Section 12 and the succeeding sections of the Arbitration Law. (Annex "A,"
Petition.)
In its Answer with Counterclaim (Annex "C," Petition), petitioner here specifically denied
the averments of the petition below; theorizing that such petition is premature since
respondent Yao has not yet formally required arbitrators Alamarez and Sabile to agree on
the third arbitrator, within ten (10) days from notice, and that the delay in the arbitration
was due to respondent Yao's failure to perform what is incumbent upon him, of notifying
and thereafter, requiring both arbitrators to appoint the third member of the Board of
Arbitrators. According to petitioner, it actually gave arbitrators Sabile and Alamarez a free
hand in choosing the third arbitrator; and, therefore, respondent Yao has no cause of
action against it (petitioner). By way of Counterclaim, petitioner alleged that it suffered
actual damages of P100,000.00; and incurred attorney's fees of P50,000.00, plus P500.00
for every court appearance of its counsel.
On October 20, 1989, respondent Yao filed an amended petition for "Enforcement of
Arbitration Agreement with Damages;" praying that petitioner be ordered to pay interest
on the unpaid rents, at the prevailing rate of interest in commercial banks, and exemplary
damages of at least P250,000.00.
On October 24, 1989, despite petitioner's opposition to the motion to admit the amended
petition, the respondent court admitted the same.
On October 31, 1989, petitioner answered the amended petition; contending, among
others, that the amended petition should be dismissed on the ground of non-payment of
the requisite filing fees therefor; and it being in the nature of an ordinary civil action, a full
blown and regular trial, is necessary; so that respondent Yao's proposition for a summary
hearing of the arbitration issue and separate trial for his claim for damages is procedurally
untenable and implausible.
Invoking Section 5, Rule 16 of the Rules of Court, petitioner presented a "Motion to Set
Case for Preliminary Hearing" of its special and affirmative defenses, which are grounds
fro a motion to dismiss.
In its Order of November 14, 1989, the respondent court announced that the two
arbitrators chose Mrs. Eloisa R. Narciso as the third arbitrator. And on November 21, 1989,
it ordered the parties to submit their position papers on the issue as to whether or not
respondent Yao's claim for damages may be litigated upon in the summary proceeding for
enforcement of arbitration agreement. It likewise informed the parties that petitioner's
Motion to Set Case for Preliminary Hearing" of Special and Affirmative Defenses would be
resolved together with the question of damages.
On April 26, 1990, the aforequoted assailed Order issued. In moving for reconsideration of
the said Order, petitioner argued that in Special Case No. 6024, the respondent court sits
as a special court exercising limited jurisdiction and is not competent to act on respondent
Yao's claim for damages, which poses an issue litigable in an ordinary civil action. But the
respondent court was not persuaded by petitioner's submission. On June 22, 1990, it
denied the motion for reconsideration. (Rollo, pp. 89-93).
While the appellate court has agreed with petitioner that, under Section 6 of Republic Act
No. 876, a court, acting within the limits of its special jurisdiction, may in this case solely
determine the issue of whether the litigants should proceed or not to arbitration, it,
however, considered petitioner in estoppel from questioning the competence of the court
to additionally hear and decide in the summary proceedings private respondent's claim for
damages, it (petitioner) having itself filed similarly its own counterclaim with the court a
quo.
It is hardly disputable that when a court is called upon to exercise limited and special
jurisdiction, that court cannot stray to matters outside the area of its declared authority or
beyond what has been expressly invested by law (Elumbaring vs. Elumbaring, 12 Phil. 384,
387), particularly, such as in this instance, where the proceedings are summary in nature.
Prefatorily, recalling the distinctions, pertinent to the case, between the court's lack of
jurisdiction over the person of the defendant, on the one hand, and its lack of jurisdiction
over the subject matter or the nature of the action, upon the other hand, should be useful.
The lack of jurisdiction over the person of the defendant may be waived either expressly
or impliedly. When a defendant voluntarily appears, he is deemed to have submitted
himself to the jurisdiction of the court. If he so wishes not to waive this defense, he must
do so seasonably by motion for the purpose of objecting to the jurisdiction of the court;
otherwise, he shall be deemed to have submitted himself to that jurisdiction. The
decisions promulgated heretofore by this Court would likewise seemingly apply estoppel
to bar the defendant from pursuing that defense by alleging in his answer any other issue
for dismissing the action.
In Wang Laboratories, Inc., vs. Mendoza (156 SCRA 44), this Court has ruled that if the
defendant, besides setting up in a motion to dismiss his objection to the jurisdiction of the
court, alleges at the same time any other ground for dismissing the action, he is deemed
to have submitted himself to the jurisdiction of the court. In the process, it has equated the
matter to a situation where, such as in Immaculata vs. Judge Navarro, et al. (146 SCRA 5),
the defendant invokes an affirmative relief against his opponent.
In De Midgely vs. Judge Ferandos (64 SCRA 23, 31), the Court elaborated thusly:
We are of the opinion that the lower court has acquired jurisdiction over the person of Mrs.
Midgely by reason of her voluntary appearance. The reservation in her motion to dismiss
that she was making a special appearance to contest the court's jurisdiction over her
person may be disregarded.
It may be disregarded because it was nullified by the fact that in her motion to dismiss she
relied not only on the ground of lack of jurisdiction over her person but also on the ground
that there was no showing that earnest efforts were exerted to compromise the case and
because she prayed "for such other relief as" may be deemed "appropriate and proper."
When the appearance is by motion for the purpose of objecting to the jurisdiction of the
court over the person, it must be for the sole and separate purpose of objecting to the
jurisdiction of the court. If his motion is for any other purpose than to object to the
jurisdiction of the court over his person, he thereby submits himself to the jurisdiction of
the court. A special appearance by motion made for the purpose of objecting to the
jurisdiction of the court over the person will be held to be a general appearance, if the
party in said motion should, for example, ask for a dismissal of the action upon the further
ground that the court had no jurisdiction over the subject matter. (Syllabus, Flores vs.
Zurbito, supra , at page 751. That rule was followed in Ocampo vs. Mina and Arejola, 41
Phil. 308).
The justification for the rule was expressed in Republic vs. Ker and Companry, Ltd. (18
SCRA 207, 213-214), in this wise:
We observed that the motion to dismiss filed on April 14, 1962, aside from disputing the
lower court's jurisdiction over defendant's person, prayed for dismissal of the complaint on
the ground that plaintiff's cause of action had prescribed. By interposing such second
ground in its motion to dismiss, Ker & Co., Ltd. availed of an affirmative defense on the
basis of which it prayed the court to resolve controversy in its favor. For the court to validly
decide the said plea of defendant Ker & Co., Ltd., it necessarily had to acquire jurisdiction
upon the latter's person, who, being the proponent of the affirmative defense, should be
deemed to have abandoned its special appearance and voluntarily submitted itself to the
jurisdiction of the court.
Voluntary appearance cures defects of summons, if any, Such defect, if any, was further
cured when defendant filed its answer to the complaint. A defendant can not be permitted
to speculate upon the judgment of the court by objecting to the court's jurisdiction over its
person if the judgment is adverse to it, and acceding to jurisdiction over its person if and
when the judgment sustains its defenses.
The doctrine of estoppel is predicated on, and has its origin in, equity which, broadly
defined, is justice according to natural law and right. It is a principle intended to avoid a
clear case of injustice. The term is hardly distinguishable from a waiver of right. Estoppel,
like its said counterpart, must be unequivocal and intentional for, when misapplied, it can
easily become a most convenient and effective means of injustice. Estoppel is not
understood to be a principle that, as a rule, should prevalently apply but, such as it
concededly is, as a mere exception from the standard legal norms of general application
that can be invoked only in highly exceptional and justifiable cases.
Tested by the above criteria, the Court sees it propitious to re-examine specifically the
question of whether or not the submission of other issues in a motion to dismiss, or of an
affirmative defense (as distinguished from an affirmative relief) in an answer, would
necessarily foreclose, and have the effect of a waiver of, the right of a defendant to set up
the court's lack of jurisdiction over the person of the defendant.
Not inevitably.
Section 1, Rule 16, of the Rules of Court, provides that a motion to dismiss may be made
on the following grounds:
(a) That the court has no jurisdiction over the person of the defendant or over the subject
of the action or suit;
(b) That the court has no jurisdiction over the nature of the action or suit;
(f) That the cause of action is barred by a prior judgment or by statute of limitations;
(h) That the claim or demand set forth in the plaintiff's pleading has been paid, waived,
abandoned, or otherwise extinguished;
( i ) That the claim on which the action or suit is founded is unenforceable under the
provisions of the statute of frauds;
( j ) That the suit is between members of the same family and no earnest efforts towards a
compromise have been made.
Any ground for dismissal in a motion to dismiss, except improper venue, may, as further
set forth in Section 5 of the same rule, be pleaded as an affirmative defense and a
preliminary hearing may be had thereon as if a motion to dismiss had been filed. An
answer itself contains the negative, as well as affirmative, defenses upon which the
defendant may rely (Section 4, Rule 6, Rules of Court). A negative defense denies the
material facts averred in the complaint essential to establish the plaintiff's cause of action,
while an affirmative defense in an allegation of a new matter which, while admitting the
material allegations of the complaint, would, nevertheless, prevent or bar recovery by the
plaintiff. Inclusive of these defenses are those mentioned in Rule 16 of the Rules of Court
which would permit the filing of a motion to dismiss.
In the same manner that the plaintiff may assert two or more causes of action in a court
suit, a defendant is likewise expressly allowed, under Section 2, Rule 8, of the Rules of
Court, to put up his own defenses alternatively or even hypothetically. Indeed, under
Section 2, Rule 9, of the Rules of Court, defenses and objections not pleaded either in a
motion to dismiss or in an answer, except for the failure to state a cause of action, are
deemed waived. We take this to mean that a defendant may, in fact, feel enjoined to set
up, along with his objection to the court's jurisdiction over his person, all other possible
defenses. It thus appears that it is not the invocation of any of such defenses, but the
failure to so raise them, that can result in waiver or estoppel. By defenses, of course, we
refer to the grounds provided for in Rule 16 of the Rules of Court that must be asserted in
a motion to dismiss or by way of affirmative defenses in an answer.
Mindful of the foregoing, in Signetics Corporation vs. Court of Appeals and Freuhauf
Electronics Phils., Inc. (225 SCRA 737, 738), we lately ruled:
This is not to say, however, that the petitioner's right to question the jurisdiction of the
court over its person is now to be deemed a foreclosed matter. If it is true, as Signetics
claims, that its only involvement in the Philippines was through a passive investment in
Sigfil, which it even later disposed of, and that TEAM Pacific is not its agent, then it cannot
really be said to be doing business in the Philippines. It is a defense, however, that
requires the contravention of the allegations of the complaint, as well as full ventilation, in
effect, of the main merits of the case, which should not thus be within the province of a
mere motion to dismiss. So, also, the issue posed by the petitioner as to whether a foreign
corporation which has done business in the country, but which has ceased to do business
at the time of the filing of a complaint, can still be made to answer for a cause of action
which accrued while it was doing business, is another matter that would yet have to await
the reception and admission of evidence. Since these points have seasonably been
raised by the petitioner, there should be no real cause for what may understandably be its
apprehension, i.e., that by its participation during the trial on the merits, it may, absent an
invocation of separate or independent reliefs of its own, be considered to have voluntarily
submitted itself to the court's jurisdiction.
Lack of jurisdiction over the subject matter of the suit is yet another matter. Whenever it
appears that the court has no jurisdiction over the subject matter, the action shall be
dismissed (Section 2, Rule 9, Rules of Court). This defense may be interposed at any time,
during appeal (Roxas vs. Rafferty, 37 Phil. 957) or even after final judgment (Cruzcosa vs.
Judge Concepcion, et al., 101 Phil. 146). Such is understandable, as this kind of
jurisdiction is conferred by law and not within the courts, let alone the parties, to
themselves determine or conveniently set aside. In People vs. Casiano (111 Phil. 73 93-94),
this Court, on the issue of estoppel, held:
The rule was reiterated in Calimlim vs. Ramirez (118 SCRA 399, 406), and quite recently,
in Southeast Asian Fisheries Development Center-Aquaculture Department vs. National
Labor Relations Commission (206 SCRA 283).
Jurisdiction over the nature of the action, in concept, differs from jurisdiction over the
subject matter. Illustrated, lack of jurisdiction over the nature of the action is the situation
that arises when a court, which ordinarily would have the authority and competence to
take a case, is rendered without it either because a special law has limited the exercise of
its normal jurisdiction on a particular matter or because the type of action has been
reposed by law in certain other courts or quasi-judicial agencies for determination.
Nevertheless, it can hardly be questioned that the rules relating to the effects of want of
jurisdiction over the subject matter should apply with equal vigor to cases where the court
is similarly bereft of jurisdiction over the nature of the action.
(1) Jurisdiction over the person must be seasonably raised, i.e., that it is pleaded in a
motion to dismiss or by way of an affirmative defense in an answer. Voluntary appearance
shall be deemed a waiver of this defense. The assertion, however, of affirmative defenses
shall not be constructed as an estoppel or as a waiver of such defense.
(2) Where the court itself clearly has no jurisdiction over the subject matter or the nature of
the action, the invocation of this defense may be done at any time. It is neither for the
courts nor the parties to violate or disregard that rule, let alone to confer that jurisdiction,
this matter being legislative in character. Barring highly meritorious and exceptional
circumstances, such as hereinbefore exemplified, neither estoppel nor waiver shall apply.
In the case at bench, the want of jurisdiction by the court is indisputable, given the nature
of the controversy. The arbitration law explicitly confines the court's authority only to pass
upon the issue of whether there is or there is no agreement in writing providing for
arbitration. In the affirmative, the statute ordains that the court shall issue an order
"summarily directing the parties to proceed with the arbitration in accordance with the
terms thereof." If the court, upon the other hand, finds that no such agreement exists, "the
proceeding shall be dismissed." The proceedings are summary in nature.
All considered, the court a quo must then refrain from taking up the claims of the
contending parties for damages, which, upon the other hand, may be ventilated in
separate regular proceedings at an opportune time and venue. The circumstances
obtaining in this case are far, we hold, from justifying the application of estoppel against
either party.
WHEREFORE, the decision of the Court of Appeals and the orders of the trial court in
question are SET ASIDE. The court a quo, in the instant proceedings, is ordered to
DESIST from further hearing private respondent's claim, as well as petitioner's
counterclaim, for damages. No costs.
SO ORDERED.
FIRST DIVISION
Petitioner,
Present:
Panganiban, C.J.
(Chairperson),
- versus - Ynares-Santiago,
Austria-Martinez,
Chico-Nazario, JJ.
Respondent.
----------------------------------------------------------------------------------------
DECISION
YNARES-SANTIAGO, J.:
Order [2] of the Regional Trial Court of Makati City, Branch 135, in Civil
Case No. 92-145 which dismissed the petition for review for lack of
thereof.
On December 11, 1991, Far East Bank and Trust Company (Respondent)
and debited against its clearing account. HBTC sent these checks to
funds and returned the checks to HBTC. However, the latter refused to
accept them since the checks were returned by respondent after the
with the Regional Trial Court (RTC) in Makati City docketed as Civil
Case No. 92-145 for Sum of Money and Damages with Preliminary
Attachment. The complaint was filed not only against HBTC but also
dated April 30, 1992,[8] suspended the proceedings in the case against all
follows:
SO ORDERED. [11]
135 of the RTC of Makati and docketed as Civil Case No. 92-145.[15] In
an order dated January 20, 1999, the RTC directed both petitioner and
Surrejoinder. [21]
On November 9, 1999, the RTC rendered the assailed Order which held,
thus:
SO ORDERED. [22]
Petitioner contends that Civil Case No. 92-145 was merely suspended to
await the outcome of the arbitration case pending before the PCHC. Thus,
be filed in Civil Case No. 92-145 and should not be docketed as a separate
action. Likewise, petitioner avers that had it filed a separate action, this
procedure.
basis for such appeal.Respondent argues that petitioners claim that the
cases under Section 2, Rule 20 of the Rules of Court, when it filed the
same in Branch 135 of the RTC of Makati where there was already a
proceedings.
The PCHC has its own Rules of Procedure for Arbitration (PCHC
The Arbitration Law [26] and supplemented by the Rules of Court. [27] Thus,
we first thresh out the remedy of petition for review availed of by the
xxxx
x x x x. (Emphasis supplied)
and conclusive upon all the parties in said arbitration dispute. [28] Under
Article 2044[29] of the New Civil Code, the validity of any stipulation on
its disposal after the Arbitration Committee denied its Motion for
vacating the award on the grounds provided for under Section 24 of the
Arbitration Law. [34] Petitioner likewise has the option to file a petition for
review under Rule 43 of the Rules of Court with the Court of Appeals on
questions of fact, of law, or mixed questions of fact and law. [35] Lastly,
petitioner may file a petition for certiorari under Rule 65 of the Rules of
remedies available to it. Instead it filed a petition for review with the RTC
the trial court with respect to the petition for review filed by petitioner.
right to act in a case.[37] Jurisdiction over the subject matter is the power
to hear and determine the general class to which the proceedings in
law and not by the consent or acquiescence of any or all of the parties or
In the instant case, petitioner and respondent have agreed that the
jurisdiction to the RTC. Thus, the portion of the PCHC Rules granting
either a motion to vacate the arbitral award with the RTC, a petition for
review with the Court of Appeals under Rule 43 of the Rules of Court, or
a petition for certiorari under Rule 65 of the Rules of Court. In the case at
bar, petitioner filed a petition for review with the RTC when the same
should have been filed with the Court of Appeals under Rule 43 of the
Rules of Court. Thus, the RTC of Makati did not err in dismissing the
petition for review for lack of jurisdiction but not on the ground that
petitioner should have filed a separate case from Civil Case No. 92-145
but on the necessity of filing the correct petition in the proper court. It is
immaterial whether petitioner filed the petition for review in Civil Case
case in the RTC, considering that the RTC will only have jurisdiction
arguments, with respect to the filing of separate action from Civil Case
Court.
review for lack of jurisdiction and the February 1, 2000 Order denying its
SO ORDERED.
FIRST DIVISION
Petitioner, Present:
Panganiban, C.J.
(Chairperson),
- versus - Ynares-Santiago,
Austria-Martinez,
Chico-Nazario, JJ.
----------------------------------------------------------------------------------------
RESOLUTION
YNARES-SANTIAGO, J.:
Before the Court is a Motion to Inhibit the Honorable Chief Justice and
Motion to Refer Case to the Court En Banc, dated August 4, 2006, filed
I.
According to the movant, the Motion to Inhibit the Chief Justice is
the Honorable Chief Justice has not acted in an objective, impartial and
the parties.
The movant adds that the dizzying pace by which private respondents
granted special attention and favor by the Honorable Chief Justice. (bold
types in original)
Atty. Chavezs perception about the alleged closeness and the good
relationship between Atty. Ordoez and the Chief Justice to impair the
latters objectivity and impartiality has no basis, for the following reasons:
(1) The actions taken on the various motions and incidents enumerated by
Division. Not being the ponente, the Chief Justice did not initiate or
propose any of the actions and rulings made by the Court. Like the three
other Division members, he merely concurred with the actions/rulings
chairman (who in this case is the Chief Justice), they are really collective
actions of the entire Division, not merely those of the Chair. This is the
(2) The alleged unpleasant interaction these past 19 years between Atty.
Chavez and Atty. Sedfrey Ordoez with whom Chief Justice worked either
were given on the basis only of legal merit, and on nothing else.
(3) True, the Chief Justice was an associate (not a partner) in 1961 to 1963
dissolved in 1987. True also, he has had a close personal and professional
relationship with the principal partner in that law firm, Sen. Jovito R.
Salonga. That is the reason the Chief Justice has inhibited himself from
has not inhibited himself from cases involving Atty. Ordoez. In fact, he
has not hesitated, on several occasions, to vote against parties/causes
(4) In fairness to all concerned, Atty. Ordoez has never spoken, directly
or indirectly, with the Chief Justice on any matter pending in the Supreme
any manner whatsoever. In fact, the Chief Justice understands that Atty.
Ordoez has been seriously ill, going in and out of the hospital, over the
past several months. And yet the Chief Justice has not even visited or
(5) On the other hand, the Chief Justice, when so warranted by the facts
and law, has voted in favor of causes and parties represented by Atty.
133, December 9, 1998; 366 Phil. 863, May 19, 1999), which was written
that he has won the vote of the Chief Justice without his having to speak
(6) Movants perception that Atty. Ordoezs concern for and interest
personally or through others, between the Chief Justice and Atty. Ordoez
(or anyone representing him) about any matter related to any case in this,
or any other, court. Neither is the Chief Justice aware of any alleged
retire from the judiciary. It is totally inconceivable that he will smear his
Supreme Court with any action that is less than objective, impartial and
neutral. On the other hand, he assures movant (and all concerned) that he
will continue with his vow to lead a judiciary characterized by four Ins:
II.
Ordoez and the Chief Justice, the movant assailed certain proceedings in
Justice was on official leave. The remaining Members of the Division can
proceed with official business despite the absence of the Chief Justice as
Section 4(3), Article VIII of the Constitution which provides that cases or
deliberations on the issues in the case and voted thereon, and in no case,
proceedings in Civil Case No. 03-110 and from enforcing the Order of the
trial court dated June 29, 2006 ordering the sheriff to implement the writ
respondents with the Regional Trial Court of Muntinlupa City which was
attorneys fees and costs of the suit. In an Order dated May 17, 2006, Judge
all the construction materials they bought for the construction of the
10, 2006, respondents averred that from July 7, 2006 until 4 oclock in the
Court of Appeals that the CIAC, not the Regional Trial Court, which has
jurisdiction over the case, and despite the pendency of the instant case
before us, the Regional Trial Court still proceeded with the
properly took cognizance of the case while respondents claim that CIAC
matter. Otherwise stated, if we rule in the instant case that CIAC has
jurisdiction over the controversy, then it would necessarily follow that the
Regional Trial Court does not have jurisdiction. Since it did not acquire
jurisdiction over the controversy, then the writ of execution that it issued
was void. If we allow the RTC Judge and the Sheriff to continue with the
Thus on July 12, 2006, the Court issued a Resolution that reads:
2006. Both the July 12, 2006 and July 19, 2006 Resolutions are covered by
the petition is given due course, the Supreme Court may require or allow
deem necessary within such periods and under such conditions as it may
(5) The Court did not exceed its jurisdiction; neither did it encroach
established they are entitled to the relief demanded. It may further be said
that the issuance of a TRO on July 12, 2006 is not a final determination of
the matter. It was a remedy intended to avoid any irreparable injury that
might be caused to the parties. It may be recalled that the CIAC and the
trial court each asserted its jurisdiction over the controversy to the
(6) There is no truth or basis to the allegation that the case has been
given special attention. All actions on the motions and incidents have
is GRANTED.
SO ORDERED.
THIRD DIVISION
INC., respondent.
DECISION
PANGANIBAN, J.:
Before us is a Petition for Review on Certiorari [2] under Rule 45 of the Rules
of Court, seeking to set aside the January 28, 2000 Decision of the Court of
Appeals[3] (CA) in CA-GR CV No. 54232. The dispositive portion of the Decision
reads as follows:
The Facts
On appeal, the CA reversed the RTC and ordered the referral of the case
to arbitration. The appellate court held as arbitrable the issue of whether
respondents take-over of some work items had been intended to be a
termination of the original contract under Letter K of the Subcontract. It ruled
likewise on two other issues: whether petitioner was liable under the warranty
clause of the Agreement, and whether it should reimburse respondent for the
work the latter had taken over. [15]
Hence, this Petition. [16]
The Issues
In its Memorandum, petitioner raises the following issues for the Courts
consideration:
A
In the affirmative, whether or not the requirements provided in Article III [1] of
CIAC Arbitration Rules regarding request for arbitration ha[ve] been
complied with[.] [17]
Clearly, the resolution of the dispute between the parties herein requires a
referral to the provisions of their Agreement. Within the scope of the arbitration
clause are discrepancies as to the amount of advances and billable
accomplishments, the application of the provision on termination, and the
consequent set-off of expenses.
A review of the factual allegations of the parties reveals that they differ on
the following questions: (1) Did a take-over/termination occur? (2) May the
expenses incurred by respondent in the take-over be set off against the
amounts it owed petitioner? (3) How much were the advances and billable
accomplishments?
The resolution of the foregoing issues lies in the interpretation of the
provisions of the Agreement. According to respondent, the take-over was
caused by petitioners delay in completing the work. Such delay was in violation
of the provision in the Agreement as to time schedule:
G. TIME SCHEDULE
Because of the delay, respondent alleges that it took over some of the
work contracted to petitioner, pursuant to the following provision in the
Agreement:
K. TERMINATION OF AGREEMENT
xxxxxxxxx
6. If despite previous warnings by [respondent], [petitioner] does
not execute the WORK in accordance with this Agreement,
or persistently or flagrantly neglects to carry out [its] obligations
under this Agreement. [21]
If the total direct and indirect cost of completing the remaining part of the
WORK exceed the sum which would have been payable to [petitioner] had it
completed the WORK, the amount of such excess [may be] claimed by
[respondent] from either of the following:
xxxxxxxxx
xxxxxxxxx
xxxxxxxxx
N. OTHER CONDITIONS
xxxxxxxxx
Clearly, there is no more need to file a request with the CIAC in order to
vest it with jurisdiction to decide a construction dispute.
The arbitral clause in the Agreement is a commitment on the part of the
parties to submit to arbitration the disputes covered therein. Because that
clause is binding, they are expected to abide by it in good faith. [35] And because
it covers the dispute between the parties in the present case, either of them
may compel the other to arbitrate.[36]
Since petitioner has already filed a Complaint with the RTC
without prior recourse to arbitration, the proper procedure to enable
the CIAC to decide on the dispute is to request the stay or suspension
of such action, as provided under RA 876 [the Arbitration Law]. [37]
THIRD DIVISION
DECISION
ROMERO, J.:
The basic issue in this petition for review on certiorari is whether or not the
contract for the construction of the EDSA Plaza between petitioner BF
Corporation and respondent Shangri-la Properties, Inc. embodies an
arbitration clause in case of disagreement between the parties in the
implementation of contractual provisions.
Petitioner and respondent Shangri-la Properties, Inc. (SPI) entered into an
agreement whereby the latter engaged the former to construct the main
structure of the EDSA Plaza Project, a shopping mall complex in the City of
Mandaluyong.
The construction work was in progress when SPI decided to expand the
project by engaging the services of petitioner again. Thus, the parties entered
into an agreement for the main contract works after which construction work
began.
However, petitioner incurred delay in the construction work that SPI
considered as serious and substantial. [1] On the other hand, according to
petitioner, the construction works progressed in faithful compliance with the
First Agreement until a fire broke out on November 30, 1990 damaging Phase I
of the Project. [2] Hence, SPI proposed the re-negotiation of the agreement
between them.
Consequently, on May 30, 1991, petitioner and SPI entered into a written
agreement denominated as Agreement for the Execution of Builders Work for
the EDSA Plaza Project. Said agreement would cover the construction work
on said project as of May 1, 1991 until its eventual completion.
According to SPI, petitioner failed to complete the construction works and
abandoned the project.[3] This resulted in disagreements between the parties
as regards their respective liabilities under the contract. On July 12, 1993, upon
SPIs initiative, the parties respective representatives met in conference but
they failed to come to an agreement. [4]
Barely two days later or on July 14, 1993, petitioner filed with the Regional
Trial Court of Pasig a complaint for collection of the balance due under the
construction agreement. Named defendants therein were SPI and members of
its board of directors namely, Alfredo C. Ramos, Rufo B. Colayco, Antonio B.
Olbes, Gerardo O. Lanuza, Jr., Maximo G. Licauco III and Benjamin C.
Ramos.
On August 3, 1993, SPI and its co-defendants filed a motion to suspend
proceedings instead of filing an answer. The motion was anchored on
defendants allegation that the formal trade contract for the construction of the
project provided for a clause requiring prior resort to arbitration before judicial
intervention could be invoked in any dispute arising from the contract. The
following day, SPI submitted a copy of the conditions of the contract containing
the arbitration clause that it failed to append to its motion to suspend
proceedings.
Petitioner opposed said motion claiming that there was no formal contract
between the parties although they entered into an agreement defining their
rights and obligations in undertaking the project. It emphasized that the
agreement did not provide for arbitration and therefore the court could not be
deprived of jurisdiction conferred by law by the mere allegation of the
existence of an arbitration clause in the agreement between the parties.
In reply to said opposition, SPI insisted that there was such an arbitration
clause in the existing contract between petitioner and SPI. It alleged that
suspension of proceedings would not necessarily deprive the court of its
jurisdiction over the case and that arbitration would expedite rather than delay
the settlement of the parties respective claims against each other.
In a rejoinder to SPIs reply, petitioner reiterated that there was no
arbitration clause in the contract between the parties. It averred that granting
that such a clause indeed formed part of the contract, suspension of the
proceedings was no longer proper. It added that defendants should be
declared in default for failure to file their answer within the reglementary
period.
In its sur-rejoinder, SPI pointed out the significance of petitioners
admission of the due execution of the Articles of Agreement. Thus, on page
D/6 thereof, the signatures of Rufo B. Colayco, SPI president, and Bayani
Fernando, president of petitioner appear, while page D/7 shows that the
agreement is a public document duly notarized on November 15, 1991 by
Notary Public Nilberto R. Briones as document No. 345, page 70, book No.
LXX, Series of 1991 of his notarial register.[5]
Thereafter, upon a finding that an arbitration clause indeed exists, the
lower court[6] denied the motion to suspend proceedings, thus:
It appears from the said document that in the letter-agreement dated
May 30, 1991 (Annex C, Complaint), plaintiff BF and defendant
Shangri-La Properties, Inc. agreed upon the terms and conditions of
the Builders Work for the EDSA Plaza Project (Phases I, II and
Carpark), subject to the execution by the parties of a formal trade
contract. Defendants have submitted a copy of the alleged trade
contract, which is entitled `Contract Documents For Builders Work
Trade Contractor dated 01 May 1991, page 2 of which is entitled
`Contents of Contract Documents with a list of the documents therein
contained, and Section A thereof consists of the abovementioned
Letter-Agreement dated May 30, 1991. Section C of the said Contract
Documents is entitled `Articles of Agreement and Conditions of
Contract which, per its Index, consists of Part A (Articles of Agreement)
and B (Conditions of Contract). The said Articles of Agreement
appears to have been duly signed by President Rufo B. Colayco of
Shangri-La Properties, Inc. and President Bayani F. Fernando of BF
and their witnesses, and was thereafter acknowledged before Notary
Public Nilberto R. Briones of Makati, Metro Manila on November 15,
1991. The said Articles of Agreement also provides that the `Contract
Documents' therein listed `shall be deemed an integral part of this
Agreement, and one of the said documents is the `Conditions of
Contract which contains the Arbitration Clause relied upon by the
defendants in their Motion to Suspend Proceedings.
This Court notes, however, that the `Conditions of Contract referred to,
contains the following provisions:
`3. Contract Document.
Three copies of the Contract Documents referred to in
the Articles of Agreement shall be signed by the parties
to the contract and distributed to the Owner and the
Contractor for their safe keeping. (underscoring
supplied)
And it is significant to note further that the said `Conditions of Contract
is not duly signed by the parties on any page thereof --- although it
bears the initials of BFs representatives (Bayani F. Fernando and
Reynaldo M. de la Cruz) without the initials thereon of any
representative of Shangri-La Properties, Inc.
Considering the insistence of the plaintiff that the said Conditions of
Contract was not duly executed or signed by the parties, and the
failure of the defendants to submit any signed copy of the said
document, this Court entertains serious doubt whether or not the
arbitration clause found in the said Conditions of Contract is binding
upon the parties to the Articles of Agreement. (Underscoring supplied.)
The lower court then ruled that, assuming that the arbitration clause was
valid and binding, still, it was too late in the day for defendants to invoke
arbitration. It quoted the following provision of the arbitration clause:
Notice of the demand for arbitration of a dispute shall be filed in writing
with the other party to the contract and a copy filed with the Project
Manager. The demand for arbitration shall be made within a
reasonable time after the dispute has arisen and attempts to settle
amicably have failed; in no case, however, shall the demand he made
be later than the time of final payment except as otherwise expressly
stipulated in the contract.
Against the above backdrop, the lower court found that per the May 30,
1991 agreement, the project was to be completed by October 31,
1991. Thereafter, the contractor would pay P80,000 for each day of delay
counted from November 1, 1991 with liquified (sic) damages up to a maximum
of 5% of the total contract price.
The lower court also found that after the project was completed in
accordance with the agreement that contained a provision on progress
payment billing, SPI took possession and started operations thereof by
opening the same to the public in November, 1991. SPI, having failed to pay for
the works, petitioner billed SPI in the total amount of P110,883,101.52,
contained in a demand letter sent by it to SPI on February 17, 1993. Instead of
paying the amount demanded, SPI set up its own claim of P220,000,000.00 and
scheduled a conference on that claim for July 12, 1993. The conference took
place but it proved futile.
Upon the above facts, the lower court concluded:
Considering the fact that under the supposed Arbitration Clause
invoked by defendants, it is required that `Notice of the demand for
arbitration of a dispute shall be filed in writing with the other party x x x
x in no case x x x x later than the time of final payment x x x x which
apparently, had elapsed, not only because defendants had taken
possession of the finished works and the plaintiffs billings for the
payment thereof had remained pending since November, 1991 up to
the filing of this case on July 14, 1993, but also for the reason that
defendants have failed to file any written notice of any demand for
arbitration during the said long period of one year and eight months,
this Court finds that it cannot stay the proceedings in this case as
required by Sec. 7 of Republic Act No. 876, because defendants are in
default in proceeding with such arbitration.
The lower court denied SPIs motion for reconsideration for lack of merit
and directed it and the other defendants to file their responsive pleading or
answer within fifteen (15) days from notice.
Instead of filing an answer to the complaint, SPI filed a petition
for certiorariunder Rule 65 of the Rules of Court before the Court of Appeals.
Said appellate court granted the petition, annulled and set aside the orders
and stayed the proceedings in the lower court. In so ruling, the Court of
Appeals held:
The reasons given by the respondent Court in denying petitioners
motion to suspend proceedings are untenable.
Provided always that in case any dispute or difference shall arise between the
Owner or the Project Manager on his behalf and the Contractor, either during
the progress or after the completion or abandonment of the Works as to the
construction of this Contract or as to any matter or thing of whatsoever nature
arising thereunder or in connection therewith (including any matter or being left
by this Contract to the discretion of the Project Manager or the withholding by
the Project Manager of any certificate to which the Contractor may claim to be
entitled or the measurement and valuation mentioned in clause 30 (5) (a) of
these Conditions or the rights and liabilities of the parties under clauses 25, 26,
32 or 33 of these Conditions), the Owner and the Contractor hereby agree to
exert all efforts to settle their differences or dispute amicably. Failing these
efforts then such dispute or difference shall be referred to Arbitration in
accordance with the rules and procedures of the Philippine Arbitration Law.
The fact that said conditions of contract containing the arbitration clause bear
only the initials of respondent Corporations representatives, Bayani Fernando
and Reynaldo de la Cruz, without that of the representative of petitioner
Shangri-La Properties, Inc. does not militate against its effectivity. Said
petitioner having categorically admitted that the document, Annex A to its reply
dated August 26, 1993 (Annex G, petition), is the agreement between the
parties, the initial or signature of said petitioners representative to signify
conformity to arbitration is no longer necessary. The parties, therefore, should
be allowed to submit their dispute to arbitration in accordance with their
agreement.
2. The respondent Court held that petitioners `are in default in proceeding with
such arbitration. It took note of `the fact that under the supposed Arbitration
Clause invoked by defendants, it is required that Notice of the demand for
arbitration of a dispute shall be filed in writing with the other party x x x in no
case x x x later than the time of final payment, which apparently, had elapsed,
not only because defendants had taken possession of the finished works and
the plaintiffs billings for the payment thereof had remained pending since
November, 1991 up to the filing of this case on July 14, 1993, but also for the
reason that defendants have failed to file any written notice of any demand for
arbitration during the said long period of one year and eight months, x x x.
Respondent Court has overlooked the fact that under the arbitration clause
Notice of the demand for arbitration dispute shall be filed in writing with the
other party to the contract and a copy filed with the Project Manager. The
demand for arbitration shall be made within a reasonable time after the dispute
has arisen and attempts to settle amicably had failed; in no case, however,
shall the demand be made later than the time of final payment except as
otherwise expressly stipulated in the contract (underscoring supplied)
quoted in its order (Annex A, petition). As the respondent Court there said,
after the final demand to pay the amount of P110,883,101.52, instead of paying,
petitioners set up its own claim against respondent Corporation in the amount
of P220,000,000.00 and set a conference thereon on July 12, 1993. Said
conference proved futile. The next day, July 14, 1993, respondent Corporation
filed its complaint against petitioners. On August 13, 1993, petitioners wrote to
respondent Corporation requesting arbitration. Under the circumstances, it
cannot be said that petitioners resort to arbitration was made beyond
reasonable time. Neither can they be considered in default of their obligation to
respondent Corporation.
Hence, this petition before this Court. Petitioner assigns the following
errors:
A.
THE COURT OF APPEALS ERRED IN ISSUING THE
EXTRAORDINARY WRIT OF CERTIORARI ALTHOUGH THE
REMEDY OF APPEAL WAS AVAILABLE TO RESPONDENTS.
B.
THE COURT OF APPEALS ERRED IN FINDING GRAVE ABUSE
OF DISCRETION IN THE FACTUAL FINDINGS OF THE TRIAL
COURT THAT:
(i) THE PARTIES DID NOT ENTER INTO AN
AGREEMENT TO ARBITRATE.
(ii) ASSUMING THAT THE PARTIES DID ENTER
INTO THE AGREEMENT TO ARBITRATE,
RESPONDENTS ARE ALREADY IN DEFAULT IN
INVOKING THE AGREEMENT TO ARBITRATE.
On the first assigned error, petitioner contends that the Order of the lower
court denying the motion to suspend proceedings is a resolution of an incident
on the merits. As such, upon the continuation of the proceedings, the lower
court would appreciate the evidence adduced in their totality and thereafter
render a decision on the merits that may or may not sustain the existence of an
arbitration clause. A decision containing a finding that the contract has no
arbitration clause can then be elevated to a higher court in an ordinary appeal
where an adequate remedy could be obtained. Hence, to petitioner, the Court
of Appeals should have dismissed the petition for certiorari because the
remedy of appeal would still be available to private respondents at the proper
time. [7]
The above contention is without merit.
The rule that the special civil action of certiorari may not be invoked as a
substitute for the remedy of appeal is succinctly reiterated in Ongsitco v. Court
of Appeals [8] as follows:
x x x. Countless times in the past, this Court has held that `where appeal is the
proper remedy, certiorari will not lie. The writs of certiorari and prohibition are
remedies to correct lack or excess of jurisdiction or grave abuse of discretion
equivalent to lack of jurisdiction committed by a lower court. `Where the proper
remedy is appeal, the action for certiorari will not be entertained. x x
x. Certiorari is not a remedy for errors of judgment. Errors of judgment are
correctible by appeal, errors of jurisdiction are reviewable by certiorari.
The Court has likewise ruled that certiorari will not be issued to cure errors
in proceedings or correct erroneous conclusions of law or fact. As long as a
court acts within its jurisdiction, any alleged errors committed in the exercise of
its jurisdiction will amount to nothing more than errors of judgment which are
reviewable by timely appeal and not by a special civil action of certiorari.[9] v.
Court of Appeals, 327 Phil. 1, 41-42 (1996).9
This is not exactly so in the instant case. While this Court does not deny
the eventual jurisdiction of the lower court over the controversy, the issue
posed basically is whether the lower court prematurely assumed jurisdiction
over it. If the lower court indeed prematurely assumed jurisdiction over the
case, then it becomes an error of jurisdiction which is a proper subject of a
petition for certiorari before the Court of Appeals. And if the lower court does
not have jurisdiction over the controversy, then any decision or order it may
render may be annulled and set aside by the appellate court.
However, the question of jurisdiction, which is a question of law depends
on the determination of the existence of the arbitration clause, which is a
question of fact.In the instant case, the lower court found that there exists an
arbitration clause.However, it ruled that in contemplation of law, said
arbitration clause does not exist.
The issue, therefore, posed before the Court of Appeals in a petition for
certiorari is whether the Arbitration Clause does not in fact exist. On its face,
the question is one of fact which is not proper in a petition for certiorari.
The Court of Appeals found that an Arbitration Clause does in fact exist. In
resolving said question of fact, the Court of Appeals interpreted the
construction of the subject contract documents containing the Arbitration
Clause in accordance with Republic Act No. 876 (Arbitration Law) and existing
jurisprudence which will be extensively discussed hereunder. In effect, the
issue posed before the Court of Appeals was likewise a question of law. Being
a question of law, the private respondents rightfully invoked the special civil
action of certiorari.
It is that mode of appeal taken by private respondents before the Court of
Appeals that is being questioned by the petitioners before this Court. But at the
heart of said issue is the question of whether there exists an Arbitration
Clausebecause if an Arbitration Clause does not exist, then private
respondents took the wrong mode of appeal before the Court of Appeals.
For this Court to be able to resolve the question of whether private
respondents took the proper mode of appeal, which, incidentally, is a question
of law, then it has to answer the core issue of whether there exists an
Arbitration Clause which, admittedly, is a question of fact.
Moreover, where a rigid application of the rule that certiorari cannot be a
substitute for appeal will result in a manifest failure or miscarriage of justice,
the provisions of the Rules of Court which are technical rules may be
relaxed.[10] As we shall show hereunder, had the Court of Appeals dismissed
the petition for certiorari, the issue of whether or not an arbitration clause
exists in the contract would not have been resolved in accordance with
evidence extant in the record of the case. Consequently, this would have
resulted in a judicial rejection of a contractual provision agreed by the parties
to the contract.
In the same vein, this Court holds that the question of the existence of the
arbitration clause in the contract between petitioner and private respondents is
a legal issue that must be determined in this petition for review on certiorari.
Petitioner, while not denying that there exists an arbitration clause in the
contract in question, asserts that in contemplation of law there could not have
been one considering the following points. First, the trial court found that the
conditions of contract embodying the arbitration clause is not duly signed by
the parties. Second, private respondents misrepresented before the Court of
Appeals that they produced in the trial court a notarized duplicate original copy
of the construction agreement because what were submitted were mere
photocopies thereof. The contract(s) introduced in court by private
respondents were therefore of dubious authenticity because: (a) the
Agreement for the Execution of Builders Work for the EDSA Plaza Project
does not contain an arbitration clause, (b) private respondents surreptitiously
attached as Annexes `G-3 to `G-5 to their petition before the Court of Appeals
but these documents are not parts of the Agreement of the parties as there
was no formal trade contract executed, (c) if the entire compilation of
documents is indeed a formal trade contract, then it should have been duly
notarized, (d) the certification from the Records Management and Archives
Office dated August 26, 1993 merely states that the notarial record of Nilberto
Briones x x x is available in the files of (said) office as Notarial Registry Entry
only, (e) the same certification attests that the document entered in the notarial
registry pertains to the Articles of Agreement only without any other
accompanying documents, and therefore, it is not a formal trade contract, and
(f) the compilation submitted by respondents are a mere hodge-podge of
documents and do not constitute a single intelligible agreement.
In other words, petitioner denies the existence of the arbitration clause
primarily on the ground that the representatives of the contracting corporations
did not sign the Conditions of Contract that contained the said clause. Its other
contentions, specifically that insinuating fraud as regards the alleged insertion
of the arbitration clause, are questions of fact that should have been threshed
out below.
This Court may as well proceed to determine whether the arbitration
clause does exist in the parties contract. Republic Act No. 876 provides for the
formal requisites of an arbitration agreement as follows:
SECOND DIVISION
CORPORATION, [1]
ROGELIO S. CHUA,
FEDERICO C. PASCUAL,
LEOPOLDO S. VEROY,
WILFRIDO V. VERGARA,
EDILBERTO V. JAVIER,
ANTHONY F. CONWAY,
ROMULAD U. DY TANG,
ANTONIO N. COTOCO,
Petitioners,
- versus -
Promulgated:
x---------------------------------------------------------------------------------------
--x
DECISION
The Case
reversal of the January 8, 2008[2] and March 17, 2008[3] Orders of the
Regional Trial Court (RTC), Branch 148 in Makati City in SP Proc. Case
Equitable PCI Bank, Inc. & Others (Philippines) . The March 17,
2008 Order.
The Facts
balance of the purchase price shall be delivered to the share buyers upon
the fulfillment of certain conditions agreed upon, in the form of a
managers check.
xxxx
where
Amount by which negative
adjustment exceeds P100 Million
X = ------------------------------------------- (1.925)
338,000,000
xxxx
provided that:
xxxx
audited, creating for the purpose an audit team led by a certain Rubio, the
price. The corresponding deeds of sale for the shares in question were
of its having overpaid the purchase price of the subject shares, claiming
PhP 478 million, resulting in the overpayment of over PhP 616 million.
Arbitration dated May 12, 2004[8] with the ICC-ICA. In the request,
RCBC alleged that both the audited and unaudited financial statements of
Bankard prior to the stock purchase were far from fair and accurate and,
prayed for the rescission of the SPA, restitution of the purchase price,
interest on the purchase price until actual restitution, moral damages, and
RCBC prayed for damages in the amount of at least PhP 809,796,092 plus
legal interest.
July 28, 2004, [9] denying RCBCs inculpatory averments and setting up the
claim had already lapsed by force of Sec. 7 of the SPA; RCBC is not
prayer of damages, being guilty of laches and failing to set out the details
Sec. 5(g) and not Sec. 5(h). As such, the tribunal concluded, RCBCs
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. On
xxxx
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 in the equally
The Issues
2007 was confirmed by the RTC in its first assailed order of January 8,
2008. Thereafter, the RTC, by order of March 17, 2008, denied petitioners
pointing out the proper mode of appeal from a decision of the RTC
award.
April 2, 2004 and became effective on April 28, 2004 after its publication
The losing party who appeals from the judgment of the court
confirming an arbitral award shall be required by the appellate court to
post a counterbond executed in favor of the prevailing party equal to
the amount of the award in accordance with the rules to be
promulgated by the Supreme Court.
It is clear from the factual antecedents that RA 9285 applies to the instant
case. This law was already effective at the time the arbitral proceedings
the ICC-ICA on May 12, 2004. Besides, the assailed confirmation order of
the RTC was issued on March 17, 2008.Thus, petitioners clearly took the
wrong mode of appeal and the instant petition can be outright rejected
and dismissed.
trial court, upon due proceedings, confirmed despite the opposition of the
losing party. Motions for reconsideration by the losing party were denied.
An appeal interposed by the losing party to the CA was denied due course.
xxxx
Finally, it should be stressed that while a court is
precluded from overturning an award for errors in
determination of factual issues, nevertheless, if an examination
of the record reveals no support whatever for the arbitrators
determinations, their award must be vacated. In the same
manner, an award must be vacated if it was made in
manifest disregard of the law.[17] (Emphasis supplied.)
not generally justify the reversal of an arbitral award. A party asking for
the vacation of an arbitral award must show that any of the grounds for
arbitral award was made in manifest disregard of the law. Otherwise, the
Jaros [18] expounded on the phrase manifest disregard of the law in the
following wise:
manifest disregard of the law, the arbiters findings must clearly and
not suffice.
award was issued in manifest disregard of the law, allege that the Partial
arguments are bereft of merit. Thus, the Partial Award dated September
price reduction falling under Sec. 5(h), in which case it was belatedly
filed, for RCBC presented the claim to petitioners on May 5, 2003, when
the period for presenting it under Sec. 5(h) expired on December 31,
2000. As a counterpoint, RCBC asserts that its claim clearly comes under
Sec. 5(g) in relation to Sec. 7 which thus gave it three (3) years from the
closing date of June 2, 2000, or until June 1, 2003, within which to make
its claim. RCBC contends having acted within the required period, having
xxxx
under Sec. 5(g) and Sec. 5(h) in conjunction with Sec. 7, thus:
(1) The relief under Sec. 5(h) is specifically for price reduction as
said section explicitly states that the Purchase Price shall be reduced in
aggrieved party the right to ask damages based on the stipulation that the
non-defaulting party shall have the right to require the Defaulting Party,
(AFS) for the three (3) years ending December 31, 1997 to 1999 and the
unaudited financial statements (UFS) for the first quarter ending March
31, 2000. On the other hand, the Sec. 5(h) warranty refers only to the AFS
for the year ending December 31, 1999 and the UFS up to May 31, 2000. It
is undenied that Sec. 5(h) refers to price reduction as it covers only the
most up-to-date audited and unaudited financial statements upon which
Bankard as of December 31, 1999 and its UFS up to May 31, 2000. No
such exclusions were made under Sec. 5(g) with respect to the warranty
(4) Sec. 5(h) gives relief only if there is material adverse effect in
the net worth in excess of PhP 100 million and it provides a formula for
price reduction. [20] On the other hand, Sec. 5(g) can be the basis for
price reduction, even if the overvaluation is less or above PhP 100 million
(5) Under Sec. 7, the aggrieved party shall present its written
demand to the defaulting party within three (3) years from closing
date. Under Sec. 5(h), the written demand shall be presented within six (6)
months from closing date. In accordance with par. 2(c) of the ASPA, the
deadline to file the demand under Sec. 5(h) was extended to December 31,
2000.
From the above determination, it becomes clear that the aggrieved party
Has RCBC the option to choose between Sec. 5(g) or Sec. 5(h)?
The answer is yes. Sec. 5 and Sec. 7 are clear that it is discretionary on
They may choose one and dispense with the other. Of course, the relief
for price reduction under Sec. 5(h) will have to conform to the
for Arbitration dated May 12, 2004, RCBC prayed for the rescission of the
SPA, restitution of the whole purchase price, and damages not for
reduction of price or for the return of any overpayment. Even in its May 5,
2000 letter, [21] RCBC did not ask for the recovery of any overpayment or
reflected in its AFS for 1999, were overstated which, necessarily, resulted
It is thus evident that RCBC did not avail itself of the option under Sec.
5(h), i.e., for price reduction or the return of any overpayment arising
invoked Sec. 5(g) to claim damages from petitioners which is one of the
Petitioners do not deny that RCBC formally filed its claim under Sec. 5(g)
Bankards revenues, assets, and net worth and, hence, the overstatement of
the purchase price. They, however, assert that such claim for
overpayment is actually a claim under Sec. 5(h) of the SPA for price
not only of the accuracy and truthfulness of the financial statements under
Sec. 5(g), but also as to Bankards actual net worth mentioned in Sec. 5(h).
and warranties.
wit:
closing date taints the veracity and accuracy of the AFS for 1997, 1998,
and 1999 and the UFS for the first quarter of 2000 and is an actionable
1999 through the AFS for 1999 and as of March 31, 2000 through the UFS
claim made within the six-month time-bar are present. In the alternative,
it may invoke Sec. 5(g) when it finds that a claim for curing the breach
filed within three (3) years from closing date. Since it has two remedies,
RCBC may opt to exercise either one. Of course, the exercise of either
clear and bereft of any ambiguity. The SPAs stipulations reveal that the
non-use or waiver of Sec. 5(h) does not preclude RCBC from availing
itself of the second relief under Sec. 5(g). Article 1370 of the Civil Code
is explicit that if terms of a contract are clear and leave no doubt upon the
shall control. Since the terms of a contract have the force of law between
the parties, [22] then the parties must respect and strictly conform to it.
Lastly, it is a long held cardinal rule that when the terms of an agreement
are reduced to writing, it is deemed to contain all the terms agreed upon
and no evidence of such terms can be admitted other than the contents of
the agreement itself. [23] Since the SPA is unambiguous, and petitioners
failed to adduce evidence to the contrary, then they are legally bound to
The Court sustains the finding in the Partial Award that Sec. 5(g) of
the SPA is a free standing warranty and not constricted by Sec. 5(h) of the
said agreement.
facts on record, RCBCs claim for rescission of the SPA and damages due
warranty under Sec. 5(g) and was not time-barred. To repeat, RCBC
presented its written claim on May 5, 2003, or a little less than a month
before closing date, well within the three (3)-year prescriptive period
provided under Sec. 7 for the exercise of the right provided under Sec.
5(g).
Petitioners bemoan the fact that the arbitrators liability award (a)
claim, and [b] substituted in its place the 3-year limitation under the
the SPA made by arbitral tribunal member, retired Justice Kapunan, in his
xxxx
xxxx
This manner of reconciling the two provisions is
consistent with the principle in Rule 130, Section 12 of the
Rules of Court that when a general and a particular provision
are inconsistent, the latter is paramount to the former [so] a
particular intent will control a general one that is inconsistent
with it. This is also consistent with existing doctrines on
statutory construction, the application of which is illustrated in
the case of Commissioner of Customs vs. Court of Tax
Appeals, GR No. L-41861, dated March 23, 1987 x x x.
xxxx
Justice Kapunan noted that without Sec. 5(h), RCBCs claim would
fall under Sec. 5(g), impliedly admitting that both provisions could very
well cover RCBCs claim, except that Sec. 5(h) excludes the situation
accuracy of the Bankards net worth while Sec. 5(g), as also couched, is a
yet both warranties boil down to the same thing and stem from the same
accounts as summarized in the AFS. Since the net worth is the balance
accounts under the AFS. In short, there are no accounts in the AFS
and also a breach of the warranty under Sec. 5(g). Thus, the subject of the
warranty in Sec. 5(h) is also covered by the warranty in Sec. 5(g), and Sec.
5(h) cannot exclude such breach from the ambit of Sec. 5(g). There is no
need to rely on Sec. 12, Rule 130 of the Rules of Court for both Sec. 5(g)
and Sec. 5(h) as alternative remedies are of equal footing and one need
not categorize one section as a general provision and the other a particular
provision.
not explicitly reveal any stipulation nor even impliedly that the parties
intended to limit the scope of the warranty in Sec. 5(g) or gave priority to
The arbitral tribunal did not find any legal basis in the SPA that
Sec. 5(h) somehow cuts down the scope of Sec. 5(g), thus:
The Court upholds the conclusion of the tribunal and rules that the
that the arbitrators partial award admitted and used the Summaries as
evidence, and held on the basis of the information contained in them that
Pressing the point, petitioners had moved, but to no avail, for the
exclusion of the said summaries. Petitioners allege that they had reserved
stated, however, that such case is not on all fours with the instant case and,
regular court.
process is the opportunity to be heard. What the law prohibits is not the
absence of previous notice but the absolute absence thereof and the lack
of opportunity to be heard.[31]
Arbitration dated May 12, 2004 from RCBC seeking rescission of the
SPA and restitution of all the amounts paid by RCBC to petitioners, with
Reference. [34] At the same time, the chairperson of the arbitral tribunal
Then, the tribunal issued Procedural Order No. 1 dated January 12,
2005,[38] denying the motion to dismiss and setting the initial hearing of the
before February 21, 2005, they would abide by the provisional timetable.
during the course of the hearings. Consequently, the tribunal amended the
brief of evidence and documents to March 21, 2005. The date of the initial
that they requested RCBC. [43] The parties also agreed to meet again
to its main credit card administration system. Such raw data are then sent
called SAS, the raw data is then converted into SAS files which may be
viewed, handled, and converted into Excel files for reporting purposes.
discs.[45]
requesting for a postponement of the April 11, 2005 hearing of the case.
Petitioners claim that they could not confirm the summaries prepared by
references to the basic cardholder documents from which such data were
such information could not be accessed as the software necessary for the
costs.[48]
On April 22, 2005, petitioners sent the tribunal a letter, [49] requesting
the ground that they could not submit their witness statements due to the
RCBC that they be allowed to examine the journal vouchers earlier made
available to them during the February 23, 2005 meeting. This demand was
answered by RCBC in a letter dated April 26, 2005,[51] stating that such
was ruled that further requests for discovery would not be made except
request for the postponement of the hearing on June 13, 2005 and
that petitioners would be provided with hard and soft copies of the
while making the journal vouchers available to petitioners for two weeks
the November 21, 2005 hearing due to the following: (1) petitioners had
earlier filed a motion dated August 11, 2005 with the RTC, in which the
practicing law in the Philippines by hearing their case, which was still
pending; and (2) the gathering and processing of the data and documents
was denied by the tribunal in Procedural Order No. 5 dated September 16,
2005.[55]
the tribunal requesting that RCBC be directed to: (1) provide petitioners
documents that RCBC used to arrive at the figures set out in the
31, 2006[58] to the tribunal claiming that the pieces of information that
RCBC merely maintained the systems that they inherited when it bought
Bankard from petitioners. RCBC added that the documents that EPCIB
from these files were never transmitted to them in the first place.
supporting documents that RCBC mentioned in its letter dated January 31,
2006. Petitioners wrote that should RCBC fail to present such documents,
of the hearing on April 24, 2006. Petitioners submit that should such
records.
evidence-in-chief. [61]
and witness statements. [62] In this request, petitioners also requested that
the hearing set for April 24, 2006 be moved. These requests were denied.
raising new issues for the first time, to which RCBC submitted Volume
the Tribunal.
Later, petitioners moved to vacate the said award before the RTC.
Such motion was denied by the trial court in the first assailed order
such order, but their motion was also denied in the second assailed order
accounting records, and reports. The pleadings reveal that RCBC granted
More so, they had more than three (3) years to prepare for their defense
after RCBCs submission of its brief of evidence. Finally, it must be
Award to the RTC, which they in fact did. Later, petitioners even moved
for the reconsideration of the denial of their appeal. Having been able to
procedure, albeit they are, at all times required, to adhere to the basic
concepts of fair play. The Court wrote in CMP Federal Security Agency,
Inc. v. NLRC:
process when they were allegedly denied the right to cross-examine the
RCBCs witnesses, petitioners were not denied their right to due process.
Bankard. RCBC, they claim, had full control of the operations of Bankard
since June 2, 2000 and RCBCs audit team reviewed the accounts in
September 2000. Thus, RCBC is now precluded from denying the fairness
and accuracy of said accounts since it did not seek price reduction under
Sec. 5(h). Lastly, they asseverate that RCBC continued with Bankards
argued that when it paid the purchase price on December 29, 2000, RCBC
could no longer claim that the accounting practices that went into the
reporting of the 1999 AFS of Bankard were not in accord with generally
the audit conducted by a certain Rubio prior to the full payment of the
upon the person making it, and cannot be denied or disproved as against
fair dealing, good faith, and justice; and its purpose is to forbid one to
injury of one to whom they were directed and who reasonably relied on
them. [72]
We explained the principle of estoppel in Philippine Savings Bank
5(g) and 5(h), in relation to Sec. 7 of the SPA. Petitioners position is that
RCBC was aware of the manner in which the Bankard accounts were
shares and paying the outstanding 80% balance of the contract price. [75]
and, thus, RCBC abandoned any claim under Sec. 5(g) and 5(h) by its
inaction.
RCBC presented its claim to petitioners for violation of Sec. 5(g), within
the three (3)-year period prescribed. In other words, RCBC, prior to such
second audit, did not have full and thorough knowledge of the correctness
verifying the warranties covered under Sec. 5(g). Considering that there
all the other elements of estoppel are likewise absent in the case at bar.
must have intended that petitioners would act upon its actions. This
element is also missing. RCBC by its actions did not mislead petitioners
into believing that it waived any claim for violation of a warranty. The
periods under Sec. 5(g) and 5(h) were still available to RCBC.
RCBC is absent. The Court finds that there was no reliance on the part of
petitioners on the acts of RCBC that would lead them to believe that the
RCBC will forego the filing of a claim under Sec. 5(g). The allegation
that RCBC knew that the Bankard accounts did not comply with
the SPA explicitly provides that claims for violation of the warranties
under Sec. 5(g) can still be filed within three (3) years from the closing
operations after payment of the price and that an audit undertaken by the
Rubio team did not find anything wrong with the accounts could not have
plausibly misled petitioners into believing that RCBC will waive its right
to file a claim under Sec. 5(g). After all, the period to file a claim under
Sec. 5(g) is three (3) years under Sec. 7, much longer than the six
(6)-month period under Sec. 5(h). Petitioners are fully aware that the
warranties under Sec. 5(g) (1997 up to March 2000) are of a wider scope
than that of Sec. 5(h) (AFS of 1999 and UFS up to May 31, 2000),
necessitating a longer audit period than the six (6)-month period under
Sec. 5(h).
estopped is also absent considering that, as stated, RCBC was still in the
why Bankards alleged irregular practices were maintained for more than
two (2) years from closing date. The fact that RCBC continued with the
audit of Bankards AFS and records after the termination of the Rubio
audit can only send the clear message to petitioners that RCBC is still
then be said that petitioners reliance on RCBCs acts after full payment of
the price could have misled them into believing that no more claim will
be presented by RCBC.
10.25 The fact that the purchase price was paid over in
full without any deduction in terms of clause 5(h) is not
a bar to the Claimant bringing a claim under 5(g) within
the three-year period. The fact that payment was made
can be, as the Tribunal has held, a barrier to a claim for
rescission and restitution ad inegrum. A claim for
estoppel needs a finding of representation by words of
conduct or a shared presumption that a right would not
be relied upon. The party relying on estoppel has to
show reliance to its detriment or that, otherwise, it
would be unconscionable to resile from the provision.
xxxx
10.42 The Tribunal is not the appropriate forum for
deciding whether there have been any regulatory or
ethical infractions by Bankard and/or the Claimant in
setting the buy-back price. It has no bearing on whether
the Claimant must be considered as having waived its
right to claim against the Respondents.
prove that the formation of the Transition Committee and the conduct of
RCBC that it would not pursue a claim under Sec. 5(g) and that
the findings of the tribunal that estoppel is not present in the situation at
bar.
Appeals (Coca-Cola ), [77] this Court ruled that the absence of the element
principle of estoppel. Those cases are, however, not on all fours with and
of the land he was buying early on in the transaction, but proceeded with
the sale anyway. According to the Court, the buyer was estopped from
the land. This is not true in the instant case. RCBC did not conduct a due
was confined to finding any breach under Sec. 5(h) for a possible
on December 31, 2000. Further, the parties clearly agreed under Sec. 7 of
the SPA to a three (3)-year period from closing date within which to
present a claim for damages for violation of the warranties under the SPA.
the nature and situation of the land relative to its intended use prior to the
signing of the contract. Its subsequent assertion that the land was not
suited for the purpose it was leased was, therefore, cast aside for being
guaranteed RCBC that it could file a claim for damages for any mistakes
upheld.
assailed January 8, 2008 and March 17, 2008 Orders of the RTC, Branch
SO ORDERED.