National Union Fire Insurance Company of Pittburgh,

et.al.,Petitioners,
vs.
Stolt-Nielsen Phils., Inc. and Court of Appeals, Respondents.
GR No. 87958; April 26, 1990

United Coconut Chemicals (SHIPPER) shipped distilled fatty

acid on board MT “StoltSceptre” (CARRIER). The shipment was
insured under a marine cargo policy with National Union Fire
Insurance Co (INSURER). Upon receipt of the cargo by the
consignee in Netherlands, it was totally contaminated. Hence, claim
was made on the INSURER of the cargo. The INSURER as subrogee
filed a claim for damages against the CARRIER with RTC Manila.
The CARRIER invoked that arbitration must be done pursuant to the
Charter. The INSURER opposed, arguing that the provision on
arbitration was not included in the Bill of Lading. SC: The INSURER
cannot avoid the binding effect of the arbitration clause. By
subrogation, it became privy to the Charter Party as fully as the
SHIPPER before the latter was indemnified, because as subrogee it
stepped into the shoes of the SHIPPER and is subrogated merely to
the latter's rights.

FACTS:
 On 9 January 1985, United Coconut Chemicals, Inc. shipped
404.774 metric tons of distilled C6-C18 fatty acid on board MT
"StoltSceptre," a tanker owned by Stolt-Nielsen Philippines Inc.,
from Bauan, Batangas, Philippines, consigned to
"NieuweMatex" at Rotterdam, Netherlands, covered by Tanker
Bill of Lading BL No. BAT-1.
 The shipment was insured under a marine cargo policy with
Petitioner National Union Fire Insurance Company of Pittsburg
(hereinafter referred to as INSURER), a non-life American
insurance corporation, through its settling agent in the
Philippines, the American International Underwriters
(Philippines), Inc., the other petitioner herein.
 Upon receipt of the cargo by the consignee in the Netherlands,
it was found to be discoloured and totally contaminated. Hence,
a claim was made on the Insurer of the cargo. The insurer as
subrogee filed a claim for damages against the carrier with the
RTC of Manila.
 The carrier filed a motion to dismiss on the ground that the case
was arbritrable and pursuant to the charter party as embodied
in the bill of lading, arbitration must be done. The insurer
opposed the motion by arguing that the provision on arbitration
1
 was not included in the bill of lading and even if it was included,
it was nevertheless unjust and unreasonable.
 The RTC denied the motion but upon reconsideration, the
resolution on the motion to dismiss was suspended or deferred.
 The carrier then filed a petition for review on certiorari with
preliminary injunction/TRO which was granted by the CA.

ISSUE: Are the terms of the Charter Party, particularly the provision
on arbitration, binding on the INSURER?

HELD: Yes. The pertinent portion of the Bill of Lading in issue

provides in part:
xxx [A]ll the terms whatsoever of the said Charter except the
rate and payment of freight specified therein apply to and
govern the rights of the parties concerned in this shipment.xxx
The provision on arbitration in the Charter Party reads:
4. Arbitration. Any dispute arising from the making, performance
or termination of this Charter Party shall be settled in New York,
Owner and Charterer each appointing an arbitrator, who shall be a
merchant, broker or individual experienced in the shipping business;
the two thus chosen, if they cannot agree, shall nominate a third
arbitrator who shall be an admiralty lawyer. Such arbitration shall be
conducted in conformity with the provisions and procedure of the
United States arbitration act, and a judgment of the court shall be
entered upon any award made by said arbitrator. Nothing in this
clause shall be deemed to waive Owner's right to lien on the cargo for
freight, deed of freight, or demurrage.
Clearly, the Bill of Lading incorporates by reference the terms of
the Charter Party. It is settled law that the charter may be made part
of the contract under which the goods are carried by an appropriate
reference in the Bill of Lading. As the respondent Appellate Court
found, the INSURER "cannot feign ignorance of the arbitration clause
since it was already charged with notice of the existence of the
charter party due to an appropriate reference thereof in the bill of
lading and, by the exercise of ordinary diligence, it could have easily
obtained a copy thereof either from the shipper or the charterer.
We hold, therefore, that the INSURER cannot avoid the binding
effect of the arbitration clause. By subrogation, it became privy to the
Charter Party as fully as the SHIPPER before the latter was
indemnified, because as subrogee it stepped into the shoes of the
SHIPPER-ASSURED and is subrogated merely to the latter's rights.

2
It can recover only the amount that is recoverable by the assured.
And since the right of action of the SHIPPER-ASSURED is governed
by the provisions of the Bill of Lading, which includes by reference the
terms of the Charter Party, necessarily, a suit by the INSURER is
subject to the same agreements. It has not been shown that the
arbitral clause in question is null and void, inoperative, or incapable of
being performed. Nor has any conflict been pointed out between the
Charter Party and the Bill of Lading.

HEIRS OF AUGUSTO L. SALAS, JR., Petitioners,

vs.
LAPERAL REALTY CORPORATION, et.al.,Respondents.
G.R. No. 135362,December 13, 1999
(320 SCRA 610)

FACTS:

Petitioner Salas Jr. and Respondent Laperal Realty Corporation

entered into an agreement for the latter to develop and provide
complete construction services on formers land. Petitioner executed a
special power of attorney in favor of Respondent Corporation to
exercise general control, supervision and management of the sale of
his land. On June 10, 1989 Petitioner left his home for a business trip
in Nueva Ecija but never returned again. Petitioner’s wife filed a
petition for presumptive death of her husband after seven years of
absence. The trial court granted her petition.

On the other hand, Respondent Corporation already subdivided

the property owned by Salas Jr. to different lot buyers. The heirs of
Salas Jr. filed in the RTC of Lipa City a Complaint for nullity of sale,
reconveyance, cancellation of contract and damages against Laperal
Realty Corporation and lot buyers. Laperal Realty Corporation filed a
motion to dismiss on the ground that the heirs of Salas Jr. failed to
submit their grievance to arbitration as stated in the agreement
executed by Salas Jr. and Laperal Realty Corporation. The lot buyers
also filed a motion to dismiss based on the same ground.

ISSUE:

(1) Whether or not the arbitration clause in the agreement

between Salas Jr. and Laperal Realty binds the heirs of the former.
(2) Whether or not the trial court must dismiss the case or must
hear the case simultaneously.

3
HELD:

(1) A submission to arbitration is a contract. As such, the

Agreement, containing the stipulation on arbitration, binds the parties
thereto, as well as their assigns and heirs. But only they. Petitioners,
as heirs of Salas Jr., and respondent Laperal Realty Corporation are
certainly bound by the agreement.

(2) The arbitration agreement is valid, binding and enforceable

and not contrary to public policy so much so when there obtains a
written provision for arbitration which is not complied with, the trial
court should suspend the proceedings and order the parties to
proceed to arbitration in accordance with the terms of their
agreement. However it would be in the interest of justice if the trial
court hears the complaint against all herein respondents and
adjudicates petitioners rights as against theirs in a singles and
complete proceeding.

The petition is granted the trial court must proceed with the
hearing of the case.

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

COLLINS and LUIS HIDALGO, Petitioners,
vs.
COURT OF APPEALS, JUDGE BIENVENIDO L. REYES in his
capacity as Presiding Judge, RTC-Br. 74, Malabon, Metro Manila,
MONTEBUENO MARKETING, INC., LIONG LIONG C. SY and
SABROSA FOODS, INC., Respondents.
G.R. No. 136154. February 7, 2001
FACTS:
On July 1, 1994 - in a Distributorship Agreement, Del
Monte Corporation-USA (DMC-USA) appointed 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. Said agreement provided for an arbitration
clause, which states: This Agreement shall be governed by the laws
of the State of California and/or, if applicable, the United States of
America. All disputes arising out of or relating to this Agreement or
the parties’ relationship, including the termination thereof, shall be
resolved by arbitration in the City of San Francisco, State of
California, under the Rules of the American Arbitration Association.
4
The arbitration panel shall consist of three members, one of
whom shall be selected by DMC-USA, one of whom shall be
selected by MMI, and third of whom shall be selected by the
other two members and shall have relevant experience in the industry
October 1994 -appointment of 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, MMI appointed Sabrosa Foods, Inc. (SFI), with the
approval of DMC-USA, as MMI’s marketing arm to concentrate on
its marketing and selling function as well as to manage its critical
relationship with the trade. On October 3 1996 -MMI, SFI and MMI’s
Managing Director LiongLiong C. Sy (LILY SY) filed a Complaint
against DMC-USA, Managing Director of Del Monte Corporation’s
Export Sales Department Paul E. Derby, Jr., Regional Director of Del
Monte Corporation’s Export Sales Department Daniel Collins, Head
of Credit Services Department of Del Monte Corporation Luis Hidalgo
and Dewey Ltd. before Malabon RTC. MMI et al. predicated their
complaint on the alleged violations by Del Monte et al. of Articles 201,
212and 233 of the Civil Code.
According to them, DMC-USA products continued to be
brought into the country by parallel importers despite the
appointment of MMI as the sole and exclusive distributor of Del
Monte products thereby causing them great embarrassment and
substantial damage. They alleged that the products brought into
the country by these importers were aged, damaged, fake or
counterfeit, so that in March 1995 they had to cause, 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. 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 DMC-USA through Paul E. Derby, Jr. MMI et al. further
averred that:
1. DMC-USA et al. 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
2. They had exhausted all possible avenues for an amicable
resolution and settlement of their grievances
3. As a result of the fraud, bad faith, malice and wanton
attitude of DMC-USA et al., they should be held responsible

5
for all the actual expenses incurred by MMI et al. 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
4. The bad faith, fraudulent acts and willful negligence
of DMC-USA et al., motivated by their determination to
squeeze MMI et al. out of the outstanding and on-going
Distributorship Agreement in favor of another party, had placed Lily
Sy on tenterhooks since then
5. The shrewd and subtle manner with which DMC-USA et al.
concocted imaginary violations by MMI of the Distributorship
Agreement in order to justify the untimely termination thereof was a
subterfuge
On October 21 1996 –DMC-USA et al. filed a Motion to
Suspend Proceedings, invoking the arbitration clause. The RTC
deferred consideration of DMC-USA et al.’s 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 DMC-USA et
al. filed a MR to which MMI et al. filed their comment/opposition.
DMC-USA et al. filed a reply. They later on filed a Motion to Admit
Supplemental Pleading.
Said motion was admitted. As a result of the admission of
the Supplemental Complaint, DMC-USA et al. 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 November 11 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. On appeal, the CA affirmed the RTC decision. Hence, this
petition.

6
ISSUE:
WON the dispute between the parties warrants an order
compelling them to submit to arbitration.

HELD:
There is no doubt that arbitration is valid and constitutional in
our jurisdiction. 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. 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. A careful examination of the instant case shows
that the arbitration clause in the Distributorship Agreement
between DMC-USA and MMI is valid and the dispute
between the parties is arbitrable.
However, this Court must deny the petition. The Agreement
between DMC-USA and MMI is a contract. The provision to submit
to arbitration any dispute arising there from 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. Clearly, only parties to the Agreement, i.e.,
DMC-USA and its Managing Director for Export Sales Paul E.
Derby, Jr., and MMI and its Managing Director LILY SY are
bound by the Agreement and its arbitration clause as they are the
only signatories thereto. Daniel Collins and Luis Hidalgo, and 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 but only as to

7
DMC-USA and Paul E. Derby, Jr., and 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, which
superseded that of Toyota Motor Philippines Corp. v. Court of
Appeals. 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" and that "[a]s such, the parties are thereby expected to abide
with good faith in their contractual commitments."
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. The object of arbitration is to allow the
expeditious determination of a dispute. 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.

NATIONAL STEEL CORPORATION, Petitioner,

vs.
THE RTC OF LANAO DEL NORTE, BRANCH 2, ILIGAN CITY AND
E. WILLKOM ENTERPRISES, INC.,Respondents.
G.R. No. 127004, March 11, 1999

FACTS:
On November 18, 1992, Edward Wilkom Enterprises Inc.
(EWEI) together with Ramiro Construction and National Steel
Corporation (NSC) executed a Contract for Site Development.
In the said contract EWEI and Ramiro Construction jointly
undertook to develop NSC’s Integrated Iron and Steel Mills Complex
which is to be established at Iligan City and to be finished on July 17,
1983.

8
 But sometime in the year 1983, the services of Ramiro
Construction was terminated thus, EWEI took over Ramiro's
contractual obligation. Due to this and to other causes deemed
sufficient by EWEI, extensions of time for the termination of the
project were granted by NSC.
Differences later arose, EWEI then filed Civil Case No. 1615
before the RTC of Lanao del Norte, Branch 06, praying essentially for
the payments of P458,381.00 with interest from the time of delay; the
price adjustment as provided by PD 1594; and exemplary damages in
the amount of P50,000.00 and attorney's fees.
NSC filed an answer with counterclaim.
On August 21, 1990, upon joint motion of both parties, the RTC
issued an order dismissing the said complaint and counterclaim in
view of the desire of both parties to implement Paragraph 19 of the
contract, providing for a resolution of any conflict by arbitration.
Thereafter, in accordance with the order of the RTC and
pursuant to Paragraph 19 of the contract, EWEI and NSC constituted
an Arbitration Board. And after series of hearings, the Arbitrators
rendered a decision directing NSC to pay EWEI P458, 381.00
representing EWEI's last billing No. 16 with interest thereon at the
rate of 1-1/4% per month from January 1, 1985 to actual date of
payment; P1,335,514.20 representing price escalation adjustment
under PD No. 1594, with interest thereon at the rate of 1-1/4 % per
month from January 1, 1985 to actual date of payment; P50,000 as
and for exemplary damages; P350,000 as and for attorney's fees.;
and P35,000.00 as and for cost of arbitration.
Aggrieved, the NSC filed a petition praying that the arbitrator’s
award be vacated. The NSC posited therein that there was evident
partiality in the aforesaid decision of the Arbitrators and that there
was mistaken appreciation of the facts and application of the law by
the Arbitrators.
However, the RTC affirmed the award of the Board of
Arbitrators "entoto" and ordered that an entry of judgment be entered
pursuant to R.A. No. 876. Further, theRTC dismissed the petition of
NSC praying that the arbitrator’s award be vacated.
NSC filed a Motion for Reconsideration but the same was
denied, thus the NSC elevated the case to the Supreme Court.

9
ISSUE:
Whether or not the lower court acted with grave abuse of
discretion in not vacating the arbitrator’s award.

HELD:
Thus, in a Petition to Vacate Arbitrator’s Decision before the
trial court, regularity in the performance of official functions is
presumed and the complaining party has the burden of proving the
existence of any of the grounds for vacating the award, as provided
for by Sections 24 of the Arbitration Law, to wit: (a) The award was
procured by corruption, fraud or other undue means; (b) That there
was evident partiality or corruption in the arbitrators of any of them; or
(c) That the arbitrators were guilty of misconduct in refusing to
postpone the hearing upon sufficient cause shown, or in refusing to
hear evidence pertinent and material to the controversy; that one or
more of the arbitrators was disqualified to act as such under section
nine hereof, and wilfully refrained from disclosing such disqualification
or of any other misbehavior by which the rights of any party have
been materially prejudiced; or (d) That the arbitrators exceeded their
powers, or so imperfectly executed them, that a mutual, final and
definite award upon the subject matter submitted to them was not
made. . . .
The grounds relied upon by the petitioner were the following (a)
That there was evident partiality in the assailed decision of the
Arbitrators in favor of the respondent; and (b) That there was
mistaken appreciation of the facts and application of the law by the
Arbitrators.
Petitioner’s allegation that there was evident partiality is
untenable. It is anemic of evidentiary support. In the case of Adamson
vs. Court of Appeals, in upholding the decision of the Board of
Arbitrators, this Court ruled that the fact that a party was
disadvantaged by the decision of the Arbitration Committee does not
prove evident partiality. Proofs other than mere inference are needed
to establish evident partiality. Here, petitioner merely averred evident
partiality without any proof to back it up. Petitioner was never
deprived of the right to present evidence nor was there any showing
that the Board showed signs of any bias in favor of EWEI.
Parenthetically, and in the light of the record above-mentioned,
this Court hereby holds that the Board of Arbitrators did not commit
any “evident partiality” imputed by petitioner NSC. Above all, this
Court must sustain the said decision for it is a well-settled rule that

10
the actual findings of an administrative body should be affirmed if
there is substantial evidence to support them and the conclusions
stated in the decision are not clearly against the law and
jurisprudence, similar to the instant case, Henceforth, every
reasonable intendment will be indulged to give effect such
proceedings and in favor of the regulatory and integrity of the
arbitrators act. Indeed, the allegation of evident partiality is not well-
taken because the petitioner failed to substantiate the same.
WHEREFORE, the awards made by the Board of Arbitrators
which the trial court adopted in its decision are modified.

ASSET PRIVATIZATION TRUST, Petitioner,

vs.
COURT OF APPEALS, et.al.,Respondents.
G.R. No. 121171,December 29, 1998

FACTS:
Pursuant to a Mortgage Trust Agreement, the Development
Bank of the Philippines and the Philippine National Bank foreclosed
the assets of the Marinduque Mining and Industrial Corporation. The
assets were sold to Philippine National Bank and later transferred to
the Asset Privatization Trust (APT).

In February 1985, Jesus Cabarrus, Sr., together with other

stockholders of Marinduque Mining and Industrial Corporation, filed a
derivative suit against Development Bank of the Philippines and
Philippine National Bank before the Regional Trial Court of Makati for
Annulment of Foreclosures, Specific Performance and Damages. In
the course of the trial, Marinduque Mining and Industrial Corporation
and Asset Privatization Trust as successor in interest of Development
Bank of the Philippines and Philippine National Bank, agreed to
submit the case to arbitration by entering into a Compromise and
Arbitration Agreement. This agreement was approved by the trial
court and the complaint was corollarily dismissed.

Thereafter, the Arbitration Committee rendered a decision

ordering Asset Privatization Trust to pay Marinduque Mining and

11
Industrial Corporation damages and arbitration costs in the amount of
P2.5 Billion, P13,000,000.00 of which is for moral and exemplary
damages.
On motion of Cabarrus and the other stockholders of Marinduque
Mining and Industrial Corporation, the trial court confirmed the
Arbitration Committee’s award. Its motion for reconsideration having
been denied, Asset Privatization Trust filed a special civil action for
certiorari with the Court of Appeals. It was likewise denied.

Hence, this petition for review on certiorari.

ISSUE:

Whether or not the Marinduque Mining and Industrial

Corporation is entitled to moral damages?

HELD:

No. How could the MMIC be entitled to a big amount of moral

damages when its credit reputation was not exactly something to be
considered sound and wholesome. Under Article 2217 of the Civil
Code, moral damages include besmirched reputation which a
corporation may possibly suffer. A corporation whose overdue and
unpaid debts to the Government alone reached a tremendous
amount of P22 Billion Pesos cannot certainly have a solid business
reputation to brag about.

Besides, it is not yet a well settled jurisprudence that

corporations are entitled to moral damages. While the Supreme Court
may have awarded moral damages to a corporation for besmirched
reputation in Mambulao vs. PNB, 22 SCRA 359, such ruling cannot
find application in this case. It must be pointed out that when the
supposed wrongful act of foreclosure was done, MMIC’s credit
reputation was no longer a desirable one. The company then was
already suffering from serious financial crisis which definitely projects
an image not compatible with good and wholesome reputation. So it
could not be said that there was a “reputation” besmirched by the act
of foreclosure.
12
 As a rule, a corporation exercises its powers, including the
power to enter into contracts, through its board of directors. While a
corporation may appoint agents to enter into a contract in its behalf,
the agent should not exceed his authority. 54 In the case at bar, there
was no showing that the representatives of PNB and DBP in MMIC
even had the requisite authority to enter into a debt-for-equity swap.
And if they had such authority, there was no showing that the banks,
through their board of directors, had ratified the FRP.

WHEREFORE, the petition is GRANTED

NATIONAL IRRIGATION ADMINISTRATION (NIA), Petitioner,

VS.
HONORABLE COURT OF APPEALS (4TH Division),
CONSTRUCTION INDUSTRY ARBITRATION COMMISSIN, AND
HYDRO RESOURCES CONTRACTORS CORPORATION,
Respondents.
G.R. No. 129169, November 17, 1999

FACTS:
Hydro Resources Contractors Corporation (hereafter HYDRO)
was awarded Contract MPI-C-2 for the construction of the main civil
works of the Magat River Multi-Purpose Project. HYDRO
substantially completed the works under the contract and final
acceptance by NIA. HYDRO thereafter determined that it still had an
account receivable from NIA representing the dollar rate differential of
the price escalation for the contract.
After unsuccessful pursuing its case with NIA, HYDRO, filed
with CIAC a Request for Adjudication of the aforesaid claim. NIA
questioned the jurisdiction of the CIAC alleging lack of cause of
action, laches and estoppel in view of HYDRO’s alleged failure to
avail its right to submit the dispute to arbitration within the prescribed
period as provided in the contract.

13
ISSUE:
Whether or not there was grave abuse of discretion on the part
of the CIAC when it dismissed the petition.

HELD:
The CIAC has no grave abuse of discretion. It has jurisdiction
over the controversy.
It is undisputed that the contracts between HYDRO and NIA
contained an arbitration clause wherein they agreed to submit to
arbitration any dispute between them that may arise before or after
the termination of the agreement. Consequently, the claim of
HYDRO having arisen from the contract is arbitrable.
It is undeniable that NIA agreed to submit the dispute for
arbitration to the CIAC. NIA through its counsel actively participated
in the arbitration proceedings by filing an answer with counterclaim,
as well as its compliance wherein it nominated arbitrators to the
proposed panel, participating in the deliberations on, and the
formulation of, the Terms of Reference of the arbitration proceeding,
and examining the documents submitted by HYDRO after NIA asked
for the originals of the said documents.
As to the defenses of laches and prescription, they are
evidentiary in nature which could not be established by mere
allegations in the pleadings and must not be resolved in a motion to
dismiss. Those issues must be resolved at the trial of the case on the
merits where both parties will be given ample opportunity to prove
their respective claims and defenses. In the instant case, the issue of
prescription and laches cannot be resolved on the basis solely of the
complaint. The court may either grant the motion to dismiss, deny it,
or order the amendment of the pleading.

14
 DEMOSTHENES AGAN, JR., et.al.Petitioners,
VS.
PHIL. INTL. AIR TERMINALS CO., INC
(PIATCO)et.al.,Respondents.
G.R. NO. 155001, MAY 5, 2013

FACTS:
On October 5, 1994, AEDC submitted an unsolicited proposal
to the Government through the DOTC/MIAA for the development of
NAIA International Passenger Terminal III (NAIA IPT III).
DOTC constituted the Prequalification Bids and Awards
Committee (PBAC) for the implementation of the project and
submitted with its endorsement proposal to the NEDA, which
approved the project.

On June 7, 14, and 21, 1996, DOTC/MIAA caused the

publication in two daily newspapers of an invitation for competitive or
comparative proposals on AEDC’s unsolicited proposal, in
accordance with Sec. 4-A of RA 6957, as amended.

On September 20, 1996, the consortium composed of People’s

Air Cargo and Warehousing Co., Inc. (Paircargo), Phil. Air and
Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security
Bank) (collectively, Paircargo Consortium) submitted their competitive
proposal to the PBAC. PBAC awarded the project to Paircargo
Consortium. Because of that, it was incorporated into Philippine
International Airport Terminals Co., Inc.

AEDC subsequently protested the alleged undue preference

given to PIATCO and reiterated its objections as regards the
prequalification of PIATCO.

On July 12, 1997, the Government and PIATCO signed the

“Concession Agreement for the Build-Operate-and-Transfer
Arrangement of the NAIA Passenger Terminal III” (1997 Concession
Agreement). The Government granted PIATCO the franchise to
operate and maintain the said terminal during the concession period
and to collect the fees, rentals and other charges in accordance with
the rates or schedules stipulated in the 1997 Concession
Agreement. The Agreement provided that the concession period

15
shall be for twenty-five (25) years commencing from the in-service
date, and may be renewed at the option of the Government for a
period not exceeding twenty-five (25) years. At the end of the
concession period, PIATCO shall transfer the development facility to
MIAA.

Meanwhile, the MIAA which is charged with the maintenance

and operation of the NAIA Terminals I and II, had existing concession
contracts with various service providers to offer international airline
airport services, such as in-flight catering, passenger handling, ramp
and ground support, aircraft maintenance and provisions, cargo
handling and warehousing, and other services, to several
international airlines at the NAIA.

On September 17, 2002, the workers of the international airline

service providers, claiming that they would lose their job upon the
implementation of the questioned agreements, filed a petition for
prohibition. Several employees of MIAA likewise filed a petition
assailing the legality of the various agreements.

During the pendency of the cases, PGMA, on her speech,

stated that she will not “honor (PIATCO) contracts which the
Executive Branch’s legal offices have concluded (as) null and void.”

ISSUE:
Whether or not the State can temporarily take over a business
affected with public interest.

RULING:
Yes. PIATCO cannot, by mere contractual stipulation,
contravene the Constitutional provision on temporary government
takeover and obligate the government to pay “reasonable cost for the
use of the Terminal and/or Terminal Complex.”

Article XII, Section 17 of the 1987 Constitution provides:

Section 17. In times of national emergency, when the public interest
so requires, the State may, during the emergency and under
reasonable terms prescribed by it, temporarily take over or direct the
operation of any privately owned public utility or business affected
with public interest.

16
 The above provision pertains to the right of the State in times of
national emergency, and in the exercise of its police power, to
temporarily take over the operation of any business affected with
public interest. The duration of the emergency itself is the determining
factor as to how long the temporary takeover by the government
would last. The temporary takeover by the government extends only
to the operation of the business and not to the ownership thereof. As
such the government is not required to compensate the private entity-
owner of the said business as there is no transfer of ownership,
whether permanent or temporary. The private entity-owner affected
by the temporary takeover cannot, likewise, claim just compensation
for the use of the said business and its properties as the temporary
takeover by the government is in exercise of its police power and not
of its power of eminent domain.

Article XII, section 17 of the 1987 Constitution envisions a

situation wherein the exigencies of the times necessitate the
government to “temporarily take over or direct the operation of any
privately owned public utility or business affected with public interest.”
It is the welfare and interest of the public which is the paramount
consideration in determining whether or not to temporarily take over a
particular business. Clearly, the State in effecting the temporary
takeover is exercising its police power. Police power is the “most
essential, insistent, and illimitable of powers.” Its exercise therefore
must not be unreasonably hampered nor its exercise be a source of
obligation by the government in the absence of damage due to
arbitrariness of its exercise. Thus, requiring the government to pay
reasonable compensation for the reasonable use of the property
pursuant to the operation of the business contravenes the
Constitution.

LM POWER ENGINEERING CORPORATION, Petitioner,

vs.
CAPITOL INDUSTRIAL CONSTRUCTION GROUPS, INC.,
Respondent.
G.R. NO. 141833, March 26, 2003

17
FACTS:
This is a Petition for Review on Certiorari filed by the
petitioner LM Power against Respondent Capitol Industrial seeking to
set aside the decision of CA.
Petitioner LM Power Engineering Corporation and Respondent
Capitol Industrial Construction Groups Inc. entered into a Subcontract
Agreement involving electrical work at the Third Port of Zamboanga.
Due to the inability of the petitioner to procure materials, Capitol
IndustrialConstruction Groups, Inc. took over some of the work
contracted to the former. After the completion of the contract,
petitioner billed respondent in the amount of P6, 711,813.90 but the
respondent refused to pay.
Petitioner filed with the RegionalTrialCourt of Makati a
Complaint for the collection of the amount representing the alleged
balance due it under the subcontract. Respondent filed a Motion to
Dismiss, alleging that the Complaint was premature, due to the
absence of prior recourse to arbitration.
RTC denied the Motion on the ground that the dispute did not
involve the interpretation or the implementation of the Agreement and
was not covered by the arbitral clause and ruled in favor of the
petitioner.
Respondent appealed to the Court of Appeals, the
latterreversed the decision of the RTC and ordered the referral of the
case to arbitration.
Hence, this Petition.

ISSUE:
WhetherOr Not there is a need for the prior arbitration before
filing of the complaint with the court.

HELD:
The Court Ruled in the AFFIRMATIVE.
SupremeCourt ruled that in the case at hand it involves
technical discrepancies that are better left to an arbitral body that has
expertise in the subject matter. Moreover, the agreement between the
parties contains arbitral clause that “any dispute or conflict as regards
to interpretation and implementation of this agreement which cannot
be settled between respondent and petitioner amicably shall be

18
settled by means of arbitration”. 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.
With respect to the disputes on the take-over/termination and
the expenses incurred by respondent in the take-over, the SC ruled
that the agreement provides specific provisions that any delay,
expenses and any other acts in violation to such agreement, the
respondent can terminate and can set off the amount it incurred in the
completion of the contract.
SC tackled also that there’s no need for the prior request for
arbitration by the parties with the Construction Industry Arbitration
Commission (CIAC) in order for it to acquire jurisdiction. Because
pursuant to Section 1 of Article III of the new Rules of Procedure
Governing Construction Arbitration, when a contract contains a
clause for the submission of a future controversy to arbitration, it is
not necessary for the parties to enter into a submission agreement
before the claimant may invoke the jurisdiction of CIAC. Furthermore,
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.
Since a complaint with the RTC has been filed without prior
recourse to arbitration, under RA 876 (Arbitration Law) the proper
procedure is to request the stay or suspension of such action in order
to settle the dispute with the CIAC.

LM POWER ENGINEERING COPORATION v CAPITOL

INDUSTRIAL CONSTRUCTIONGROUPS
G.R No. 141833
March 26 2003

FACTS:

LM Power Engineering Corporation (Petitioner) and Capitol

IndustrialConstruction Groups(Respondent) entered into a
Subcontract Agreement involving electrical work at the Port
ofZamboanga. Respondent then took over some of the work
contracted to Petitioner, It wasalleged that the petitioner failed to
finish it because of its inability to procure materials.

19
Upon completion of the task, Petitioner billed the respondent the
amount of 6,711,813.90pesos. Respondent refused to pay and
contested the accuracy of the amount of advances and billable
accomplishments listed by thepetitioner. Respondent also took refuge
in the terminationclause agreement which allowed it to set off the cost
of the work that petitioner had failed to undertake (due to termination
of takeover).Because of the dispute, the Petitioner filed a complaint
foe collection of the balance dueunder the subcontract agreement.
However, instead of filing an answer, the respondent filed aMotion to
Dismiss, alleging that the complaint was premature because there
was no priorrecourse to arbitration.

RTC denied the motion on the ground that the dispute did not involve
theinterpretation or implementation of the agreement and was,
therefore, not covered by thearbitral clause. Also, the RTC ruled that
the takeover of some work items by the respondentwas not
equivalent to termination but a mere modification of the subcontract.

ISSUE:

Whether or not there exists a dispute between petitioner and

respondent regarding theinterpretation and implementation of the
Sub-Contract Agreement that requires prior recourse tovoluntary
arbitration?

RULING:

Yes. The instant case involves technical discrepancies that are better
left to an arbitralbody that has expertise on those areas. The
Subcontract has theArbitral clause stating that theparties agree that
“Any dispute or conflict as regards to interpretation and
implementation of thisagreement which cannot be settled between
the parties amicably shall be settled by means ofarbitration.” Within
the scope of the Arbitration clause are discrepancies as to the
amount ofadvances and billable accomplishments, the application of
the provision on termination, and theconsequent set-off expenses.

Also, there is no need for prior request for arbitration. As long asthe
parties agree to submit to voluntary arbitration, regardless of what
forum they may choose, their agreement will fall within the jurisdiction
of the CIAC, such that, even if they specificallychoose another forum,
the parties will not be precluded from electing to submit their dispute
before the CIAC because this right has been vested upon each party
by the law.

20
CHARLES BERNARD H. REYES doing business under the name
and style CBHREYES ARCHITECTS,vs.ANTONIO YULO BALDE
II, PAULINO M. NOTO and ERNESTO J. BATTAD, SR., intheir
capacities as Arbitrators of the CONSTRUCTION INDUSTRY
ARBITRATIONCOMMISSION, SPOUSES CESAR and CARMELITA
ESQUIG and ROSEMARIEPAPAS,
G.R. No. 168384
August 18, 2006

YNARES-SANTIAGO,

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 by
Atty. Francisco I. Chavez.I. According to the movant, the Motion to
Inhibit the Chief Justice "is not an accusation of wrongdoing on the part
of the Honorable Chief Justice. Rather it is impelled by Atty.Chavez’s
perception that in this case, the Honorable Chief Justice has not acted in
anobjective, impartial and neutral manner in disposing of incidental issues
and motionspresented by the parties."The movant adds that "the dizzying
pace by which private respondents’ motions havebeen received and
favorably acted upon in record time supports Atty. Chavez’sperception that
private respondents’ motions – without as much as requiring petitioner to
respond thereto – have been granted special attention and favor by the
HonorableChief Justice." (Bold types in original) Atty. Chavez’s perception
about the alleged "closeness and the good relationshipbetween Atty.
Ordoñez and the Chief Justice" to impair the latter’s objectivity andimpartiality
has no basis, for the following reasons :(1) The actions taken on the various
motions and incidents enumerated by the movantwere made by the entire
membership of the First Division.

Not being the ponente, theChief Justice did not initiate or propose any of the
actions and rulings made by theCourt. Like the three other Division
members, he merely concurred with theactions/rulings proposed by the
ponente. While some orders and actions, especiallytemporary restraining
orders, are issued in the name of the Division chairman (who inthis case is
the Chief Justice), they are really collective actions of the entire Division,
notmerely those of the Chair. This is the normal procedure in all Divisions,
not just in theFirst.

21
 MARIA LUISA PARK ASSOCIATION, INC., Petitioner, vs.
SAMANTHA MARIE T. ALMENDRAS and PIA ANGELA T.
ALMENDRAS, Respondents.
G.R. No. 171763, June 5, 2009

Nature of the Case: Petition for review on certiorari

FACTS:

The respondents Samantha Marie T. Almendras and Pia Angela T.

Almendras purchased from MRO Development Corporation a
residential lot in Cebu City.They then filed with Maria Luisa Park
Association Inc. an application to construct a residential house which
was approved and construction commenced.

Upon ocular inspection MLPAI found out that Almendras violated the
prohibition against multi-dwelling as stated in the Deed of Restriction
of MLPAI.MLPAI sent a letter to the respondents, demanding that
they rectify the structure. Respondents, as represented by their father
Ruben D. Almendras denied having violated MLPAI’s Deed of
Restriction.

MLPAI, in its reply, pointed out respondents’ specific violations of the

subdivision rules:installation of a second water meter and tapping the
subdivision’s main water pipeline; and construction of “two separate
entrances that are mutually exclusive of each other.”

Respondents filed a complaint with the RTC of Cebu for Injunction,

Declaratory Relief, Annulment of Provisions of Articles and By-Laws
with Prayer for Issuance of a Temporary Restraining Order
(TRO)/Preliminary Injunction.MLPAI moved for dismissal of the
complaint on the ground of lack of jurisdiction and failure to comply
with the arbitration clause provided for in MLPAI’s by-laws.

RTC dismissed the complaint holding that it was the Housing and
Land Use Regulatory Board that has original and exclusive
jurisdiction over the case. MR filed by respondents was denied. CA
declared the decision of RTC null and void, and ordering it to take
cognizance of the case.

ISSUE: Whether the HLURB and not the RTC has jurisdiction over
the case. Did the parties failed to abide the arbitration agreement in
the by-laws?

22
HELD:

The Home Insurance and Guaranty Corporation (HIGC), now

HLURB, has original and exclusive jurisdiction over the case since it
is vested with the quasi-judicial authority to hear and decided matters
over the homeowners’ associations and its members and settle their
disputes and controversies. Petition Granted.

The parties failed to abide by the arbitration agreement in the

MLPAI by-laws. Article XII of the MLPAI by-laws entered into by the
parties provides that any dispute or claim against the Association or
any of its officers and governors shall first be settled amicably. If
amicable settlement fails, such dispute shall be brought by the
member to an arbitration panel for final settlement. The arbitral
award shall be valid and binding between the parties unless
repudiated on grounds that the same was procured through fraud or
violence, or that there are patent or gross errors in the tribunal’s
findings of facts upon which the decision was based.

Respondents, being members of MLPAI, are bound by its by-

laws, and are expected to abide by it in good faith. The parties in the
case made no earnest effort to resolve their differences in
accordance with the arbitration clause provided for in their by-
laws. Mere exchange of correspondence will not suffice much less
satisfy the requirement of arbitration.

The Court also pointed out that arbitration being the mode of
settlement between the parties expressly provided for in their by-
laws, the same should be respected.Unless an arbitration agreement
is such as absolutely to close the doors of the courts against the
parties, the courts should look with favor upon such amicable
arrangements. Arbitration is one of the alternative methods of dispute
resolution that is now rightfully vaunted as “the wave of the future” in
international relations, and is recognized worldwide. To brush aside a
contractual agreement calling for arbitration in case of disagreement
between the parties would therefore be a step backward.

23
 FORT BONIFACIO DEVELOPMENT CORPORATION, Petitioner,
vs.
MANUEL N. DOMINGO, Respondent.
GR No. 180765, Feb. 27, 2009

Nature of the Case: Petition for review on certiorari

FACTS:

Petitioner, a domestic corporation duly organized under

Philippine laws, is engaged in the real estate development
business. Respondent is the assignee of L and M Maxco Specialist
Engineering Construction (LMM Construction) of its receivables from
petitioner.

Petitioner entered into a Trade Contract with LMM Construction

for partial structural and architectural works on one of its projects, the
Bonifacio Ridge Condominium. According to the said Contract,
petitioner had the right to withhold the retention money equivalent to
5% of the contract price for a period of one year after the completion
of the project.

Due to the defect and delay in the work of LMM Construction on

the condominium project, petitioner unilaterally terminated the Trade
Contract and hired another contractor to finish the rest of the work left
undone by LMM Construction. Despite the pre-termination of the
Trade Contract, petitioner was liable to pay LMM Construction a
fraction of the contract price in proportion to the works already
performed by the latter.

On 30 April 2005, petitioner received a letter dated 18 April

2005 from respondent inquiring on the retention money supposedly
due to LMM Construction and informing petitioner that a portion of the
amount receivable by LMM Construction therefrom was already
assigned to him as evidenced by the Deed of Assignment executed
by LMM Construction in respondent’s favor on 28 February
2005. LMM Construction assigned its receivables from petitioner to
respondent to settle the alleged unpaid obligation of LMM
Construction to respondent amounting to P804,068.21. Petitioner

24
acknowledged that LMM Construction did have receivables still with
petitioner, however it still failed to pay the said amount to respondent.

This prompted respondent to file a Complaint for collection of

sum of money, against both LMM Construction and petitioner,
docketed as Civil Case No. 06-0200-CFM before the RTC of Pasay
City, Branch 109.

Instead of filing an Answer, petitioner filed a Motion to Dismiss

Civil Case No. 06-0200-CFM on the ground of lack of jurisdiction over
the subject matter. Petitioner argued that since respondent merely
stepped into the shoes of LMM Construction as its assignor, it was
the Construction Industry Arbitration Commision (CIAC) and not the
regular courts that had jurisdiction over the dispute as provided in the
Trade Contract. RTC denied the Motion to Dismiss, CA affirmed said
order.

ISSUE: Whether the RTC has jurisdiction over Civil Case No. 06-
0200-CFM.

RULING:

RTC has jurisdiction over civil case no. 06-0200-CFM.

According to the Court, it is an elementary rule of procedural law that
jurisdiction of the court over the subject matter is determined by the
allegations of the complaint, irrespective of whether or not the plaintiff
is entitled to recover upon all or some of the claims asserted therein.

As a necessary consequence, the jurisdiction of the court

cannot be made to depend upon the defenses set up in the answer or
upon the motion to dismiss; for otherwise, the question of jurisdiction
would almost entirely depend upon the defendant. What determines
the jurisdiction of the court is the nature of the action pleaded as
appearing from the allegations in the complaint. The averments
therein and the character of the relief sought are the ones to be
consulted.

The Court pointed out that a scrupulous examination of the

aforementioned allegations in respondent’s Complaint unveils the fact
that his cause of action springs not from a violation of the provisions

25
of the Trade Contract, but from the non-payment of the monetary
obligation of LMM Construction to him. What respondent puts in issue
before the RTC is the purportedly arbitrary exercise of discretion by
the petitioner in giving preference to the claims of the other creditors
of LMM Construction over the receivables of the latter.

The Court said that respondent’s claim is not even construction-

related at all. Petitioner’s insistence on the application of the
arbitration clause of the Trade Contract to respondent is clearly
anchored on an erroneous premise that respondent is seeking to
enforce a right under the same. Again, the right to the receivables of
LMM Construction from petitioner under the Trade Contract is not
being impugned herein. In fact, petitioner readily conceded that LMM
Construction still had receivables due from petitioner, and respondent
did not even have to refer to a single provision in the Trade Contract
to assert his claim. What respondent is demanding is that a portion
of such receivables amounting to P804, 068.21 should have been
paid to him first before the other creditors of LMM Construction,
which, clearly, does not require the CIAC’s expertise and technical
knowledge of construction.

26
 FORT BONIFACIO DEVELOPMENT vs. CORPORATION HON.
EDWIN D. SORONGON and VALENTIN FONG
G.R. NO. 176709MAY 8, 2009, 587 SCRA 613

FACTS:
Petitioner Fort Bonifacio Development Corp is a corporation
registered under Philippine laws and is engaged in the business of
real estate development. Respondent, Valentin Fong (respondent)
doing business under the name VF Industrial Sales is the assignee of
L & M Maxco Specialist Constructions (Maxco) retention money from
the Bonifacio Ridge Condominium Phase 1 (BRCP 1). On July 2000,
Petitioner entered into a trade contract with Maxco wherein Maxco
would undertake the structural and partial architectural package of
the BRCP 1.
Later petitioner accused Maxco of delay in completion of its work and
on August 24, 2004 sent the latter a notice of termination. o Petitioner
also instructed Maxco to perform remedial measures prior to the
contract expiration pursuant to Clause 23.1 of the contract.
Subsequently, Maxco was sued by its creditors including respondent
for debts unrelated to BRCP 1.In order to settle the collection suit, on
February 28, 2005, Maxco assigned its receivables representing its
retention money from the BRCP 1 in the amount of one million five
hundred seventy seven thousand one hundred fifteen pesos and
ninety centavos (P1, 577,115.90).
On April 18, 2005, respondent (a CREDITOR of MAXCO) wrote to
petitioner, informing the latter of Maxcos assignment in his favor and
asking the latter to confirm the validity of Maxcos receivables.
Petitioner replied, informing the respondent that Maxco did have
receivables, however these were not due and demandable until
January of next year, moreover the amount had to be ascertained
and liquidated.A subsequent exchange of correspondence failed to
settle the matter petitioner wrote respondent informing the latter that
there is no more amount due to Maxco from petitioner after the
rectification of defect as well as the satisfaction of notices of
garnishment dated July 30, 2004 and January 26, 2006.
Respondent filed a complaint for a sum of money against petitioner
and Maxco RTC Mandaluyong City. Respondent claimed that there
were sufficient residual amounts to pay the receivables of Maxco at
the time he served notice of the assignment. The subsequent notices
of garnishment should not adversely affect the receivables assigned

27
to him. The retention money was over due in January 2006 and
despite demand, petitioner did not pay the amount subject of the
deed of assignment. Petitioner however, paid out the retention money
to other garnishing creditors of Maxco to the detriment of respondent
petitioner filed a Motion to Dismiss on the ground of lack of
jurisdiction over the subject matter. Petitioner argued that since
respondent merely stepped into the shoes of Maxco as its assignee,
it was the CIAC and not the regular courts that had jurisdiction over
the dispute as provided in the Trade Contract.
RTC: Judge Edwin Sorongon: DENIED petitioners motion to dismiss.
MR also DENIED. Petitioner filed a petition for certiorari and
prohibition with the Court of Appeals.
Court of Appeals: DENIED petition for certiorari and prohibition for
lack of merit appellate court held that it was the trial court and not the
Construction Industry Arbitration Commission (CIAC) that had
jurisdiction over the claims of Valentin Fong. The claim could not be
construed as related to the construction industry as it is for
enforcement of Maxcos deed of assignment over its retention money.
MR to CA DENIED.

ISSUE:
Which has jurisdiction: RTC or CIAC?

RULING:
RTC. The adjudication of Civil Case necessarily involves the
application of pertinent statutes and jurisprudence to matters of
assignment and preference of credits. As this Court held in Fort
Bonifacio Development Corporation v. Domingo, this task more suited
for a trial court to carry out after a full-blown trial, than an arbitration
body specifically devoted to construction contracts.
RATIO: Jurisdiction is defined as the authority to try, hear and decide
a case. Moreover, that jurisdiction of the court over the subject matter
is determined by the allegations of the complaint without regard to
whether or not the plaintiff is entitled to recover upon all or some of
the claims asserted therein is a well-entrenched principle.
In this regard, the jurisdiction of the court does not depend upon the
defenses pleaded in the answer or in the motion to dismiss, lest the
question of jurisdiction would almost entirely depend upon the
defendant.

28
An examination of the allegations in Fongs complaint reveals that his
cause of action springs NOT from a violation of the provisions of the
Trade Contract, but from the assignment of Maxcos retention money
to him and failure of petitioner to turn over the retention money.
The allegations in Fongs Complaint are clear and simple:
(1) That Maxco had an outstanding obligation to respondent;
(2) Maxco assigned to Fong its retention from petitioner in payment of
the said obligation,
(3) Petitioner as early as April 18, 2005 was notified of the
assignment;
(4) Despite due notice of such assignment, petitioner still refused to
deliver the amount assigned to respondent, giving preference,
instead, to the 2 other creditors of Maxco;
(5) At the time petitioner was notified of the assignment, there were
only one other notice of garnishment and there were sufficient
residual amounts to satisfy Fongs claim; and
(6) Uncertain over which one between Maxco and petitioner he may
resort to for payment, respondent named them both as defendants in
Civil Case No. 06-0200-CFM.
While it is true that respondent, as the assignee of the receivables of
Maxco from petitioner under the Trade Contract, merely stepped into
the shoes of Maxco. However, the right of Maxco to the retention
money from petitioner under the trade contract is not even in dispute
in Civil Case No. 06-0200-CFM. Respondent raises as an issue
before the RTC is the petitioners alleged unjustified preference to the
claims of the other creditors of Maxco over the retention money.
Although the jurisdiction of the CIAC is not limited to the instances
enumerated in Section 4 of E. O. No. 10081, Fongs claim is not even
construction-related at all. This court has held that: Construction is
defined as referring to all on-site works on buildings or altering
structures, from land clearance through completion including
excavation, erection and assembly and installation of components
and equipment.
Thus, petitioner’s insistence on the application of the arbitration
clause of the Trade Contract to Fong is clearly anchored on an
erroneous premise that the latter is seeking to enforce a right under
the trade contract. This premise cannot stand since the right to the
retention money of Maxco under the Trade Contract is not being
impugned herein. It bears mentioning that petitioner readily conceded
the existence of the retention money.

29
Fongs demand that the portion of retention money should have been
paid to him before the other creditors of Maxco clearly, does not
require the CIACs expertise and technical knowledge of construction.
The adjudication of Civil Case necessarily involves the application of
pertinent statutes and jurisprudence to matters of assignment and
preference of credits. As this Court held in Fort Bonifacio
Development Corporation v. Domingo, this task more suited for a trial
court to carry out after a full-blown trial, than an arbitration body
specifically devoted to construction contracts.

30
 HUTAMA-RSEA Joint Operations, Inc. v. Citra Metro Manila
Tollways Corporation
GR No.180640, April 24, 2009

In this case, the Court declared that “the bare fact that the parties
incorporated an arbitration clause in [their contract] is sufficient to
vest the CIAC with jurisdiction over any construction controversy or
claim between the parties. The arbitration clause in the
construction contract ipso facto vested the CIAC with
jurisdiction.”

FACTS:
The ruling was rendered in G.R. No. 180640, entitled HUTAMA-RSEA
Joint Operations, Inc. vs. Citra Metro Manila Tollways Corporation.
The case stemmed from a dispute over money claims of HUTAMA-
RSEA Joint Operations, Inc. (HUTAMA), an engineering and
construction subcontractor, against Citra Metro Manila Tollways
Corporation (Citra), the general contractor and operator of the South
Metro Manila Skyway Project (Skyway Project). On September 25,
1996, Citra and HUTAMA entered into an Engineering Procurement
Construction Contract (EPCC), whereby HUTAMA would construct
Stage 1 of the Skyway Project, and Citra agreed to pay HUTAMA the
total amount US$369,510,304.00 for the construction. Thereafter,
HUTAMA made several demands on Citra for the payment of various
balances, charges and other amounts. Despite several meetings and
negotiations, the parties failed to amicably settle their dispute.
HUTAMA filed a Request for Arbitration with CIAC to enforce its
money claims. In its Answer Ad Cautelam with Motion to Dismiss,
Citra argued that the case was premature because the parties had
not complied with a condition precedent in the EPCC requiring
referral of their dispute to the DAB prior to arbitration. CIAC ruled that
it had jurisdiction over the case, and the issue raised by Citra was
factual and should be resolved during the trial. After the parties
signed the Terms of Reference, Citra urgently moved that CIAC
refrain from proceeding with the arbitration until it resolved the issue
of whether prior resort by the parties to the DAB was a condition
precedent to the submission of the dispute to CIAC. When CIAC
denied Citra’s motion, it appealed the CIAC ruling to the Court of
Appeals. The appellate court ruled in favor of Citra and enjoined
CIAC from proceeding with the arbitration until the parties’ dispute

31
was first referred to and resolved by the DAB. HUTAMA moved for
reconsideration, but this was denied by the Court of Appeals.
HUTAMA then filed a petition for review on certiorari with the
Supreme Court. CIAC Jurisdiction The Supreme Court granted
HUTAMA’s petition and held that CIAC had jurisdiction over a dispute
involving a contraction contract if it contained an arbitration clause,
notwithstanding any reference by the same agreement to another
arbitration institution or arbitral body.
ISSUE:
Whether prior resort by the parties to the Dispute Adjudication Board
(DAB) was a condition precedent to the submission of the dispute to
CIAC?

RULING:
In a Decision promulgated last April 24, 2009, the Philippine Supreme
Court’s Third Division ruled that the Construction Industry Arbitration
Commission (CIAC) may assume jurisdiction of a dispute even if the
parties had not previously referred it to the Dispute Adjudication
Board (DAB) as stipulated in their construction agreement.
Although the Supreme Court noted that the EPCC stipulated that the
parties should first refer their dispute to the DAB prior to commencing
arbitration, the Tribunal held that this did not bar CIAC from assuming
jurisdiction over the dispute if such condition was not complied with.
According to the Supreme Court, since the jurisdiction of CIAC was
conferred by law, it could not be subjected to any condition nor can it
be waived or diminished by the stipulation, act or omission of the
parties, as long as the parties agreed to submit their dispute to
arbitration or agreed to an arbitration clause in their construction
contract. In other words, the arbitration clause in the EPCC ipso facto
vested CIAC with jurisdiction over the dispute between HUTAMA and
Citra. The Supreme Court also considered the factual milieu of the
parties. It noted that the dispute between them had been lingering for
almost five years, and no amicable settlement was reached despite
numerous meetings and negotiations. The Tribunal believed that it
would be circuitous and dilatory, and would entail unnecessary delays
and expenses on both parties, to refer the dispute to the DAB. This
would be contrary to the intent of Executive Order No. 1008 (1985),
which mandated CIAC to expeditiously settle construction industry
disputes. Role of the DAB The Tribunal’s Decision did not discuss the
important role played by the DAB in alternative dispute resolution. A
DAB created at the commencement of the construction work plays a
key role in resolving disputes between the parties to the contract
32
while the work is in progress, even if the resolution of the dispute is
only provisional. However, where no party had taken any step to
constitute the DAB within the agreed period and construction is
completed, the utility of creating a DAB at such late stage may be
questionable. It can hardly be said that it is the intention of the parties
to submit their dispute – which remained unresolved at that stage – to
a two-tiered process, first the DAB which is a less formal dispute
resolution procedure, and then to arbitration. The exception, which is
highly unlikely, is when the parties agree to accept the resolution of
the dispute by the DAB. However, perhaps in anticipation of the
Tribunal’s resolution of the issue raised by HUTAMA, Rule 3, Section
3.2.2 of the CIAC Revised Rules of Procedure Governing
Construction Arbitration now provides that in case of noncompliance
with a condition precedent, absent a showing of justifiable reasons,
exemption, or a waiver thereof, CIAC shall suspend arbitration
proceedings pending compliance therewith within a reasonable
period directed by the arbitral tribunal.

33
 Equitable PCI Banking Corp. vs. RCBC Capital Corp.
December 18, 2008
G.R. No. 182248

FACTS:
Petitioners Equitable PCI Bank, Inc. (EPCIB) and the individual
shareholders of Bankard,Inc., as sellers, and respondent
RCBC Capital Corporation (RCBC), as buyer, executed a
Share Purchase Agreement5(SPA) for the purchase of
petitioners’ interests in Bankard, representing 226,460,000
shares, for the price of PhP 1,786,769,400. To expedite the
purchase, RCBC agreed to dispense with the conduct of a due
diligence audit on the financial status of Bankard. Under the SPA,
RCBC undertakes, on the date of contract execution, to
deposit, as down payment, 20% of the purchase price, or PhP
357,353,880, in an escrow account. The escrowed amount, the SPA
stated, should be released to petitioners on an agreed-upon release
date and the 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 manager’s check.
RCBC deposited the stipulated down payment amount in an escrow
account after which it was given full management and operational
control of Bankard. June 2, 2000 is also considered by the parties as
the Closing Date referred to in the SPA. RCBC had Bankard’s
accounts audited, creating for the purpose an audit team led by a
certain Rubio, the Vice-President for Finance of RCBC at the time.
Rubio’s conclusion was that the warranty, as contained in Section
5(h) of the SPA (simply Sec. 5[h] hereinafter), was correct.
RCBC paid the balance of the contract price. The corresponding
deeds of sale for the shares in question were executed in January
2001. Thereafter, in a letter, RCBC informed petitioners of its having
overpaid the purchase price ofthe subject shares, claiming that
there was an overstatement of valuation of accounts
amounting to PhP 478 million, resulting in the overpayment of over
PhP 616 million. Thus, RCBC claimed that petitioners violated their
warranty, as sellers, embodied in Sec. 5(g) of the SPA (Sec. 5[g]
hereinafter).
Following unsuccessful attempts at settlement, RCBC, in accordance
with Sec. 10 of the SPA, filed a Request for Arbitration dated May 12,
20048 with the ICC-ICA. In the request, RCBC charged Bankard with
deviating from, contravening and not following generally accepted

34
accounting principles and practices in maintaining their books. Due
to these improper accounting practices, RCBC alleged that both the
audited and unaudited financial statements of Bankard prior to the
stock purchase were far from fair and accurate and, hence, violated
their presentations and warranties of petitioners in the SPA. Per
RCBC, its overpayment amounted to PhP 556 million. It thus prayed
for the rescission of the SPA, restitution of the purchase price,
payment of actual damages in the amount of PhP 573,132,110, legal
interest on the purchase price until actual restitution, moral damages,
and litigation and attorney’s fees. As alternative to rescission and
restitution, RCBC prayed for damages in the amount of at least PhP
809,796,092 plus legal interest.
Arbitration in the ICC-ICA proceeded after the formation of the
arbitration tribunal consisting of retired Justice Santiago M. Kapunan,
nominated by petitioners; Neil Kaplan, RCBC’s nominee; and Sir Ian
Barker, appointed by the ICC-ICA. After drawn out proceedings with
each party alleging deviation and non-compliance by the other with
arbitration rules, the tribunal, with Justice Kapunan dissenting,
rendered a Partial Award. RCBC filed with the RTC a Motion to
Confirm Partial Award. On the same day, petitioners countered with a
Motion to Vacate the Partial Award.
The RTC issued the first assailed order confirming the Partial Award
and denying the adverted separate motions to vacate and to suspend
and inhibit. From this order, petitioners sought reconsideration, but
their motion was denied by the RTC in the equally assailed second
order.
ISSUE:
WON the trial court acted contrary to law and judicial authority in
refusing to vacate the arbitral award, notwithstanding it was rendered
in plain disregard of the parties’ contract and applicable Philippine
law, under which the claim in arbitration was indubitably time-barred.

RULING:
The petition must be denied.
The Court Will Not Overturn an Arbitral Award Unless It Was Made in
Manifest Disregard of the Law. In Asset Privatization Trust v. Court of
Appeals, 16 the Court passed on similar issues as the ones tendered
in the instant petition. In that case, the arbitration committee issued
an arbitral award which the trial court, upon due proceedings,
confirmed despite the opposition of the losing party. Motions for
reconsideration by the losing party were denied. An appeal
35
interposed by the losing party to the CA was denied due course. On
appeal to this Court, we established the parameters by which an
arbitral award may be set aside, to wit:
As a rule, the award of an arbitrator cannot be set aside
for mere errors of judgment either as to the law or as to the
facts. Courts are without power to amend or overrule merely
because of disagreement with matters of law or facts determined by
the arbitrators. They will not review the findings of law and fact
contained in an award, and will not undertake to substitute their
judgment for that of the arbitrators, since any other rule would make
an award the commencement, not the end, of litigation. Errors
of law and fact, or an erroneous decision of matters submitted to
the judgment of the arbitrators, are insufficient to invalidate an award
fairly and honestly made. Judicial review of an arbitration is, thus,
more limited than judicial review of a trial.
Nonetheless, the arbitrators’ awards is not absolute and
without exceptions. The arbitrators cannot resolve issues beyond
the scope of the submission agreement. The parties to such an
agreement are bound by the arbitrators’ award only to the extent and
in the manner prescribed by the contract and only if the award is
rendered in conformity thereto. Thus, Sections 24 and 25 of the
Arbitration Law provide grounds for vacating, rescinding or modifying
an arbitration award. Where the conditions described in Articles2038,
2039 and 2040 of the Civil Code applicable to compromises and
arbitration are attendant, the arbitration award may also be annulled.
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."
Following Asset Privatization Trust, errors in law and fact would 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 vacating, rescinding, or modifying an award are present or that
the arbitral award was made in manifest disregard of the law.
Otherwise, the Court is duty-bound to up hold an arbitral award.
The instant petition dwells on the alleged manifest disregard of the
law by the ICC-ICA.
The US case of Merrill Lynch, Pierce, Fenner& Smith, Inc. v. Jaros18
expounded on the phrase" manifest disregard of the law" in the
following wise:
36
This court has emphasized that manifest disregard of the law is a
very narrow standard of review. Anaconda Co. v. District Lodge No.
27, 693 F.2d 35 (6th Cir.1982). A mere error in interpretation or
application of the law is insufficient. Anaconda, 693 F.2d at 37-38.
Rather, the decision must fly in the face of clearly established legal
precedent. When faced with questions of law, an arbitration panel
does not act in manifest disregard of the law unless (1) the
applicable legal principle is clearly defined and not subject
to reasonable debate; and (2) the arbitrators refused to heed that
legal principle.
Thus, to justify the vacation of an arbitral award on account of
"manifest disregard of the law, "the arbiter’s findings must clearly and
unequivocally violate an established legal precedent. Anything less
would not suffice. In the present case, petitioners, in a bid to
establish that the arbitral award was issued in manifest
disregard of the law, allege that the Partial Award violated
the principles of prescription, due process, and estoppel. A review
of petitioners’ arguments would, however, show that their arguments
are bereft of merit. Thus, the Partial Award dated September 27,
2007 cannot be vacated.

Empire East Land Holdings, Inc. v. Capitol Industrial

Construction Groups, Inc., G.R. No.168074, September 26, 2008
Facts:

Capitol Industrial Corporation Groups, Inc. (CICG) and Empire East

Land Holdings, Inc.(EELH) entered into a construction contract. Later
CICG filed a request for adjudication with the Construction Industry
Arbitration Commission (CIAC) praying that be EELH made to pay
CICG.

EELH filed a counterclaim for payroll assistance and materials

accommodation.

Issue: whether EELH’s claim for payroll assistance and materials

accommodation be allowed

Ruling: Yes.

In administrative or quasi-judicial bodies like the CIAC, a fact may be

established if supported by substantial evidence, or that amount of
relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.

37
CIAC’s conclusion was based on substantial evidence as can be
gleaned on the petition and annexes, as against the Comment of
respondent.

ABS-CBN Broadcasting Corporation v. World Interactive

Network Systems [WINS] Japan Co., Ltd., G.R. No. 169332,
February 11, 2008

FACTS:
Petitioner ABS-CBN Broadcasting Corporation entered into a
licensing agreement with respondent World Interactive Network
System (WINS) Japan Co., Ltd., a foreign corporation licensed under
the laws of Japan, in that the former granted respondent the
exclusive license to distribute and sublicense the distribution of the
television service known as the “The Filipino Channel” (TFC) in
Japan. By virtue thereof, petitioner undertook to transmit the TFC
programming signals to respondent which the latter received through
its decoders and distributed to its subscribers. A dispute arose
between the parties when petitioner accused respondent of inserting
nine episodes of WINS WEEKLY, a weekly 35-minute community
news program for Filipinos in Japan, into the TFC programming.
Petitioner claimed that these were “unauthorized insertions”
constituting a material breach of their agreement. Consequently,
petitioner notified respondent of its intention to terminate the
agreement. Thereafter, respondent filed an arbitration suit pursuant to
the arbitration clause of its agreement with petitioner. The parties
appointed Professor Alfredo F. Tadiar to act as sole arbitrator who
then rendered a decision in favor of respondent holding that petitioner
gave its approval for the airing of WINS WEEKLY as shown by a
series of written exchanges between the parties and that petitioner
threatened to terminate the agreement due to its desire to compel
respondent to re-negotiate the terms thereof for higher fees.
Petitioner filed in the CA a petition for review under Rule 43 of the
Rules of Court or in the alternative, a petition for certiorari under Rule
65 of the same Rules, with application for temporary restraining order
and writ of preliminary injunction. Respondent, on the other hand,
filed a petition for confirmation of arbitral award. The CA rendered the
assailed decision dismissing ABS-CBN’s petition for lack of
jurisdiction. Petitioner moved for reconsideration but the same was
denied.
ISSUE:
Whether an aggrieved party in a voluntary arbitration dispute may
avail of, directly in the CA, a petition for review under Rule 43 or a
petition for certiorari under Rule 65 of the Rules of Court, instead of
filing a petition to vacate the award in the RTC when the grounds
invoked to overturn the arbitrator’s decision are other than those for a
petition to vacate an arbitral award enumerated under RA 876.
38
RULING:
RA 876 itself mandates that it is the CFI, now RTC, which has
jurisdiction over questions relating to arbitration, such as petition to
vacate an arbitral award. As RA 876 did not expressly provide errors
of fact and/or law and grave abuse of discretion (proper grounds for a
petition for review under Rule 43 and a petition for certiorari under
Rule 65, respectively) as grounds for maintaining a petition to vacate
an arbitral award in the RTC, it necessarily follows that a party may
not avail of the latter remedy on the grounds of error of fact and/or
law or grave abuse of discretion to overturn an arbitral award.
Adamson v. Court of Appeals gave ample warning that a petition to
vacate filed in the RTC which is not based on the grounds
enumerated in Section 24 of RA 876 should be dismissed.
In cases not falling under any of the aforementioned grounds to
vacate an award, the Court has already made several
pronouncements that a petition for review under Rule 43 or petition
for certiorari under Rule 65 may be availed of in the CA. Which one
would depend on the grounds relied upon by the petitioner.
Nevertheless, although petitioner’s position on the judicial remedies
available to it was correct, we sustain the dismissal of its petition by
the CA. The remedy petitioner availed of, entitled “alternative petition
for review under Rule 43 or petition for certiorari under Rule 65,” was
wrong. Time and again, we have ruled that the remedies of appeal
and certiorari are mutually exclusive and not alternative or
successive.
Wherefore, the petition is hereby denied. The decision and resolution
of the CA directing the RTC to proceed with the trial of the petition for
confirmation of arbitral award is affirmed.

DIESEL CONSTRUCTION CO. INC., G.R. No. 154885

Petitioner,- versus -UPSI PROPERTY HOLDINGS, INC.,
Respondent.
x------------------------------------------------x
UPSI PROPERTY HOLDINGS, INC., G.R. No. 154937Petitioner,
- versus -DIESEL CONSTRUCTION CO., INC.and FGU
INSURANCE CORP.,Respondents. March 24, 2008

FACTS:

That on Aug 26, 1995, Diesel and UPSI entered into a Construction
Agreement for the interior architectural construction works of the 14 th
to the 16th floors of UPSI Building 3 Meditel/Condotel Project. The
12.7M covers provisions on contract works and completion, extension
of contract period, change or extra work orders as well as to take the
project payable by progress billing. Part of the agreement is, in case
39
of unjustifiable delay, Diesel is obliged to pay the owner liquidated
damages in the amount equivalent to 1/5 of 1% of the total project
cost for every calendar day of delay.

The project supposedly starts on Aug 2, 1999 to run for a period of 90

days until Nov. 8, 1999 but later agreed to move the commencement
date to Aug 21 until Nov 20, 1999.

March 16, 2000, Diesel’s project manager, sent a letter of notice

completion to UPSI, as of same date. Disregarded and refused to
accept the delivery by UPSI because during project implementation,
change orders and extensions were sought because of the several
delaying factors, putting Diesel in a state of default and assessed for
liquidated damages, deducting from his progress payments.

Diesel filed a complaint before CIAC (Construction Industry

Arbitration Commission), praying that UPSI be compelled to pay the
balance plus damages and attorney’s fees.

UPSI’s counterclaim denied liability and prayed for the repayment of

expenses it incurred for completing the project and for a declaration
that the deductions it made for liquidated damages were proper.

CIAC rendered a judgment ordering UPSI to pay Diesel about 4M

covering the unpaid balance and attorney’s fees, dismissing UPSI’s
counterclaim.

Both parties sought reconsideration. CA modified the ruling of CIAC,

granting the claim of UPSI for liquidated damages (1.3M)
representing 45days of delay. CA also ruled that Diesel complied with
the contract and is entitled to 100% payment of contract price (2.4M
unpaid balance). In sum, UPSI is held liable to Diesel in the amount
of 1.1M.

Parties filed separate petitions before the SC.

ISSUE:

Whether or not Diesel can be entitled to full payment of the contract

amount.

HELD:

SC resolve to modify the assailed CA Decision.

40
The CIAC found Diesel not to have incurred delay, thus negating
UPSI’s entitlement to liquidated damages. The CA, on the other
hand, found Diesel to have been in delay for 45 days.

In determining whether or not Diesel was in delay, they considered

the fact that Diesel had the Project period extended beyond 90-day
completion period. Both agreed that there were factors that gave
Diesel the right to an extension but differed on the matter of length of
the extension, and on the nature of the delay, that is, whether the
delay is excusable or not.

There were provisions on the agreement on excusable delays for

which the contractor shall inform the owner in a timely manner. This
includes: acts of god, civil disturbance, government acts, wars,
delays initiated by owner or his personnel. The delaying event
should be unforeseeable and beyond the control of Diesel. The lack
of location for the hoisting machine can be hardly tagged as
foreseeable event.

The CA completely failed to factor in the change orders of UPSI

to Diesel––the directives effectively extending the Project
completion time at the behest of UPSI.

-UPSI issued Change Order (CO) Nos. 1 to 4 on February 3, 2, 8,

and 9, 2000 respectively. Thereafter, Diesel submitted a Schedule
of Completion of Additional Works under which Diesel committed to
undertake CO No. 1 for 30 days from February 10, 2000; CO No. 2
for 21 days from January 6, 2000; CO No. 3 for 15 days, subject to
UPSI’s acceptance of Diesel’s proposal; and CO No. 4 for 10 days
after the receipt of the items from UPSI. Thus, as correctly held by
the CIAC, UPSI, no less, effectively moved the completion date,
through the various COs, to April 7, 2000.

Moreover, as evidenced by UPSI’s Progress Report No. 19 for the

period ending March 22, 2000, Diesel’s scope of work, as of that
date, was already 97.56% complete. Such level of work
accomplishment would, by any rational norm, be considered as
substantial to warrant full payment of the contract amount, less
actual damages suffered by UPSI. Article 1234 of the Civil Code says
as much, “If the obligation had been substantially performed in good
faith, the obligor may recover as though there had been a strict and
complete fulfillment, less damages suffered by the obligee.”
Diesel was not strictly in delay in the completion of the Project. No
valid reason, therefore, obtains for UPSI to withhold the retention
money or to refuse to pay the unpaid balance of the contract price.
Indeed, the retention and nonpayment were, to us, as was to the
CIAC, resorted to by UPSI out of whim, thus forcing the hand of

41
Diesel to sue to recover what is rightfully due. Thus, the grant of
attorney’s fees would be justifiable under Art. 2208 of the Civil Code.

In all, Diesel cannot be considered as in delay and, hence, is not

amenable under the Agreement for liquidated damages

Korea Technologies co., ltd. v. Hon. Alberto A. Lerma and Pacific

General Steel Manufacturing Corporation
GR No. 143581 January 7, 2008

Facts:
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean
corporation which is engaged in the supply and installation of
Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while
private respondent Pacific General Steel Manufacturing Corp.
(PGSMC) is a domestic corporation. On March 5, 1997, PGSMC and
KOGIES executed a Contract whereby KOGIES would set up an LPG
Cylinder Manufacturing Plant in Carmona, Cavite. The contract was
executed in the Philippines. On April 7, 1997, the parties executed, in
Korea, an Amendment for Contract No. KLP-970301 dated March 5,
1997 amending the terms of payment. The contract and its
amendment stipulated that KOGIES will ship the machinery and
facilities necessary for manufacturing LPG cylinders for which
PGSMC would pay USD 1,224,000. KOGIES would install and initiate
the operation of the plant for which PGSMC bound itself to pay USD
306,000 upon the plants production of the 11-kg. LPG cylinder
samples. Thus, the total contract price amounted to USD 1,530,000.
On October 14, 1997, PGSMC entered into a Contract of Lease with
Worth Properties, Inc. (Worth) for use of Worths 5,079-square meter
property with a 4,032-square meter warehouse building to house the
LPG manufacturing plant. The monthly rental was PhP 322,560
commencing on January 1, 1998 with a 10% annual increment
clause. Subsequently, the machineries, equipment, and facilities for
the manufacture of LPG cylinders were shipped, delivered, and
installed in the Carmona plant. PGSMC paid KOGIES USD
1,224,000. However, gleaned from the Certificate executed by the
parties on January 22, 1998, after the installation of the plant, the
initial operation could not be conducted as PGSMC encountered
financial difficulties affecting the supply of materials, thus forcing the
parties to agree that KOGIES would be deemed to have completely
complied with the terms and conditions of the March 5, 1997 contract.
For the remaining balance of USD306,000 for the installation and
initial operation of the plant, PGSMC issued two postdated checks:
(1) BPI Check No. 0316412 dated January 30, 1998 for PhP
4,500,000; and (2) BPI Check No. 0316413 dated March 30, 1998 for
PhP 4,500,000. When KOGIES deposited the checks, these were
dishonored for the reason PAYMENT STOPPED. Thus, on May 8,

42
1998, KOGIES sent a demand letter to PGSMC threatening criminal
action for violation of Batas PambansaBlg. 22 in case of nonpayment.
On the same date, the wife of PGSMCs President faxed a letter dated
May 7, 1998 to KOGIES President who was then staying at a Makati
City hotel. She complained that not only did KOGIES deliver a
different brand of hydraulic press from that agreed upon but it had not
delivered several equipment parts already paid for.

Issue: Whether or not the arbitration clause in the contract of the

parties should govern.

Held: Yes. Established in this jurisdiction is the rule that the law of the
place where the contract is made governs. Lex loci contractus. The
contract in this case was perfected here in the Philippines. Therefore,
our laws ought to govern. Nonetheless, Art. 2044 of the Civil Code
sanctions the validity of mutually agreed arbitral clause or the finality
and binding effect of an arbitral award. Art. 2044 provides. Any
stipulation that the arbitrators award or decision shall be final, is valid,
without prejudice to Articles 2038, 2039 and 2040.
The arbitration clause was mutually and voluntarily agreed upon by
the parties. It has not been shown to be contrary to any law, or
against morals, good customs, public order, or public policy. There
has been no showing that the parties have not dealt with each other
on equal footing. We find no reason why the arbitration clause should
not be respected and complied with by both parties. In Gonzales v.
Climax Mining Ltd., we held that submission to arbitration is a
contract and that a clause in a contract providing that all matters in
dispute between the parties shall be referred to arbitration is a
contract. Again in Del Monte Corporation-USA v. Court of Appeals, we
likewise ruled that [t]he 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.
Having said that the instant arbitration clause is not against public
policy, we come to the question on what governs an arbitration clause
specifying that in case of any dispute arising from the contract, an
arbitral panel will be constituted in a foreign country and the
arbitration rules of the foreign country would govern and its award
shall be final and binding.
Thus, it can be gleaned that the concept of a final and binding arbitral
award is similar to judgments or awards given by some of our quasi-
judicial bodies, like the National Labor Relations Commission and
Mines Adjudication Board, whose final judgments are stipulated to be
final and binding, but not immediately executory in the sense that
they may still be judicially reviewed, upon the instance of any party.
Therefore, the final foreign arbitral awards are similarly situated in
that they need first to be confirmed by the RTC.
43
 Insular Savings Bank vs. Far East Bank And Trust
Company, G.R. No. 141818, June 22, 2006

Facts:

Respondent filed a complaint against Home Bankers Trust and

Company (HBTC) with the Philippine Clearing House Corporation’s
(PCHC) Arbitration Committee, seeking recovery from the petitioner,
the sum of P25,200,000.00 representing the total amount of the three
checks drawn and debited against its clearing account.

Before the termination of the arbitration proceedings, respondent filed

another complaint but this time with the Regional Trial Court (RTC)
for Sum of Money and Damages with Preliminary Attachment. The
RTC suspended the proceedings pending the decision of the
Arbitration Committee.

44
The PCHC Arbitration Committee rendered its decision in favor of
respondent. Petitioner motion for reconsideration was denied. It then
filed a petition for review in the earlier case filed by respondent in the
RTC. The RTC dismissed the petition for review, for lack of
jurisdiction.

Issue: Whether or not the petitioner availed the proper remedy

contesting the decision rendered by the Arbitration Committee.

Ruling: Negative.

Petitioner had several judicial remedies available at its disposal after

the Arbitration Committee denied its Motion for Reconsideration. It
may petition the proper RTC to issue an order vacating the award on
the grounds provided for under Section 24 of the Arbitration
Law. 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. Lastly,
petitioner may file a petition for certiorari under Rule 65 of the Rules
of Court on the ground that the Arbitrator Committee acted without or
in excess of its jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction. Since this case involves
acts or omissions of a quasi-judicial agency, the petition should be
filed in and cognizable only by the Court of Appeals.

LM Power Engineering Corporation vs. Capitol Industrial

Construction Groups, Inc. G.R. No. 141833 March 26, 2003)

FACTS:

LM Power Engineering Corporation and Capitol Industrial

Construction Groups, Inc. entered into a “Subcontract Agreement”
involving electrical work at the Third Port of Zamboanga. Two years
thereafter, Respondent took over some of the work contracted to
Petitioner. Allegedly, the latter had failed to finish it because of its
inability to procure materials.
When task was completed Petitioner billed Respondent in the amount
of P6.7M. Respondent, however, refused to pay and contested the
accuracy of the amount of advances and billable accomplishments
listed by Petitioner. Respondent also took refuge in the termination
45
clause of the Agreement. That clause allowed it to set off the cost of
the work that Petitioner had failed to undertake — due to termination
or take-over — against the amount it owed the latter.
Petitioner filed with the RTC of Makati a Complaint for Collection of
the amount representing the alleged balance due it under the
Subcontract. Instead of submitting an Answer, Respondent filed a
Motion to Dismiss, alleging that the Complaint was premature
because there was no prior recourse to arbitration.
RTC denied the Motion to Dismiss on the ground that the dispute did
not involve the interpretation or the implementation of the Agreement
and was, therefore, not covered by the arbitral clause. The RTC ruled
that the take-over of some work items by Respondent was not
equivalent to a termination, but a mere modification, of the
Subcontract. The latter was ordered to give full payment for the work
completed by Petitioner.
CA reversed on appeal the RTC ruling and ordered the referral of the
case to arbitration. The CA held as arbitrable the issue of whether
Respondent’s take-over of some work items had been intended to be
a termination of the original contract under Letter “K” of the
Subcontract.
Petitioner elevated the case to SC.
ISSUES:
1. Whether or not there exists a controversy/dispute between
Petitioner and Respondent regarding the interpretation and
implementation of the Subcontract Agreement that requires
prior recourse to voluntary arbitration?;
2. In the affirmative, whether or not there is a need to file a
request first with the CIAC in order to vest it with jurisdiction to
decide a construction dispute?
3.

46
RULING:
The Petition is unmeritorious; hence, DENIED. The assailed
Decision of the CA is AFFIRMED.
1. YES. SC sides with Respondent. The instant case involves
technical discrepancies that are better left to an arbitral body that has
expertise in those areas.
2. NO. SC is not persuaded with Petitioner’s contention. Section 1
of Article III of the NEW Rules of Procedure Governing Construction
Arbitration has dispensed with the requirement to submit a request for
arbitration. Recourse to the CIAC may now be availed of whenever a
contract “contains a clause for the submission of a future controversy
to arbitration.”
In the instant case, the Subcontract has the following arbitral clause:
“6. The Parties hereto agree that any dispute or conflict as regards to
interpretation and implementation of this Agreement which cannot be
settled between [respondent] and [petitioner] amicably shall be
settled by means of arbitration x xx.”
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, the resolutions of which lies in the
interpretation of the provisions of the Subcontract Agreement:
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?

47
Being an inexpensive, speedy and amicable method of settling
disputes, arbitration — along with mediation, conciliation and
negotiation — is encouraged by the SC. Aside from unclogging
judicial dockets, arbitration also hastens the resolution of disputes,
especially of the commercial kind. It is thus regarded as the “wave of
the future” in international civil and commercial disputes. Brushing
aside a contractual agreement calling for arbitration between the
parties would be a step backward.
Consistent with the above-mentioned policy of encouraging
alternative dispute resolution methods, courts should liberally
construe arbitration clauses. Provided such clause is susceptible of
an interpretation that covers the asserted dispute, an order to
arbitrate should be granted. Any doubt should be resolved in favor of
arbitration.
Section 1 of Article III of the NEW Rules of Procedure Governing
Construction Arbitration provides:
“SECTION 1. Submission to CIAC Jurisdiction — An
arbitration clause in a construction contract or a submission to
arbitration of a construction dispute shall be deemed an
agreement to submit an existing or future controversy to CIAC
jurisdiction, notwithstanding the reference to a different
arbitration institution or arbitral body in such contract or
submission. When a contract contains a clause for the
submission of a future controversy to arbitration, it is not
necessary for the parties to enter into a submission agreement
before the claimant may invoke the jurisdiction of CIAC.”
As clearly explained in China Chang Jiang Energy Corporation
(Philippines) v. Rosal Infrastructure Builders et al. (an extended
unsigned Resolution) and reiterated in National Irrigation
Administration v. Court of Appeals [1999], from which SC quote
thus:

48
 “Under the present Rules of Procedure, for a particular
construction contract to fall within the jurisdiction of CIAC, it is
merely required that the parties agree to submit the same to
voluntary arbitration unlike in the original version of Section 1,
as applied in the Tesco case, the law as it now stands does not
provide that the parties should agree to submit disputes arising
from their agreement specifically to the CIAC for the latter to
acquire jurisdiction over the same. Rather, it is plain and clear
that as long as the parties agree to submit to voluntary
arbitration, regardless of what forum they may choose, their
agreement will fall within the jurisdiction of the CIAC, such that,
even if they specifically choose another forum, the parties will
not be precluded from electing to submit their dispute before
the CIAC because this right has been vested upon each party
by law, i.e., E.O. No. 1008.”
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. And because it covers the dispute between the parties in
the present case, either of them may compel the other to arbitrate.

JORGE GONZALES and PANEL OF ARBITRATORS vs. CLIMAX

MINING LTD., CLIMAX-ARIMCO MINING CORP. and
AUSTRALASIAN PHILIPPINES MINING INC., G.R. No. 161957,
January 22, 2007

Facts:

This is a consolidation of two petitions rooted in the same disputed

Addendum Contract entered into by the parties.

In one case, the Court held that the DENR Panel of Arbitrators had no
jurisdiction over the complaint for the annulment of the Addendum
Contract on grounds of fraud and violation of the Constitution and that
the action should have been brought before the regular courts as it
involved judicial issues.

Gonzales averred that the DENR Panel of Arbitrators Has jurisdiction

because the case involves a mining dispute that properly falls within
the ambit of the Panel’s authority.

49
Respondents Climax Mining Ltd., et al., on the other hand, seek
reconsideration/clarification on the decision holding that the case
should not be brought for arbitration under R.A. No. 876. They
argued that the arbitration clause in the Addendum Contract should
be treated as an agreement independent of the other terms of the
contract, and that a claimed rescission of the main contract does not
avoid the duty to arbitrate.

On another case, Gonzales challenged the order of the RTC

requiring him to proceed with the arbitration proceedings while the
complaint for the nullification of the Addendum Contract was pending
before the DENR Panel of Arbitrators. He contended that any issue
as to the nullity, inoperativeness, or incapability of performance of the
arbitration clause/agreement raised by one of the parties to the
alleged arbitration agreement must be determined by the court prior
to referring them to arbitration.

While Climax-Arimco contended that an application to compel

arbitration under Sec. 6 of R.A. No. 876 confers on the trial court only
a limited and special jurisdiction, i.e., a jurisdiction solely to determine
(a) whether or not the parties have a written contract to arbitrate, and
(b) if the defendant has failed to comply with that contract.

Issue: Whether or not arbitration is proper even though issues of

validity and nullity of the Addendum Contract and, consequently, of
the arbitration clause were raised.

Ruling: Positive.

In La Naval Drug Corporation v. Court of Appeals, the Court held that

R.A. No. 876 explicitly confines the court's authority only to the
determination of whether or not there is an 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 cited case also stressed that the
proceedings are summary in nature.

Implicit in the summary nature of the judicial proceedings is the

separable or independent character of the arbitration clause or
agreement.

The doctrine of separability or severability enunciates that an

arbitration agreement is independent of the main contract. The
arbitration agreement is to be treated as a separate agreement and
the arbitration agreement does not automatically terminate when the
contract of which it is part comes to an end.
50
The separability of the arbitration agreement is especially significant
to the determination of whether the invalidity of the main contract also
nullifies the arbitration clause. Indeed, the doctrine denotes that the
invalidity of the main contract, also referred to as the “container”
contract, does not affect the validity of the arbitration
agreement. Irrespective of the fact that the main contract is invalid,
the arbitration clause/agreement still remains valid and enforceable.

The validity of the contract containing the agreement to submit to

arbitration does not affect the applicability of the arbitration clause
itself. A contrary ruling would suggest that a party’s mere repudiation
of the main contract is sufficient to avoid arbitration. That is exactly
the situation that the separability doctrine, as well as jurisprudence
applying it, seeks to avoid.

The Court added that when it declared that the case should not be
brought for arbitration, it should be clarified that the case referred to is
the case actually filed by Gonzales before the DENR Panel of
Arbitrators, which was for the nullification of the main contract on the
ground of fraud, as it had already been determined that the case
should have been brought before the regular courts involving as it did
judicial issues.

51
CALIFORNIA AND HAWAIIAN SUGAR vs. PIONEER INSURANCE
GR No. 139273 Nov 28, 2000

Facts:

♣ Nov 27, 1990 - the vessel MV “SUGAR ISLANDER” arrived at

the port of Manila carrying a cargo of soybean meal in bulk
consigned to several consignees, one of which was the Metro
Manila Feed Millers Association.
♣ Nov 30, 1990 – discharging of cargo from vessel to barges
commenced. From the barges, the cargo was allegedly
offloaded, rebagged and reloaded on consignee’s delivery
trucks.
♣ Pioneer Insurance, however, claims that when the cargo was
weighed on a licensed truck scale a shortage of 255.051 metric
tons valued at P1,621,171.16 was discovered. The above-
mentioned shipment was insured with Pioneer Insurance
against all risk in the amount of P19,976,404.00.
♣ Due to the alleged refusal of California and Hawaiian et al. to
settle their respective liabilities, Pioneer, as insurer, paid the
consignee Metro Manila Feed Miller’s Association.
♣ March 26, 1992 - as alleged subrogee of Metro, Pioneer filed a
complaint for damages against California and Hawaiian et al.
♣ Within the reglementary period to file an Answer, California and
Hawaiian et al. filed a Motion to Dismiss the complaint on the
ground that Pioneer’s claim is premature, the same being
arbitrable.
♣ Pioneer filed its Opposition thereto and California and Hawaiian
et al. filed their Reply to Opposition.
♣ RTC: issued an Order deferring the hearing on the Motion to
Dismiss until the trial and directing petitioners to file their
Answer.
♣ California and Hawaiian et al. then moved to reconsider said
Order which was, however, denied by the RTC on the ground
that the reason relied upon by California and Hawaiian et al. in
its Motion to Dismiss and Motion for Reconsideration was a
matter of defense which they must prove with their evidence.
♣ California and Hawaiian et al. filed their Answer with
Counterclaim and Cross-claim alleging therein that Pioneer did
not comply with the arbitration clause of the charter party;
hence, the complaint was allegedly prematurely filed.
♣ The trial court set the case for pre-trial on November 26, 1993.
♣ Nov 15 & 16, 1993 – California and Hawaiian et al. filed a
Motion to Defer Pre-Trial and Motion to Set for Preliminary
Hearing the Affirmative Defense of Lack of Cause of Action for
Failure to comply with Arbitration Clause, respectively.

52
 ♣ Pioneer did not file an Opposition to the said Motion to Set for
Preliminary Hearing.
♣ RTC: denied the motion to set for preliminary hearing
♣ California and Hawaiian et al.’s MR was denied by the RTC.
♣ California and Hawaiian et al. filed a petition for certiorari with
the CA.
♣ CA: ruled that the arbitration clause did not bind Pioneer
Insurance, which is a mere subrogee of Metro Manila Feed
Millers Association citing Pan Malayan Insurance vs. CA
♣ Hence, this petition.

Issue:

1. WON the RTC erred in denying California and Hawaiian et al.’s

Motion to set for preliminary hearing [YES]
2. WON the arbitration clause is binding to Pioneer Insurance
[YES]

Ruling:

1. True, Section 6, Rule 16 of the 1997 Rules, [11] specifically

provides that a preliminary hearing on the affirmative defenses
may be allowed only when no motion to dismiss has been
filed. Section 6, however, must be viewed in the light of Section
3 of the same Rule,[12] which requires courts to resolve a motion
to dismiss and prohibits them from deferring its resolution on
the ground of indubitability. Clearly then, Section 6 disallows
a preliminary hearing of affirmative defenses once a
motion to dismiss has been filed because such defense
should have already been resolved. In the present case,
however, the trial court did not categorically resolve petitioners’
Motion to Dismiss, but merely deferred resolution thereof.
Indeed, the present Rules are consistent with Section 5, Rule
16 of the pre-1997 Rules of Court, because both presuppose
that no motion to dismiss had been filed; or in the case of the
pre-1997 Rules, if one has been filed, it has not been
unconditionally denied. Hence, the ground invoked may still be
pleaded as an affirmative defense even if the defendant’s
Motion to Dismiss has been filed but not definitely resolved, or if
it has been deferred as it could be under the pre-1997 Rules.
A preliminary hearing is not mandatory, but subject to the
discretion of the trial court. We note that the trial court deferred
the resolution of petitioners’ Motion to Dismiss because of a
single issue. It was apparently unsure whether the charter
party that the bill of lading referred to was indeed the Baltimore
Berth Grain Charter Party submitted by petitioners.

53
 Considering that there was only one question, which may even
be deemed to be the very touchstone of the whole case, the
trial court had no cogent reason to deny the Motion for
Preliminary Hearing. Indeed, it committed grave abuse of
discretion when it denied a preliminary hearing on a simple
issue of fact that could have possibly settled the entire
case. Verily, where a preliminary hearing appears to suffice,
there is no reason to go on to trial.

2. There was nothing in Pan Malayan, however, that prohibited the

applicability of the arbitration clause to the subrogee. That
case merely discussed, inter alia, the accrual of the right of
subrogation and the legal basis therefor.This issue is
completely different from that of the consequences of such
subrogation; that is, the rights that the insurer acquires from the
insured upon payment of the indemnity.

Dispositive: Petition granted, CA decision reversed. Case remanded

to the RTC for preliminary hearing of California and Hawaiian et al.’s
affirmative defense.

ASSOCIATED BANK V CA
233 SCRA 137 (1994)

FACTS:

In a complaint for Violation of the NIL and damages, Visitacion and

Asuncion Flores seek there covery of the amount of P900,913.60
which petitioner charged against their& current account by virtue of
the 16 checks drawn by them despite the apparent alterations
therein with respect to the name of the payee, that is, the name
Filipinas Shell was erased and substituted with Ever trading and DBL
Trading by their supervisor Jeremias Cabrera, without their
knowledge and consent.

Petitioner claimed that the subject checks appeared to have been

regularly issued and free from any irregularity which would excite or
arouse any suspicion or warrant their dishonor when the same were
negotiated and honored by it. Petitioner filed a TPC against PCIB. Far
East Bank and City Trust for reimbursement, contribution,indemnity
for being the collecting banks of the subject checks and by virtue of
their bank guarantee for all checks sent for clearing to the Philippine
Clearing House Corporation (PCHC), as provided for in Section 17,
54
(PCHC), as provided for in Section 17, PCHC Clearing House Rules
and Regulations. Citytrust and PCIB claimed that the checks were
complete and regular on their face.

A motion to dismiss was filed by Security Bank on the &rounds that

petitioner failed to resort to arbitration as provided for in Section 36 of
the Clearing House Rules and Regulations of the Philippine Clearing
House Corporation. Petitioner maintains that this Court
has jurisdiction over the suit as provisions of the Clearing House
Rules and Regulations are applicable only if the suit or action is
between participating member banks,whereas the Floreses are
private persons and the third party complaint between participating
member banks is only a consequence of the original action initiated
the plaintiffs. The trial court dismissed the TCP for the lack of
jurisdiction citing Section 36 of the ClearingHouse Rules and
Regulations of the PCHC providing for settlement of disputes and
controversies involving any check or item cleared through the body
with the PCHC.

.It ruled--citing the Arbitration Rules of Procedure -- that the decision

or award of the PCHC through its arbitration committee/arbitrator is
appealable only on questions of law to any of the Regional Trial
Courts in the National Capital Region where the head office of any of
the parties is located. The CA affirmed.

ISSUE:
Whether or not the case should be dismissed for failure to arbitrate.

HELD:

YES.

Under the rules and regulations of the Philippine Clearing House

Corporation (PCHC), the mere act of participation of the parties
concerned in its operations in effect amounts to a manifestation of
agreement by the parties to abide by its rules and regulations. 7 As a
consequence of such participation, a party cannot invoke the
jurisdiction of the courts over disputes and controversies which fall

55
under the PCHC Rules and Regulations without first going through
the arbitration processes laid out by the body. Since claims relating to
the regularity of checks cleared by banking institutions are among
those claims which should first be submitted for resolution by the
PCHC’s Arbitration Committee, petitioner Associated Bank, having
voluntarily bound itself to abide by such rules and regulations, is
estopped from seeking relief from the Regional Trial Court on the
coattails of a private claim and in the guise of a third party complaint
without first having obtained a decision adverse to its claim from the
said body. It cannot bypass the arbitration process on the basis of its
averment that its third party complaint is inextricably linked to the
original complaint in the Regional Trial Court.

Under its Articles of Incorporation, the PCHC provides "an effective,

convenient, efficient, economical and relevant exchange and facilitate
service limited to check processing and sorting by way of assisting
member banks, entities in clearing checks and other clearing items as
defined and existing in future Central Bank of the Philippines
Circulars, memoranda, circular letters rules and regulations and
policies in pursuance of Section 107 of RA 265." Pursuant to its
function involving the clearing of checks and other clearing items, the
PCHC has adopted rules and regulations designed to provide
member banks with a procedure whereby disputes involving the
clearance of checks and other negotiable instruments undergo a
process of arbitration prior to submission to the courts below. This
procedure not only ensures a uniformity of rulings relating to factual
disputes involving checks and other negotiable instruments but also
provides a mechanism for settling minor disputes among participating
and member banks which would otherwise go directly to the trial
courts. While the PCHC Rules and Regulations allow appeal to the
Regional Trial Courts only on questions of law, this does not preclude
our lower courts from dealing with questions of fact already decided
by the PCHC arbitration when warranted and appropriate.

Thus, not only do the parties manifest by mere participation their

consent to these rules, but such participation is deemed (their) written
and subscribed consent to the binding effect of arbitration
agreements under the PCHC rules. Moreover, a participant subject to
the Clearing House Rules and Regulations of the PCHC may go on
appeal to any of the Regional Trial Courts in the National Capital
Region where the head office of any of the parties is located only
after a decision or award has been rendered by the arbitration
committee or arbitrator on questions of law.
56
Clearly therefore, petitioner Associated Bank, by its voluntary
participation and its consent to the arbitration rules cannot go directly
to the Regional Trial Court when it finds it convenient to do so. The
jurisdiction of the PCHC under the rules and regulations is clear,
undeniable and is particularly applicable to all the parties in the third
party complaint under their obligation to first seek redress of their
disputes and grievances with the PCHC before going to the trial
court.
Finally, the contention that the third party complaint should not have
been dismissed for being a necessary and inseparable offshoot of the
main case over which the court a quo had already exercised
jurisdiction misses the fundamental point about such pleading. A third
party complaint is a mere procedural device which under the Rules of
Court is allowed only with the court’s permission. It is an action
"actually independent of, separate and distinct from the plaintiffs’
complaint" (s)uch that, were it not for the Rules of Court, it would be
necessary to file the action separately from the original complaint by
the defendant against the third party.

BLOOMFIEL ACADEMY V CA
237 SCRA 43 (1994)

Facts:
Private respondent, the association of parents and guardians of
students enrolled in petitioner Bloomfield Academy, a non-stock, non-
profit educational institution, filed a complaint for injunction against
the latter. The complaint alleged that petitioner decided to increase its
tuition fees in lieu of RA 6727 granting mandatory increase of
minimum wage of the teachers without prior consultation to the
parents which is a requirement before any increase should be made
effective. Respondent court ordered the issuance of writ of
preliminary injunction. In the petition for certiorari attributing to the
court a quo grave abuse of discretion in the issuance of the writ, the
appellate court held the petition to be without merit.

Issue:

57
Whether or not the court a quo has acted within its jurisdiction in
issuing the questioned order and, in the affirmative, whether or not it
has committed grave abuse of discretion specifically in granting
private respondent’s application for a writ of preliminary injunction.

Ruling:
We see merit in the petition. The pertinent provisions of Republic Act
No. 6728, also commonly known as “An Act Providing Government
Assistance to Students and Teachers in Private Education, And
Appropriating Funds Therefor,” provide: Sec. 10. Consultation. — In
any proposed increase in the rate of tuition fee, there shall be
appropriate consultations conducted by the school administration with
the duly organized parents and teachers associations and faculty
associations with respect to secondary schools, and with students
governments or councils, alumni and faculty associations with respect
to colleges. For this purpose, audited financial statements shall be
made available to authorized representatives of these sectors. Every
effort shall be exerted to reconcile possible differences. In case of
disagreement, the alumni association of the school or any other
impartial body of their choosing shall act as arbitrator. In passing, we
also observe that the parties have both remained silent on the
provisions of Republic Act No. 6728 to the effect that in case of
disagreement on tuition fee increases (in this instance by herein
private parties), the issue should be resolved through arbitration.
Although the matter has not been raised by the parties, it is an
aspect, nevertheless, in our view that could have well been explored
by them instead of immediately invoking, such as they apparently did,
the administrative and judicial relief to resolve the controversy. All
told, we hold that the court a quo has been bereft of jurisdiction in
taking cognizance of private respondent’s complaint. We see no real
justification, on the basis of the factual and case settings here
obtaining, to permit a deviation from the long standing rule that the
issue of jurisdiction may be raised at any time even on appeal.
Wherefore, conformably with our above opinion, the instant petition is
granted and the questioned ordered of the court a quo and the
decision of the appellate court was set aside.

MINDANAO PORTLAND CEMENT CORPORATION V

MCDONOUGH CONSTRUCTION CO. OF FLORIDA,

58
 90 SCRA 808 (1967)

FACTS
a.) February 13, 1962, Mindanao Portland Cement Corporation &
respondent Mc Donough Construction Company of Florida USA
executed a contract for the construction by the respondent for
the petitioner of a dry portland cement plan at Iligan city. b.)
Turbull incorporated was engaged to design and manage the
construction of the plant, supervise the construction, schedule
deliveries amd the construction work as well as check and
certify ill contractors progress and fiscal request for payments.
c.) Extensions of time for the termination of the project, initially
agreed to be furnished on December 17, 1961were granted. d.)
October 22, 1962, respondent finally completed the project and
November 14, 1962, the delivery flood lamps were complied. e.)
Petitioner claimed from respondent in damages in the amount
of more thanP2,000,000 allegedly occasioned by the delay in
the projects completion and respondent in turn asked for more
than P450,000 from petitioner for alleged losses due top cost of
extra work and overhead as of April 1962. f.) August 8, 1962,
petitioner sent respondent and on September 24, 1962 written
invitation to arbitrate, invoking a provision in their contract
regarding arbitration of disputes. g.) November 14, 1962,
respondent with Turnbull Inc.’s approval , asking for P403,700
as unpaid balance of the consideration of contract. h.) January
29, 1963, petitioner filed the present action in the Court of First
Instance of Manila to compel respondent to arbitrate with it
concerning alleged disputes arising from their contract. i.)
February 23, 1963, respondent filed an answer denied the
alleged existence of disagreement between parties, that claims
and and damages should be resolved by Turnbull Inc.. J.) May
13, 1964, court rendered decision with respect to their rights
and obligations under their contract and the same should be
submitted for arbitration pursuant to paragraph 39 of contract
and the arbitration clause – to R.A. 876- The Arbitration Law.

ISSUE:

Whether or not disputes arises between parties should be subjected

to arbitration.

HELD
59
Yes, since there obtain a written provision for arbitration as well as
failure on respondent’s part to comply therewith, the court quo rightly
ordered the parties to proceed to arbitration in accordance with the
terms of the agreement (sec. 6, R.A. 876). respondent’s arguments
touching upon the merits of the dispute are improperly raised herein.
They should be addressed to the arbitrators. This proceeding is
merely a summary remedy to enforce the agreement to arbitrate. The
duty of the court in this case is not to resolve the merits of parties
claims but only to determine if they should proceed to arbitration or
not. Frivolous/patently baseless claim should not be ordered to
arbitration, defense exist against a claim, does not make it frivolous
or baseless. Judgment rendered is affirmed with cost against
appellant.

GONZALES V CLIMAX MINING LTD.

512 SCRA 148 (2007)

Facts:

This is a consolidation of two petitions rooted in the same disputed

Addendum Contract entered into by the parties. In G.R. No. 161957,
the Court in its Decision of 28 February 2005 denied the Rule 45
petition of petitioner Jorge Gonzales (Gonzales). It held that the
DENR Panel of Arbitrators had no jurisdiction over the complaint for
the annulment of the Addendum Contract on grounds of fraud and
violation of the Constitution and that the action should have been
brought before the regular courts as it involved judicial issues. Both
parties filed separate motions for reconsideration. Gonzales avers in
his Motion for Reconsideration that the Court erred in holding that
the DENR Panel of Arbitrators was bereft of jurisdiction, reiterating its
argument that the case involves a mining dispute that properly falls
within the ambit of the Panels authority. Gonzales adds that the Court
failed to rule on other issues he raised relating
to the sufficiency of his complaint before the DENR Panel of
Arbitrators and the timeliness of its filing. Respondents Climax Mining
Ltd., et al., (respondents) filed their Motion for Partial Reconsideration
and/or Clarification seeking reconsideration of that part of the

60
Decision holding that the case should not be brought for arbitration
under Republic Act (R.A.) No. 876, also known as the Arbitration Law.
Respondents, citing American jurisprudence and the UNCITRAL
Model Law, argue that the arbitration clause in the Addendum
Contract should be treated as an agreement independent of the other
terms of the contract, and that a claimed rescission of the main
contract does not avoid the duty to arbitrate. Respondents add that
Gonzales argument relating to the alleged invalidity of the Addendum
Contract still has to be proven and adjudicated on in a proper
proceeding; that is, an action separate from the motion to compel
arbitration. Pending judgment in such separate action, the Addendum
Contract remains valid and binding and so does the arbitration clause
therein. Respondents add that the holding in the Decision that the
case should not be brought under the ambit of the Arbitration Law
appears to be premised on Gonzales having impugn[ed] the
existence or validity of the addendum contract. If so, it supposedly
conveys the idea that Gonzales unilateral repudiation of the contract
or mere allegation of its invalidity is all it takes to avoid arbitration.
Hence, respondents submit that the courts holding that the case
should not be brought under the ambit of the Arbitration Law be
understood or clarified as operative only where the challenge to the
arbitration agreement has been sustained by final judgment.

Issue:
Whether or not it was proper for the RTC, in the proceeding to
compel
arbitration under R.A. No. 876, to order the parties to arbitrate even
though the defendant therein has raised the twin issues of validity
and nullity of the Addendum Contract and, consequently, of the
arbitration clause therein as well

Held:
Yes. Disputes do not go to arbitration unless and until the parties
have agreed to abide by the arbitrators decision. Necessarily, a
contract is required for arbitration to take place and to be binding.
R.A. No. 876 recognizes the contractual nature of the arbitration
agreement.

The doctrine of separability, or severability as other writers call it,

enunciates that an arbitration agreement is independent of the main
61
contract. The arbitration agreement is to be treated as a separate
agreement and the arbitration agreement does not automatically
terminate when the contract of which it is part comes to an end.

The separability of the arbitration agreement is especially significant

to the determination of whether the invalidity of the main contract also
nullifies the arbitration clause. Indeed, the doctrine denotes that the
invalidity of the main contract, also referred to as the container
contract, does not affect the validity of the arbitration agreement.
Irrespective of the fact that the main contract is invalid, the arbitration
clause/agreement still remains valid and enforceable.

The separability of the arbitration clause is confirmed in Art. 16(1) of

the UNCITRAL Model Law and Art. 21(2) of the UNCITRAL
Arbitration Rules. The proceeding in a petition for arbitration under
R.A. No. 876 is limited only to the resolution of the question of
whether the arbitration agreement exists. Second, the separability of
the arbitration clause from the Addendum Contract means that
validity or invalidity of the Addendum Contract will not affect the
enforceability of the agreement to arbitrate. Thus, Gonzales petition
for certiorari should be dismissed.

This brings us back to G.R. No. 161957. The adjudication of the

petition in G.R. No. 167994 effectively modifies part of the Decision
dated 28 February 2005 in G.R. No. 161957. Hence, we now hold
that the validity of the contract containing the agreement to submit to
arbitration does not affect the applicability of the arbitration clause
itself.

A contrary ruling would suggest that a parties mere repudiation of the

main contract is sufficient to avoid arbitration. That is exactly the
situation that the separability doctrine, as well as jurisprudence
applying it, seeks to avoid. We add that when it was declared in G.R.
No. 161957 that the case should not be brought for arbitration, it
should be clarified that the case referred to is the case actually filed
by Gonzales before the DENR Panel of Arbitrators, which was for the
nullification of the main contract on the ground of fraud, as it had
already been determined that the case should have been brought
before the regular courts involving as it did judicial issues.

62
 OIL AND NATURAL GAS COMMISSION V CA
293 SCRA 26 (1998)

FACTS:

Petitioner is a foreign cor&oration owned and controlled by the

Government of Indi. While the respondent is a private cor&oration
duly organized and existing under Philippine law. Both parties entered
into a contract obligating Pacific Company to supply Oil and
Natural Gas wit $,300 metric tons of oil well cement. Pacific failed to
deliver the cargo to Oil and Natural Gas Commission after he
received payment and several demands. Oil and Natural Gas won in
the Arbitral causing him to pay $899,603.77. Pacific refused to pay
the amount adjudged by the foreign court. Oil and Natural Gas then
filed a complaint with the RTC of Surigao City.

The private respondent moved to dismiss the complaint on the

following grounds:

O Plaintiffs lacks of legal capacity to sue

O lack of cause of action; and
O Plaintiff claim or demand has been waived, abandoned, or
otherwise extinguished.

RTC ruled in favor of Pacific for jurisdiction over the case

CA affirmed the RTC’s decision saying that the foreign court could not
validly adopt the arbitrator’s award.

ISSUE:

63
Whether or not the arbitrator has jurisdiction over the dispute
between the petition and the private respondent under Clause
16under the. contract.

HELD:

No.
The constitutional mandate that no decision shall be rendered by any
court without expressing therein dearly and distinctly the facts and the
law on which it is based does not preclude the validity of
“memorandum decision” which adopt by reference the fact and
conclusions of law contained in the decisions of inferior tribunals. In
Francisco v. Permskul, this Court held that the following
memorandum decision of the Regional Trial Court of Makati did not
transgress the requirements of Section 14, Article VIII of the
Constitution.

MAGELLAN CAPITAL MGT. CORP. V ZOSA

355 SCRA 157 (2001)

Facts:
Under a management agreement entered into, MCHC appointed
MCMC as manager for the operation of its business and affairs.
Pursuant thereto, petitioners and private respondent Rolando Zosa
entered into “Employment Agreement” designating the latter as
President and CEO of MCHC. Respondent Zosa then was elected to
a new position as MCHC’s Vice-Chairman/Chairman New Ventures
Development to which he communicated his resignation on the
ground that it had less responsibility and scope and demanded that
he be given termination benefits as provided in the Employment
Agreement. MCHC communicated its non-acceptance to the
resignation and advised respondent that the agreement is terminated
on account of the latter’s breach thereof. Respondent invoked the
Arbitration Clause of the agreement and both parties designated their
arbitrators in the panel. However, instead of submitting the dispute to
arbitration, respondent filed an action for damages against petitioners
before the RTC. Petitioners’s motion to dismiss was denied.
Petitioners filed a petition for certiorari and prohibition in the CA to
which it was given due course. The RTC in compliance with the

64
decision, declared the arbitration clause in the agreement partially
void and of no effect insofar as it concerns the composition of
arbitrators. Petitioners then filed this petition for review on certiorari.

Issue:
Whether or not the arbitration clause in the Employment Agreement is
partially void and of no effect.

Ruling:
We rule against the petitioners.

Even if procedural rules are disregarded, and a scrutiny of the merits

of the case is undertaken, this Court finds the trial court’s
observations on why the composition of the panel of arbitrators
should be voided, incisively correct so as to merit our approval. Thus,
“From the memoranda of both sides, the Court is of the view that the
defendants [petitioner] MCMC and MCHC represent the same
interest. There is no quarrel that both defendants are entirely two
different corporations with personalities distinct and separate from
each other and that a corporation has a personality distinct and
separate from those persons composing the corporation as well as
from that of any other legal entity to which it may be related. But as
the defendants [herein petitioner] represent the same interest, it could
never be expected, in the arbitration proceedings, that they would not
protect and preserve their own interest, much less, would both or
either favor the interest of the plaintiff. The arbitration law, as all other
laws, is intended for the good and welfare of everybody. In fact, what
is being challenged by the plaintiff herein is not the law itself but the
provision of the Employment.Agreement based on the said law, which
is the arbitration clause but only as regards the composition of the
panel of arbitrators.

“From the foregoing arbitration clause, it appears that the two (2)
defendants [petitioners] (MCMC and MCHC) have one (1) arbitrator
each to compose the panel of three (3) arbitrators. As the defendant
MCMC is the Manager of defendant MCHC, its decision or vote in the
arbitration proceeding would naturally and certainly be in favor of its
employer and the defendant MCHC would have to protect and
preserve its own interest; hence, the two (2) votes of both defendants

65
(MCMC and MCHC) would certainly be against the lone arbitrator for
the plaintiff [herein defendant]. Hence, apparently, plaintiff [defendant]
would never get or receive justice and fairness in the arbitration
proceedings from the panel of arbitrators as provided in the
aforequoted arbitration clause. In fairness and justice to the plaintiff
[defendant], the two defendants (MCMC and MCHC) [herein
petitioners] which represent the same interest should be considered
as one and should be entitled to only one arbitrator to represent them
in the arbitration proceedings. Accordingly, the arbitration clause,
insofar as the composition of the panel of arbitrators is concerned
should be declared void and of no effect, because the law says, “Any
clause giving one of the parties power to choose more arbitrators
than the other is void and of no effect” (Article 2045, Civil Code).
“The dispute or controversy between the defendants (MCMC and
MCHC) [herein petitioners] and the plaintiff [herein defendant] should
be settled in the arbitration proceeding in accordance with the
Employment Agreement, but under the panel of three (3) arbitrators,
one (1) arbitrator to represent the plaintiff, one (1) arbitrator to
represent both defendants (MCMC and MCHC) [herein petitioners]
and the third arbitrator to be chosen by the plaintiff [defendant Zosa]
and defendants [petitioners].

We need only to emphasize in closing that arbitration proceedings

are designed to level the playing field among the parties in pursuit of
a mutually acceptable solution to their conflicting claims. Any
arrangement or scheme that would give undue advantage to a party
in the negotiating table is anathema to the very purpose of arbitration
and should, therefore, be resisted. Wherefore, premises considered,
the petition is hereby dismissed and the decision of the trial court is
affirmed.

BF CORPORATION V CA
288 SCRA 267 (1998)

66
Facts:

Petitioner and respondent Shangri-la Properties, Inc. 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 Mandaluyong. Petitioner incurred delay in the construction work
that SPI considered as "serious and substantial."

On the other hand, according to petitioner, the construction works

"progressed in faithful compliance with the First Agreement until a fire
broke out damaging Phase I" of the Project.

Hence, SPI proposed the re-negotiation of the agreement between

them.Petitioner and SPI entered into a written agreement
denominated as "Agreement for the Execution of Builder's 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."

This resulted in disagreements between the parties as regards their

respective liabilities under the contract.Petitioner filed with the RTC of
Pasig a complaint for collection of the balance due under the
construction agreement. 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.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.Thereafter, upon a finding that
an arbitration clause indeed exists, the lower court denied the motion
to suspend proceedings as the 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,.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.
Considering the fact that under the supposed Arbitration Clause

67
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 in
no case later than the time of final payment "which apparently, had
elapsed because defendants have failed to file any written notice of
any demand for arbitration during the said long period of one year
and eight months. The CA annulled the orders of the RTC.

Issue:
WON a petition for certiorari is proper

Held:
Yes. The rule that the special civil action of certiorari may not be
invoked as a substitute for the remedy of appeal. 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 amountto nothing more than errors
of judgment which are reviewable by timely appeal and not by a
special civil action of certiorari ."

LUZON DEVELOPMENT BANK V LUZON DEVELOPMENT BANK

EMPLOYEES
249 SCRA 162 (1995)

FACTS:
From a submission agreement of the LDB and the Association of
Luzon Development Bank Employees (ALDBE) arose an arbitration
case to resolve the following issue:
Whether or not the company has violated the CBA provision and the
MOA on promotion.
At a conference, the parties agreed on the submission of their
respective Position Papers. Atty. Garcia, in her capacity as Voluntary
Arbitrator, received ALDBE’s Position Paper ; LDB, on the other hand,
failed to submit its Position Paper despite a letter from the Voluntary
Arbitrator reminding them to do so. As of May 23, 1995 no Position
Paper had been filed by LDB.

68
Without LDB’s Position Paper, the Voluntary Arbitrator rendered a
decision disposing as follows:
WHEREFORE, finding is hereby made that the Bank has not adhered
to the CBA provision nor the MOA on promotion.
Hence, this petition for certiorari and prohibition seeking to set aside
the decision of the Voluntary Arbitrator and to prohibit her from
enforcing the same.

ISSUE:
WON a voluntary arbiter’s decision is appealable to the CA and not
the SC

HELD:
The Court resolved to REFER this case to the Court of Appeals.

YES
The jurisdiction conferred by law on a voluntary arbitrator or a panel
of such arbitrators is quite limited compared to the original jurisdiction
of the labor arbiter and the appellate jurisdiction of the NLRC for that
matter. The “(d)ecision, awards, or orders of the Labor Arbiter are
final and executory unless appealed to the Commission …” Hence,
while there is an express mode of appeal from the decision of a labor
arbiter, Republic Act No. 6715 is silent with respect to an appeal from
the decision of a voluntary arbitrator.
Yet, past practice shows that a decision or award of a voluntary
arbitrator is, more often than not, elevated to the SC itself on a
petition for certiorari, in effect equating the voluntary arbitrator with
the NLRC or the CA. In the view of the Court, this is illogical and
imposes an unnecessary burden upon it.

In Volkschel Labor Union, et al. v. NLRC, et al., 8 on the settled

premise that the judgments of courts and awards of quasi-judicial
agencies must become final at some definite time, this Court ruled
that the awards of voluntary arbitrators determine the rights of parties;
hence, their decisions have the same legal effect as judgments of a
court. In Oceanic Bic Division (FFW), et al. v. Romero, et al., this
Court ruled that “a voluntary arbitrator by the nature of her
functions acts in a quasi-judicial capacity.” Under these rulings, it

69
follows that the voluntary arbitrator, whether acting solely or in a
panel, enjoys in law the status of a quasi-judicial agency but
independent of, and apart from, the NLRC since his decisions are not
appealable to the latter.
Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902,
provides that the Court of Appeals shall exercise:
(B) Exclusive appellate jurisdiction over all final judgments, decisions,
resolutions, orders or awards of RTC s and quasi-judicial agencies,
instrumentalities, boards or commissions, including the Securities and
Exchange Commission, the Employees Compensation Commission
and the Civil Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the Labor Code of the Philippines under Presidential
Decree No. 442, as amended, the provisions of this Act, and of
subparagraph (1) of the third paragraph and subparagraph (4) of the
fourth paragraph of Section 17 of the Judiciary Act of 1948.
Assuming arguendo that the voluntary arbitrator or the panel of
voluntary arbitrators may not strictly be considered as a quasi-judicial
agency, board or commission, still both he and the panel are
comprehended within the concept of a “quasi-judicial instrumentality.”

Toyota Motor Philippines Corporation, petitioner,

vs
The Court of Appeals, Hon. Fernando V. Gorospe, Jr. and Sun
Valley Manufacturing and Development Corporation,
respomdents.

G.R. No. 102881 December 7,1992

Facts:

This case involves a boundary dispute between petitioner Toyota

Motor Phil. Corporation (Toyota) and private respondent Sun Valley
Manufacturing and Development Corporation (Sun Valley). Both
Toyota and Sun Valley are the registered owners of two (2) adjoining
parcels of land which they purchased from the Asset Privatization
Trust (APT). The properties in question formerly belonged to Delta
Motors Corporation (DMC) which were foreclosed by the Philippine
National Bank (PNB) and later transferred to the national government
through the APT for disposition. APT then proceeded to classify the
DMC properties, called the GC III-Delta Motors Corporation, and
divided into Delta I, Delta II, and Delta III. Further subdivisions for the
70
separate catalogues were made for each division e.g. Delta I into
Lots 1, 2 and 3. After this classification, APT parcelled out and
catalogued the properties for bidding and sale.

Part of the duly parcelled Delta I property (Lot 2) was sold to Toyota
through public bidding. After its purchase, Toyota constructed a
concrete hollow block (CHB) perimeter fence around its alleged
property. Another part of the parcelled Delta I (Lot 1) was purchased
by Sun Valley from APT. Petitioner then filed a case against APT for
the reformation of the Deed of Sale executed between them alleging
that the instrument failed to reflect the true intention of the parties as
the title failed to include 723 square meters strip of land. On the other
hand, Sun Valley, filed a case for recovery of possession of the
disputed 723 square meters relying upon the title description of its
property and the surveys it has commissioned. Through legal
maneuverings, the parties have succeeded in muddling up the vital
issues of the case and getting the lower courts embroiled in
numerous appeals over technicalities. Hence, the three appellate
decisions/resolutions before the Court for review and conflicting
orders issued by lower courts as a result of the separate cases filed
by the parties.

Issue:

Whether or not Judge Tensuan had jurisdiction to take cognizance of

the case for reformation of instrument.

Ruling:

Attention must first be brought to the fact that the contract of sale
executed between APT and Toyota provides an arbitration clause
which states that:

In case of disagreement or conflict arising out of this Contract, the

parties hereby undertake to submit the matter for determination by a
committee of experts, acting as arbitrators, the composition of which
shall be as follows: a) One member to be appointed by the VENDOR;
b) One member to be appointed by the VENDEE; c) One member,
who shall be a lawyer, to be appointed by both of the aforesaid
parties;
The contention that the arbitration clause has become dysfunctional
because of the presence of third parties is untenable.

Toyota filed an action for reformation of its contract with APT, the
purpose of which is to look into the real intentions/agreement of the
parties to the contract and to determine if there was really a mistake
in the designation of the boundaries of the property as alleged by
Toyota. Such questions can only be answered by the parties to the
71
contract themselves. This is a controversy which clearly arose from
the contract entered into by APT and Toyota. Inasmuch as this
concerns more importantly the parties APT and Toyota themselves,
the arbitration committee is therefore the proper and convenient
forum to settle the matter as clearly provided in the deed of sale.
Having been apprised of the presence of the arbitration clause in the
motion to dismiss filed by APT, Judge Tensuan should have at least
suspended the proceedings and directed the parties to settle their
dispute by arbitration. Judge Tensuan should have not taken
cognizance of the case.

In view of all the foregoing, the petition is hereby dismissed for failure
to show reversible error, much less grave abuse of discretion, on the
part of the respondent court.

Heirs of Augusto L. Salas, Jr.,

Vs
Laperal Realty Corporation

302 SCRA 620

Nature of the Case:

This is a petition for review on certiorari of the Order of Branch 85 of
the Regional Trial Court of Lipa dismissing petitioners complaint for
rescission of several sale transactions involving land owned by
Augusto L. Salas, Jr., their predecessor-in-interest, on the ground that
they failed to first resort to arbitration.

Facts of the Case:

Augusto Salas, Jr., owner of a vast tract of land in Lipa City, Batangas
entered into an Owner-Contractor Agreement with Laperal Realty
Corporation to provide complete construction services on his land.

Salas Jr., executed a Special Power of Attorney in favor of Laperal

Realty to exercise general control, supervision and management of
the sale of his land in cash or installment basis.

On June 10, 198 Salas Jr., left for a business trip to NueveEcija and
never returned.

His wife filed with the Regional Trial Court of Lipa a verified petition
for declaration of presumptive death of her husband who has been
missing for more than seven years. The RTC granted the petition.
72
Laperal Realty subdivided the land of Salas, Jr., and sold portions of
it to Rockway Real Estate Corporation, South Ridge Village, Inc. and
to spouses Abrajano and Lava and Oscar Dacillo and to Eduardo
Vacuna, Florante de la Cruz and Jesus Vicente Capalan.

Petitioners as heirs of Salas Jr., filed in the RTC of Lipa City a

Complaint for Declaration of nullity of sale, reconveyance,
cancellation of contract, accounting and damages against the
respondents.

Respondent Laperal Realty filed a Motion to Dismiss on the ground

that the petitioners failed to submit to arbitration.

Respondent Spouses Abrajano and Lava and Dacillo also filed

Motion to Dismiss on the same ground.

Order dismissing the petitioners Complaint for non-compliance with

the arbitration clause was issued by the court. Hence this petition.

Issue:

Whether or not the petitioners cause of action for cancellation of

contract and accounting are covered by the Arbitration Law.

Held:

The Court recognizes arbitration agreements between the parties as

well as their assigns and heirs as valid, binding, enforceable and not
contrary to public policy. Written provisions for arbitration which is not
complied with shall cause the court to suspend the proceedings and
order the parties to proceed to arbitration in accordance with the
terms of the agreement.

In the case presented, the terms of the agreement in the arbitration is

only valid and binding among the parties but not to the respondents
of Rockway Real Estate Corporation, South Ridge Village Inc.,
Marahami Development Corporation, spouses Abrajano, Lava, Oscar,
DacilloVacuna de la Cruz and Capellan being not assignees of
Laperal Realty. They are rather buyers of the land that the
respondent Laperal Realty was given the authority to develop and
sell under an Agreement.

Respondent Laperal Realty, being a party to the Agreement has the

right to compel the petitioners first to arbitrate before seeking judicial
relief.

73
Wherefore, the instant petition is hereby GRANTED. The Order dated
August 19, 1998 of Branch 85 of the Regional Trial Court of Lipa City
is hereby NULLIFIED and SET ASIDE. Said court is hereby ordered
to proceed with the hearing of the Civil Case.

HOME BANKERS SAVINGS AND TRUST COMPANY, petitioner

vs.
COURT OF APPEALS and FAR EAST BANK & TRUST
COMPANY, respondents.
G.R. No. 115412. November 19, 1999

FACTS:
Victor Tancuan issued Home Bankers Savings and Trust
Company (HBSTC) check No. 193498 for P25,250,000.00 while
Eugene Arriesgado issued Far East Bank and Trust Company
(FEBTC) check Nos. 464264, 464272 and 464271
for P8,600,000.00, P8,500,000.00 and P8,100,000.00, respectively,
the three checks amounting to P25,200,000.00. Tancuan and
Arriesgado exchanged each other's checks and deposited them with
their respective banks for collection. When FEBTC presented
Tancuan's HBSTC check for clearing, HBSTC dishonored it for being
"Drawn Against Insufficient Funds." On October 15, 1991, HBSTC
sent Arriesgado's three (3) FEBTC checks through the Philippine
Clearing House Corporation (PCHC) to FEBTC but was returned on
October 18, 1991 as "Drawn Against Insufficient Funds." HBSTC
received the notice of dishonor on October 21, 1991 but refused to
accept the checks and on October 22, 1991, returned them to FEBTC
through the PCHC for the reason "Beyond Reglementary Period,"
implying that HBSTC already treated the three (3) FEBTC checks as
cleared and allowed the proceeds thereof to be withdrawn.FEBTC
demanded reimbursement for the returned checks and inquired from
HBSTC whether it had permitted any withdrawal of funds against the
unfunded checks and if so, on what date. HBSTC, however, refused
to make any reimbursement and to provide FEBTC with the needed
information.
Thus, on December 12, 1991, FEBTC submitted the dispute for
arbitration before the PCHC Arbitration Committee,under the PCHC's
Supplementary Rules on Regional Clearing to which FEBTC and
HBSTC are bound as participants in the regional clearing operations
administered by the PCHC.
On January 17, 1992, while the arbitration proceedings was still
pending, FEBTC filed an action for sum of money and damages with

74
preliminary attachment against HBSTC, Robert Young, Victor
Tancuan and Eugene Arriesgado. The trial court issued an omnibus
order dated April 30, 1992 denying the motion to dismiss and an
order dated October 1, 1992 denying the motion for reconsideration.
On December 16, 1992, HBSTC filed a petition for certiorari with
the respondent Court of Appeals and dismissed the petition for lack of
merit and held that "FEBTC can reiterate its cause of action before
the courts which it had already raised in the arbitration case" after
finding that the complaint filed by FEBTC "seeks to collect a sum of
money from HBT [HBSTC] and not to enforce or confirm an arbitral
award."

ISSUE:

WHETHER OR NOT PRIVATE RESPONDENT WHICH

COMMENCED AN ARBITRATION PROCEEDING UNDER THE
AUSPICES OF THE PHILIPPINE CLEARING HOUSE
CORPORATION (PCHC) MAY SUBSEQUENTLY FILE A SEPARATE
CASE IN COURT OVER THE SAME SUBJECT MATTER OF
ARBITRATION DESPITE THE PENDENCY OF THAT
ARBITRATION, SIMPLY TO OBTAIN THE PROVISIONAL REMEDY
OF ATTACHMENT AGAINST THE BANK, THE ADVERSE PARTY IN
THE ARBITRATION PROCEEDINGS."

RULING:
We find no merit in the petition. Section 14 of Republic Act 876,
otherwise known as the Arbitration Law, allows any party to the
arbitration proceeding to petition the court to take measures to
safeguard and/or conserve any matter which is the subject of the
dispute in arbitration, thus:

Section 14. Subpoena and subpoena duces tecum. - Arbitrators shall

have the power to require any person to attend a hearing as a
witness. They shall have the power to subpoena witnesses and
documents when the relevancy of the testimony and the materiality
thereof has been demonstrated to the arbitrators. Arbitrators may
also require the retirement of any witness during the testimony of any
other witness.All of the arbitrators appointed in any controversy must
attend all the hearings in that matter and hear all the allegations and
proofs of the parties; but an award by the majority of them is valid
unless the concurrence of all of them is expressly required in the
submission or contract to arbitrate. The arbitrator or arbitrators
shall have the power at any time, before rendering the
award, without prejudice to the rights of any party to petition the
court to take measures to safeguard and/or conserve any matter

75
which is the subject of the dispute in arbitration. (emphasis
supplied)

Simply put, participants in the regional clearing operations of the

Philippine Clearing House Corporation cannot bypass the
arbitration process laid out by the body and seek relief directly
from the courts. In the case at bar, undeniably, private respondent
has initiated arbitration proceedings as required by the PCHC rules
and regulations, and pending arbitration has sought relief from the
trial court for measures to safeguard and/or conserve the subject of
the dispute under arbitration, as sanctioned by section 14 of the
Arbitration Law, and otherwise not shown to be contrary to the PCHC
rules and regulations.
At this point, we emphasize that arbitration, as an alternative
method of dispute resolution, is encouraged by this Court. Aside from
unclogging judicial dockets, it also hastens solutions especially of
commercial disputes. The Court looks with favor upon such amicable
arrangement and will only interfere with great reluctance to anticipate
or nullify the action of the arbitrator.
WHEREFORE, premises considered, the petition is hereby
DISMISSED and the decision of the court a quo is AFFIRMED.
SO ORDERED.

CHUNG FU INDUSTRIES (PHILIPPINES) INC., its Directors and

Officers namely: HUANG KUO-CHANG, HUANG AN-CHUNG,

76
 JAMES J.R. CHEN, TRISTAN A. CATINDIG, VICENTE B.
AMADOR, ROCK A.C. HUANG, JEM S.C. HUANG, MARIA
TERESA SOLIVEN and VIRGILIO M. DEL ROSARIO, petitioners,

vs.

COURT OF APPEALS, HON. FRANCISCO X. VELEZ (Presiding

Judge, Regional Trail Court of Makati [Branch 57]) and
ROBLECOR PHILIPPINES, INC., respondents.

G.R. No. 96283 February 25, 1992

FACTS:

Chung Fu Industries and private respondent Roblecor Philippines,

Inc. forged a construction agreement whereby respondent contractor
committed to construct and finish on December 31, 1989, petitioner
corporation's industrial/factory complex in Tanawan, Tanza, Cavite for
and in consideration of P42,000,000.00. In the event of disputes
arising from the performance of subject contract, it was stipulated
therein that the issue(s) shall be submitted for resolution before a
single arbitrator chosen by both parties.

Apart from the aforesaid construction agreement, Chung Fu and

Roblecor entered into two (2) other ancillary contracts. However,
respondent Roblecor failed to complete the work despite the
extension of time allowed it by Chung Fu. Claiming an unsatisfied
account of P10,500,000.00 and unpaid progress billings of
P2,370,179.23, Roblecor on May 18, 1990, filed a petition for
Compulsory Arbitration with prayer for Temporary Restraining Order
before respondent Regional Trial Court, pursuant to the arbitration
clause in the construction agreement.

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.

Chung Fu elevated the case via a petition for certiorari to respondent

Court of Appeals.

ISSUE:

Whether or not the 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 by refusing to

77
exercise their judicial authority and legal duty to review the arbitration
award.

RULING:

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
provision

s 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.

Lucas Adamson vs. Court of Appeals

232 SCRA 602, 1994

78
Facts:

A deficiency tax assessment was issued against Petitioners relating

to their payment of capital gains tax and VAT on their sale of shares
of stock and parcels of land. Subsequent to the preliminary
conference, the CIR filed with the Department of Justice her Affidavit
of Complaint against Petitioners. The Court of Appeals ultimately
ruled that, in a criminal prosecution for tax evasion, assessment of
tax deficiency is not required because the offense of tax evasion is
complete or consummated when the offender has knowingly and
willfully filed a fraudulent return with intent to evade the tax.

Issues:

(1) Dis the CIR issue an assessment?

(2) Must a criminal prosecution for tax evasion be preceded by a
deficiency tax assessment?
(3) Does the CTA have jurisdiction on the case?

Held:

(1) NO.

The recommendation letter of the Commissioner cannot be

considered a formal assessment as (a) it was not addressed to the
taxpayers; (b) there was no demand made on the taxpayers to pay
the tax liability, nor a period for payment set therein; (c) the letter was
never mailed or sent to the taxpayers by the Commissioner. It was
only an affidavit of the computation of the alleged liabilities and thus
merely served as prima facie basis for filing criminal informations.

(2) YES.
79
When fraudulent tax returns are involved as in the cases at bar, a
proceeding in court after the collection of such tax may be begun
without assessment considering that upon investigation of the
examiners of the BIR, there was a preliminary finding of gross
discrepancy in the computation of the capital gains taxes due from
the transactions. The Tax Code is clear that the remedies may
proceed simultaneously.

(3) NO.

While the laws governing the CTA have expanded the jurisdiction of
the Court, they did not change the jurisdiction of the CTA to entertain
an appeal only from a final decision of the Commissioner, or in cases
of inaction within the prescribed period. Since in the cases at bar, the
Commissioner has not issued an assessment of the tax liability of the
Petitioners, the CTA has no jurisdiction.

NATIONAL STEEL CORPORATION V. RTC OF LANAO DEL

NORTE
(G.R. No. 127004. March 11, 1999)

Facts:

Respondent Edward Willkom Enterprises Inc. (EWEI) and Ramiro

Construction executed a contract with petitioner National Steel
Corporation (NSC) whereby the former jointly undertook the Contract
for Site Development for the latter’s Integrated Iron and Steel Mills

80
Complex. Sometime in 1983, the services of Ramiro Construction
was terminated and EWEI took over the contractual obligation. Due to
this and to other causes deemed sufficient by EWEI, extensions of
time for the termination of the project were granted by NSC.
Differences later arose, EWEI filed a case before the RTC praying
essentially for payments with interest from the time of delay; the price
adjustment as provided by PD 1594; and exemplary damages and
attorney’s fees. NSC filed an answer with counterclaim to plaintiffs
complaints. The court upon joint motion of both parties had issued an
order dismissing the said complaint and counterclaim in view of the
desire of both parties to implement Sec. 19 of the contract, providing
for a resolution of any conflict by arbitration. In accordance with the
aforesaid order and pursuant to Sec. 19 of the Contract, herein
parties constituted an Arbitration Board after which of a series of
hearings, rendered the decision directing NSC to pay EWEI. The
RTC affirmed and confirmed the award of the arbitrators. NSC’s
Motion for Reconsideration was denied, hence has come to this court
via the present petition.

Issue:
Whether or not the lower court acted with grave abuse of discretion in
not vacating the arbitrator’s award.

Ruling:
Thus, in a Petition to Vacate Arbitrator’s Decision before the trial
court, regularity in the performance of official functions is presumed
and the complaining party has the burden of proving the existence of
any of the grounds for vacating the award, as provided for by
Sections 24 of the Arbitration Law, to wit: (a) The award was procured
by corruption, fraud or other undue means; (b) That there was evident
partiality or corruption in the arbitrators of any of them; or (c) That the
arbitrators were guilty of misconduct in refusing to postpone the
hearing upon sufficient cause shown, or in refusing to hear evidence
pertinent and material to the controversy; that one or more of the
arbitrators was disqualified to act as such under section nine hereof,
and wilfully refrained from disclosing such disqualification or of any
other misbehavior by which the rights of any party have been
materially prejudiced; or (d) That the arbitrators exceeded their
powers, or so imperfectly executed them, that a mutual, final and
definite award upon the subject matter submitted to them was not
made. . . .

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The grounds relied upon by the petitioner were the following (a) That
there was evident partiality in the assailed decision of the Arbitrators
in favor of the respondent; and (b) That there was mistaken
appreciation of the facts and application of the law by the Arbitrators.

Petitioner’s allegation that there was evident partiality is untenable. It

is anemic of evidentiary support. In the case of Adamson vs. Court of
Appeals, in upholding the decision of the Board of Arbitrators, this
Court ruled that the fact that a party was disadvantaged by the
decision of the Arbitration Committee does not prove evident
partiality. Proofs other than mere inference are needed to establish
evident partiality. Here, petitioner merely averred evident partiality
without any proof to back it up. Petitioner was never deprived of the
right to present evidence nor was there any showing that the Board
showed signs of any bias in favor of EWEI.

Parentethically, and in the light of the record above-mentioned, this

Court hereby holds that the Board of Arbitrators did not commit any
“evident partiality” imputed by petitioner NSC. Above all, this Court
must sustain the said decision for it is a well-settled rule that the
actual findings of an administrative body should be affirmed if there is
substantial evidence to support them and the conclusions stated in
the decision are not clearly against the law and jurisprudence, similar
to the instant case, Henceforth, every reasonable intendment will be
indulged to give effect such proceedings and in favor of the regulatory
and integrity of the arbitrators act. Indeed, the allegation of evident
partiality is not well-taken because the petitioner failed to substantiate
the same.

WHEREFORE, the awards made by the Board of Arbitrators which

the trial court adopted in its decision are modified.

CHINA CHIANG JIANG ENERGY CORP (PHILS) V. ROSAL

INFRASTRUCTURE BUILDERS
G.R. 125706
September 30, 1996

FACTS:

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China Chang is the operator of the Binga Hydroelectric Plant in
Itogon, Benguet, which is undera Rehabilitate Operate and
Leaseback Contract with the National Power Corporation
( N A PO CO R) a n d wa s en gag ed i n t h e r eh ab il it at i on of t he
p o we r p l a n t , i n c lu d in g t h e construction of check dams. On
February 1994, petitioner China Chang engaged the services of
Rosal Infrastructure Builders for the construction of a Dam in Itogon,
Benguet. In this contract, the parties agreed to submit disputes
arising there from to arbitration before the Arbitration of the
International Chamber of Commerce. When a dispute arose
between the parties, Rosal filed a complaint before the
Construction Industry Arbitration Commission (CIAC) for
arbitration. China Chang filed its answer with compulsory
counterclaim and raised therein the issue of lack of jurisdiction on
the part of CIAC. In August 1995, the CIAC considered the
question of jurisdiction merely as a special defense which can be
included as part of the issues of the Terms of Reference. China
Chang filed a motion for reconsideration which was denied by CIAC
in October 1995. China Chang raised the issue of lack of
jurisdiction with the CA. In February 1996, the CA dismissed
the petition. China Chang filed a Motion for Reconsideration, but
was denied by the CA.

China Chang now questions the validity of Construction Industry

Arbitration Commission (CIAC) Resolution 3- 93 amending
Section 1, Article III of CIAC Rules of Procedure Governing
Construction Arbitration promulgated by the CIAC pursuant to its
rule-making power granted under Section 21 of Executive Order No.
1008, which pertinently provides as follows: Article III Effect of the
Agreement to Arbitrate Section 1. Submission to CIAC Jurisdiction–
An arbitration clause in a construction contract or a submission
to arbitration of a construction dispute shall be deemed an
agreement to submit an existing or future controversy to the CIAC
jurisdiction, notwithstanding the reference to a different arbitral
institution or arbitral body in such contract or submission.

ISSUES:

1. W/N the CIAC has acquired jurisdiction over the dispute.

2. W/N the parties in the case at bar can agree to submit to
arbitration their construction dispute under the CIAC.

HELD:

1. YES. There is no restriction whatsoever on any party from

submitting a dispute for arbitration to an arbitral body other than
the CIAC. On the contrary, the new rule, as amended merely

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implements the letter and the spirit of its enabling law, E.O. No.
1008, which vests jurisdiction upon the CIAC:

SECTION 4. Jurisdiction. - The CIAC shall have

original and exclusive jurisdiction over disputes arising
from, or connected with, contracts entered into by parties
involved in construction in the Philippines, whether the
disputes arises before or after the completion of the
contract, or after the abandonment or breach thereof.
These disputes may involve government or private
contracts. For the Board to acquire jurisdiction, the
parties to a dispute must agree to submit the same to
voluntary arbitration.

The jurisdiction of the CIAC may include but is not

limited to violation of specifications for materials and
workmanship; violation of the terms of agreement;
interpretation and/or application of contractual provisions;
amount of damages and penalties; commencement time
and delays; maintenance and defects; payment default of
employer or contractor and changes in contract cost.

Excluded from the coverage of this law are disputes

arising from employer-employee relationships which shall
continue to be covered by the Labor Code of
the Philippines.

2. YES. Section 1, Article III of the CIAC Rules of Procedure

Governing Construction Arbitration[19] (CIAC Rules), provides:

SECTION 1. Submission to CIAC Jurisdiction. An

arbitration clause in a construction contract or a
submission to arbitration of a construction dispute shall be
deemed an agreement to submit an existing or future
controversy to CIAC jurisdiction, notwithstanding the
reference to a different arbitration institution or arbitral
body in such contract or submission. When a contract
contains a clause for the submission of a future
controversy to arbitration, it is not necessary for the
parties to enter into a submission agreement before the
claimant may invoke the jurisdiction of CIAC.

An arbitration agreement or a submission to

arbitration shall be in writing, but it need not be signed by
the parties, as long as the intent is clear that the parties
agree to submit a present or future controversy arising
from a construction contract to arbitration.

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 It may be in the form of exchange of letters sent by
post or by telefax, telexes, telegrams or any other modes
of communication.

Based on the foregoing provisions, the CIAC shall have

jurisdiction over a dispute involving a construction contract if said
contract contains an arbitration clause (notwithstanding any reference
by the same contract to another arbitration institution or arbitral body);
or, even in the absence of such a clause in the construction contract,
the parties still agree to submit their dispute to arbitration.

It is undisputed that in the case at bar, the EPCC contains an

arbitration clause in which the petitioner and respondent explicitly
agree to submit to arbitration any dispute between them arising from
or connected with the EPCC, under the following terms and
conditions

HI-PRECISION STEEL CENTER INC. v LIM KIM STEEL BUILDERS INC.

December 13, 1993
G.R No. 110434

FACTS:

Hi-Precision (Petitioner) entered into a contract with Steel Builders

(Private Respondent) under which the latter as Contractor was to complete
a 21 Million Pesos construction project owned by Hi-Precision with a period
of 153 days. The said completion of the project was then moved, however,
when the date came, only 75.8674% of the project was actually completed.
Petitioner attributed this non-completion to Steel Builders which allegedly
incurred delays both during the original contract and period of extension. On
the other hand, the Steel Builders claimed that the said non-completion of
the project was either excusable or was due to Hi-Precision’s own fault and
issuance of change orders. The said project was taken over and completed
by Hi-Precision.

Steel Builders requested for adjudication with CIAC (Public

Respondent) and sought payment of its unpaid billings, alleged unearned
profits and other receivables. Hi-Precision on the other hand claimed for
damages and reimbursement of alleged additional costs. The CIAC formed
an Arbitral Tribunal with 3 members and such tribunal rendered a decision in
favor of Steel Builders Inc. ordering Hi-Precision to pay Steel Builders their
claim. Hi-Precision then asks the court to set aside the award on the basis of
misapprehension of facts.

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ISSUE:

Whether or not it was correct should set aside the rulin o" the Arbitral
Tribunal?

RULING:

No. The court said that it will not assist one or the other or even both
parties in an effort to subvert or defeat the objective for their private
purposes and also' that it will not review the factual findings of an arbitral
tribunal upon the allegation that such body misapprehended facts. The court
will not, therefore, permit the parties to relitigate before it the issues of facts
previously presented and argued before the Arbitral Tribunal, save only
where a very clear showing is made that, in reaching its factual conclusions,
the Arbitral Tribunal committed an error so hurtful to one party as to
constitute a brave abuse of discretion resulting on lack or loss of jurisdiction.

ABS-CBN vs. World Interactive Network Systems

544 SCRA 308, February 11, 2008

CORONA, J.:

Facts:
On September 7, 1999, petitioner ABS-CBN Broadcasting
Corporation entered into a licensing agreement with respondent
World Interactive Network Systems (WINS) Japan Co., Ltd., a foreign
corporation licensed under the laws of Japan, in that the former
granted respondent the exclusive license to distribute and sublicense
the distribution of the television service known as “The Filipino
Channel” (TFC) in Japan.

A dispute arose between the parties when petitioner accused

respondent of inserting nine episodes of a weekly 35-minute
community news program. Petitioner claimed that these were
“unauthorized insertions” constituting a material breach of their
agreement. Consequently, petitioner notified respondent of its
intention to terminate the agreement.

Thereafter, respondent filed an arbitration suit pursuant to the

arbitration clause of its agreement with petitioner.

The parties appointed Professor Alfredo F. Tadiar to act as sole

arbitrator who then rendered a decision in favor of respondent. He
then allowed respondent to recover temperate damages, attorney’s
fees and one-half of the amount it paid as arbitrator’s fee.

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Petitioner filed in the CA a petition for review under Rule 43 of the
Rules of Court or, in the alternative, a petition for certiorari under Rule
65 of the same Rules, with application for temporary restraining order
and writ of preliminary injunction.

Respondent, on the other hand, filed a petition for confirmation of

arbitral award.

The CA rendered the assailed decision dismissing ABS-CBN’s

petition for lack of jurisdiction.It stated that as the Terms of Reference
(TOR) itself provided that the arbitrator's decision shall be final and
unappealable and that no motion for reconsideration shall be filed,
then the petition for review must fail. It ruled that it is the RTC which
has jurisdiction over questions relating to arbitration. It held that the
only instance it can exercise jurisdiction over an arbitral award is an
appeal from the trial court's decision confirming, vacating or
modifying the arbitral award. It further stated that a petition for
certiorari under Rule 65 of the Rules of Court is proper in arbitration
cases only if the courts refuse or neglect to inquire into the facts of an
arbitrator's award. Petitioner moved for reconsideration but the same
was denied.

Issue:
The issue before us is whether or not an aggrieved party in a
voluntary arbitration dispute may avail of, directly in the CA, a petition
for review under Rule 43 or a petition for certiorari under Rule 65 of
the Rules of Court, instead of filing a petition to vacate the award in
the RTC when the grounds invoked to overturn the arbitrator’s
decision are other than those for a petition to vacate an arbitral award
enumerated under RA 876.

Ruling:
RA 876 itself mandates that it is the RTC, which has jurisdiction over
questions relating to arbitration, such as a petition to vacate an
arbitral award.Section 24 of RA 876 provides for the specific grounds
for a petition to vacate an award made by an arbitrator.

As RA 876 did not expressly provide for errors of fact and/or law and
grave abuse of discretion (proper grounds for a petition for review
under Rule 43 and a petition for certiorari under Rule 65,
respectively) as grounds for maintaining a petition to vacate an
arbitral award in the RTC, it necessarily follows that a party may not
avail of the latter remedy on the grounds of errors of fact and/or law
or grave abuse of discretion to overturn an arbitral award. Adamson v.
Court of Appeals gave ample warning that a petition to vacate filed in
the RTC which is not based on the grounds enumerated in Section 24
of RA 876 should be dismissed.

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However, in cases not falling under any of the grounds in Section 24
of RA 876 to vacate an award, the Court has already made several
pronouncements that a petition for review under Rule 43 or a petition
for certiorari under Rule 65 may be availed of in the CA. Which one
would depend on the grounds relied upon by petitioner.

In Luzon Development Bank v. Association of Luzon Development

Bank Employees,the Court held that a voluntary arbitrator is properly
classified as a quasi-judicial instrumentality and is, thus, within the
ambit of Section 9 (3) of the Judiciary Reorganization Act, as
amended. As such, decisions handed down by voluntary arbitrators
fall within the exclusive appellate jurisdiction of the CA.

Nevertheless, although petitioner’s position on the judicial remedies

available to it was correct, we sustain the dismissal of its petition by
the CA. The remedy petitioner availed of, entitled “alternative petition
for review under Rule 43 or petition for certiorari under Rule 65,” was
wrong. Time and again, we have ruled that the remedies of appeal
and certiorari are mutually exclusive and not alternative or
successive. Petitioner cleverly crafted its assignment of errors in such
a way as to straddle both judicial remedies, that is, by alleging
serious errors of fact and law (petition for review under Rule 43) and
grave abuse of discretion (petition for certiorari under Rule 65).

Petitioner's ploy was fatal to its

cause. An appeal taken either to this Court or the CA by the wrong or
inappropriate mode shall be dismissed. Thus, the alternative petition
filed in the CA, being an inappropriate mode of appeal, should have
been dismissed outright by the CA.

Wherefore, the petition is hereby denied. The decision and resolution

of the CA directing the RTC to proceed with the trial of the petition for
confirmation of arbitral award is affirmed.

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