Professional Documents
Culture Documents
[Uniwide] is absolved of any liability for the claims (4) one or more of the arbitrators were disqualified to act as
made by [Titan] on this Project. such under Section nine of Republic Act No. 876 and willfully
refrained from disclosing such disqualifications or of any
Project 2 – Edsa Central:
other misbehavior by which the rights of any party have been
[Uniwide] is absolved of any liability for VAT payment materially prejudiced; or
on this project, the same being for the account of the [Titan].
(5) the arbitrators exceeded their powers, or so imperfectly
On the other hand, [Titan] is absolved of any liability on the
executed them, that a mutual, final and definite award upon
counterclaim for defective construction of this project.
the subject matter submitted to them was not made.
[Uniwide] is held liable for the unpaid balance in the
amount of P6,301,075.77 which is ordered to be paid to the
[Titan] with 12% interest per annum commencing from 19 Other recognized exceptions are as follows:
December 1992 until the date of payment.
(1) when there is a very clear showing of grave abuse of
On Project 3 – Kalookan: discretion resulting in lack or loss of jurisdiction as when a
party was deprived of a fair opportunity to present its Whether or not a case based on several causes of action is
position before the Arbitral Tribunal or when an award is dismissible on the ground of improper venue where only one
obtained through fraud or the corruption of arbitrators, of the causes of action arises from a contract with
exclusive venue stipulation
(2) when the findings of the Court of Appeals are contrary to
those of the CIAC, and HELD:
(3) when a party is deprived of administrative due process. In this case, UHI contended that nowhere in the agreement
is there a mention of FPC and USWCI, and neither are the two
UNIWIDE HOLDINGS, INC., v. ALEXANDER M. CRUZ
parties thereto, hence, they cannot be bound to the
529 SCRA 664 (2007) stipulation on ―exclusive venue.‖ The Courtfound merit in
this contention.
Where there is a joinder of causes of action between the
same parties one of which does not arise out of the contract The Supreme Court cited Section 2, Rule 4 of the Rules
where the exclusive venue was stipulated upon, the complain of Court which provides that all other actions may be
may be brought before other venues. commenced and tried where the plaintiff or any of the
principal plaintiffs resides, or where the defendant or any of
Uniwide Holdings, Inc. entered into a franchise agreement the principal defendants resides, or in the case of a
with Alexander M. Cruz granting the latter a five-year nonresident defendant, where he may be found, at the
franchise to adopt and use the ―Uniwide Family Store election of the plaintiff.
System‖ for the establishment and operation of a ―Uniwide
Family Store‖ in Marikina City. The forging of a written agreement on an exclusive venueof
an action does not, however, exclude parties from bringing a
The contract stipulated that Cruz will pay a monthly service case to other venues.
fee of P50,000.00 or three percent of gross monthly
purchases, whichever is higher to UHI, payable within five Where there is a joinder of causes of action between the
days after the end of each month without need of formal same parties one of which does not arise out of the contract
billing or demand from UHI. In case of any delay in the where the exclusive venue was stipulated upon, the
payment of the monthly service fee, Cruz would, under complaint, as in the one at bar, may be brought before other
Article 10.3 of the agreement, be liable to pay an interest venues provided that such other cause of action falls within
charge of three percent per month. Cruz thereafter the jurisdiction of the court and the venue lies therein.
purchased goods from UHI’s affiliated companies First
It bears emphasis that the causes of action on the
Paragon Corporation (FPC) and Uniwide Sales Warehouse
assigned accounts are not based on a breach of the
Club, Inc. (USWCI).
agreement between UHI and Cruz. They are based on
FPC and USWCI subsequently executed Deeds of Assignment separate, distinct and independent contracts-deeds of
in favor of UHI assigning all their rights and interests over assignment in which UHI is the assignee of Cruz‘s obligations
Cruz‘s accounts payable to them. Cruz had outstanding to the assignors FPC and USWCI. Thus, any action arising from
obligations with UHI, FPC and USWCI in the amount of P1, the deeds of assignment cannot be subjected to the
358, 531.89.00. UHI sent a letter demanding for the payment exclusive venue stipulation embodied in the agreement.
of such amount but it was not settled.
ISSUE:
BENGUET CORPORATION v DENR-MAB 11.01 Arbitration
On July 3, 1998, KOGIES filed a Complaint for Specific W/N the arbitration clause is against public policy – NO.
Performance, against PGSMC before the Muntinlupa City
RULING
Regional Trial Court (RTC). The RTC granted a temporary
restraining order. In its complaint, KOGIES alleged that Established in this jurisdiction is the rule that the law of the
PGSMC had initially admitted that the checks that were place where the contract is made governs. Lex loci
stopped were not funded but later on claimed that it stopped contractus. The contract in this case was perfected here in
payment of the checks for the reason that "their value was the Philippines. Therefore, our laws ought to govern.
not received" as the former allegedly breached their contract Nonetheless, Art. 2044 of the Civil Code sanctions the validity
by "altering the quantity and lowering the quality of the of mutually agreed arbitral clause or the finality and binding
machinery and equipment" installed in the plant and failed effect of an arbitral award. Art. 2044 provides, "Any
to make the plant operational although it earlier certified to stipulation that the arbitrators’ award or decision shall be
the contrary as shown in a January 22, 1998 Certificate. final, is valid, without prejudice to Articles 2038, 2039 and
Likewise, KOGIES averred that PGSMC violated Art. 15 of 2040." (Emphasis supplied.)
their Contract, as amended, by unilaterally rescinding the
contract without resorting to arbitration. KOGIES also asked Arbitration clause not contrary to public policy: The
that PGSMC be restrained from dismantling and transferring arbitration clause which stipulates that the arbitration must
the machinery and equipment installed in the plant which be done in Seoul, Korea in accordance with the Commercial
the latter threatened to do on July 4, 1998. Arbitration Rules of the KCAB, and that the arbitral award is
final and binding, is not contrary to public policy.
On July 9, 1998, PGSMC filed an opposition to the TRO
arguing that KOGIES was not entitled to the TRO since Art. Having said that the instant arbitration clause is not against
15, the arbitration clause, was null and void for being against public policy, we come to the question on what governs an
public policy as it ousts the local courts of jurisdiction over arbitration clause specifying that in case of any dispute
the instant controversy. arising from the contract, an arbitral panel will be constituted
in a foreign country and the arbitration rules of the foreign
On July 23, 1998, the RTC issued an Order denying the country would govern and its award shall be final and
application for a writ of preliminary injunction, reasoning binding.
that PGSMC had paid KOGIES USD 1,224,000, the value of the
machineries and equipment as shown in the contract such RA 9285 incorporated the UNCITRAL Model law to which we
that KOGIES no longer had proprietary rights over them. And are a signatory: For domestic arbitration proceedings, we
finally, the RTC held that Art. 15 of the Contract as amended have particular agencies to arbitrate disputes arising from
was invalid as it tended to oust the trial court or any other contractual relations. In case a foreign arbitral body is chosen
court jurisdiction over any dispute that may arise between by the parties, the arbitration rules of our domestic
the parties. KOGIES’ prayer for an injunctive writ was denied. arbitration bodies would not be applied. As signatory to the
Arbitration Rules of the UNCITRAL Model Law on party may not unilaterally rescind or terminate the contract
International Commercial Arbitration of the United Nations for whatever cause without first resorting to arbitration.
Commission on International Trade Law (UNCITRAL) in the
New York Convention on June 21, 1985, the Philippines
committed itself to be bound by the Model Law. We have In addition, whatever findings and conclusions made by the
even incorporated the Model Law in Republic Act No. (RA) RTC Branch Sheriff from the inspection made on October 28,
9285, otherwise known as the Alternative Dispute Resolution 1998, as ordered by the trial court on October 19, 1998, is of
Act of 2004 entitled An Act to Institutionalize the Use of an no worth as said Sheriff is not technically competent to
Alternative Dispute Resolution System in the Philippines and ascertain the actual status of the equipment and machineries
to Establish the Office for Alternative Dispute Resolution, and as installed in the plant.
for Other Purposes, promulgated on April 2, 2004. And while
RA 9285 was passed only in 2004, it nonetheless applies in RTC has interim jurisdiction to protect the rights of the
the instant case since it is a procedural law which has a parties: While the issue of the proper installation of the
retroactive effect. equipment and machineries might well be under the primary
jurisdiction of the arbitral body to decide, yet the RTC under
Among the pertinent features of RA 9285 applying and Sec. 28 of RA 9285 has jurisdiction to hear and grant interim
incorporating the UNCITRAL Model Law are the following: measures to protect vested rights of the parties
(1) The RTC must refer to arbitration in proper cases While the KCAB can rule on motions or petitions relating to
the preservation or transfer of the equipment and
(2) Foreign arbitral awards must be confirmed by the RTC
machineries as an interim measure, yet on hindsight, the July
(3) The RTC has jurisdiction to review foreign arbitral awards 23, 1998 Order of the RTC allowing the transfer of the
equipment and machineries given the non-recognition by the
(4) Grounds for judicial review different in domestic and
lower courts of the arbitral clause, has accorded an interim
foreign arbitral awards
measure of protection to PGSMC which would otherwise
(5) RTC decision of assailed foreign arbitral award appealable been irreparably damaged. KOGIES is not unjustly prejudiced
as it has already been paid a substantial amount based on the
PGSMC has remedies to protect its interests: Thus, based contract. Moreover, KOGIES is amply protected by the
on the foregoing features of RA 9285, PGSMC must submit to arbitral action it has instituted before the KCAB, the award of
the foreign arbitration as it bound itself through the subject which can be enforced in our jurisdiction through the RTC.
contract. While it may have misgivings on the foreign Besides, by our decision, PGSMC is compelled to submit to
arbitration done in Korea by the KCAB, it has available arbitration pursuant to the valid arbitration clause of its
remedies under RA 9285. Its interests are duly protected by contract with KOGIES.
the law which requires that the arbitral award that may be
rendered by KCAB must be confirmed here by the RTC before PGSMC to preserve the subject equipment and
it can be enforced. machineries: While PGSMC may have been granted the right
to dismantle and transfer the subject equipment and
With our disquisition above, petitioner is correct in its machineries, it does not have the right to convey or dispose
contention that an arbitration clause, stipulating that the of the same considering the pending arbitral proceedings to
arbitral award is final and binding, does not oust our courts settle the differences of the parties. PGSMC therefore must
of jurisdiction as the international arbitral award, the award preserve and maintain the subject equipment and
of which is not absolute and without exceptions, is still machineries with the diligence of a good father of a family
judicially reviewable under certain conditions provided for by until final resolution of the arbitral proceedings and
the UNCITRAL Model Law on ICA as applied and incorporated enforcement of the award, if any.
in RA 9285.
Facts: the RTC issued a Joint Order... denying the motion to dismiss,
declaring the existence of a milling contract between the
Petitioners are associations organized by and whose
parties, and directing respondents to nominate two
members are individual sugar planters (Planters).
arbitrators to the Board of Arbitrators... motion for
Respondents Hideco Sugar Milling Co., Inc. (Hideco) and reconsideration having been denied by the RTC
Ormoc Sugar Milling Co, Inc. (OSCO) are sugar centrals
CA concluded that petitioners had no legal personality to
Article VII of the milling contracts provides that 34% of the bring the action against respondents or to demand for
sugar and molasses produced from milling the Planter's arbitration.
sugarcane shall belong to the centrals (respondents) as
Petitioners filed a motion for reconsideration, but it too was
compensation, 65% thereof shall go to the Planter and the
denied
remaining 1% shall go the association... to which the Planter
concerned belongs, as aid to the said association. The main cause of action of petitioners in their request for
arbitration with the RTC is the alleged violation of the clause
If the Planter was not a member of any association, then the
in the milling contracts involving the proportionate sharing in
said 1% shall... revert to the centrals.
the proceeds of the harvest. Petitioners essentially demand
Article XIV, paragraph B... states that the centrals may not, that respondents increase the... share of the member
during the life of the milling contract, sign or execute any Planters to 66% to equalize their situation with those of the
contract or agreement that will provide better or more non-member Planters.
benefits to a Planter, without the written consent of... the
Issues:
existing and recognized associations except to Planters
whose plantations are situated in areas beyond thirty (30) whether or not petitioners... are clothed with legal
kilometers from the mill. Article XX provides that all personality to file a suit against, or demand arbitration from,
differences and controversies which may arise between the respondents in their own name without impleading the
parties concerning the agreement shall be... submitted for individual Planters.
discussion to a Board of Arbitration, consisting of five (5)
Ruling:
members--two (2) of which shall be appointed by the
centrals, two (2) by the Planter and the fifth to be appointed Section 2 of R.A. No. 876 (the Arbitration Law)... pertinently
by the four appointed by the parties... petitioners... filed twin provides:
petitions with the RTC for Arbitration under R.A. 876,
Recovery of Equal Additional Benefits, Attorney's Fees and Two or more persons or parties may submit to the arbitration
Damages, against HIDECO and OSCO of one or more arbitrators any controversy existing between
them at the time of the submission and which may be the
Petitioners claimed that respondents violated the Milling subject of an action,... or the parties to any contract may in
Contract when they gave to independent planters who do such contract agree to settle by arbitration a controversy
not belong to any association the 1% share, instead of thereafter arising between them.
reverting said share to the centrals
The foregoing provision speaks of two modes of arbitration:
Petitioners contended that respondents unduly accorded the (a) an agreement to submit to arbitration some future
independent dispute, usually stipulated upon in a civil contract between
the parties, and known as an agreement to submit to
Planters more benefits
arbitration, and (b) an agreement submitting... an existing
Respondents filed a motion to dismiss on ground of lack of matter of difference to arbitrators, termed the submission
cause of action because petitioners had no milling contract agreement. Article XX of the milling contract is an agreement
with respondents. to submit to arbitration because it was made in anticipation
of a dispute that might arise between the parties after the
Respondents and these 80 Planters were the signatories of
contract's... execution.
the milling contracts. Thus, it was the individual Planters, and
not petitioners, who had legal standing to invoke the petitioners are associations duly existing and organized
arbitration clause in the milling contracts. Petitioners, not under Philippine law, i.e. they have juridical personalities
separate and distinct from that of their member Planters. It
is likewise undisputed that the eighty (80) milling contracts Assuming petitioners had properly brought the case in the
that... were presented were signed only by the member name of their members who had existing milling contracts
Planter concerned and one of the Centrals as parties. In other with respondents, petitioners must still prove that they were
words, none of the petitioners were parties or signatories to indeed authorized by the said members to institute an action
the milling contracts. for and on the members' behalf.
This circumstance is fatal to petitioners' cause since they As we see it, petitioners had no intention to litigate the case
anchor their right to... demand arbitration from the in a representative capacity, as they contend. All the
respondent sugar centrals upon the arbitration clause found pleadings from the RTC to this Court belie this claim.
in the milling contracts. There is no legal basis for petitioners'
he individual Planters were not even impleaded as parties to
purported right to demand arbitration when they are not
this case. In addition, petitioners need a power-of-attorney
parties to the milling contracts, especially when the language
to represent... the Planters whether in the lawsuit or to
of... the arbitration clause expressly grants the right to
demand arbitration.[16] None was ever presented here.
demand arbitration only to the parties to the contract.
Lastly, petitioners theorize that they could demand and sue
Even assuming that all the petitioners were able to present
for arbitration independently of the Planters because the
milling contracts in favor of their members, it is undeniable
milling contract is a contract pour autrui under Article 1311
that under the arbitration clause in these contracts it is the
of the Civil Code.
parties thereto who have the right to submit a controversy
or dispute to arbitration. If a contract should contain some stipulation in favor of a
third person, he may demand its fulfillment provided he
Petitioners would argue that they could sue respondents,
communicated his acceptance to the obligor before its
notwithstanding the fact that they were not signatories in the
revocation. A mere incidental benefit or interest of a person
milling contracts because they are the recognized
is not sufficient. The contracting parties must... have clearly
representatives of the Planters.
and deliberately conferred a favor upon a third person.
This claim has no leg to stand on since petitioners did not sign
To summarize, the requisites of a stipulation pour autrui or a
the milling contracts... whether as a party or as a
stipulation in favor of a third person are the following: (1)
representative of their member Planters.
there must be a stipulation in favor of a third person, (2) the
no... provision in the milling contracts that the individual stipulation must be a part, not the whole, of the contract, (3)
Planter is authorizing the association to represent him/her in the contracting... parties must have clearly and deliberately
a legal action conferred a favor upon a third person, not a mere incidental
benefit or interest, (4) the third person must have
Moreover, even assuming that petitioners are indeed
communicated his acceptance to the obligor before its
representatives of the member Planters who have milling
revocation, and (5) neither of the contracting parties bears
contracts with the respondents and assuming further that
the... legal representation or authorization of the third
petitioners signed the milling contracts as representatives of
party.[17] These requisites are not present in this case
their members, petitioners could not... initiate arbitration
proceedings in their own name as they had done in the Article VI of the Milling Contract is the solitary provision that
present case. As mere agents, they should have brought the mentions some benefit in favor of the association of which
suit in the name of the principals that they purportedly the planter is a member
represent.
The foregoing provision cannot, by any stretch of the
the principal is still the one who has the right to demand imagination, be considered as a stiputation pour autrui or for
arbitration. the benefit of the petitioners. The primary rationale for the
said stipulation is to ensure a just share in the proceeds of
Indeed, Rule 3, Section 2 of the Rules of Court requires suits
the harvest to the Planters. In... other words, it is a stipulation
to be brought in the name of the real party in interest... from
meant to benefit the Planters. Even the 1% share to be given
petitioners' own allegations, the party who would be injured
to the association as aid does not redound to the benefit of
or benefited by a decision in the arbitration proceedings will
the association but is intended to be used for its member
be the member Planters involved and... not petitioners. In
Planters. Not only that, it is explicit that said share reverts...
sum, petitioners are not the real parties in interest in the
back to respondent sugar centrals if the contracting Planter
present case.
is not affiliated with any recognized association.
Principles: these milling contracts is only incidental to their avowed
purpose of advancing the welfare and rights of their member
Except where a compulsory arbitration is provided by
Planters.
statute, the first step toward the settlement of a difference
by arbitration is the entry by the parties into a valid In Cargill Phils Inc v San Fernando Regala Trading, Inc the
agreement to arbitrate. An agreement to arbitrate is a Supreme Court ruled that while actions for rescission and
contract, the relation of the parties is contractual,... and the damages are ordinarily judicial matters, the dispute at hand
rights and liabilities of the parties are controlled by the law was to be referred to arbitration because the contract which
of contracts.[11] In an agreement for arbitration, the the plaintiff sought to have rescinded included an arbitration
ordinary elements of a valid contract must appear, including agreement.(1)
an agreement to arbitrate some specific thing, and an
agreement to... abide by the award, either in express Facts
language or by implication.
San Fernando Regala Trading filed before the trial court a
The requirements that an arbitration agreement must be
complaint for rescission of contract with damages against
written and subscribed by the parties thereto
Cargill Philippines, Inc. In its complaint, San Fernando Regala
The formal requirements of an agreement to arbitrate are Trading alleged that it was engaged in buying and selling
therefore the following: (a) it must be in writing and (b) it molasses and that Cargill was one of its suppliers. San
must be subscribed by the parties or their representatives. Fernando Regala Trading alleged that it purchased from
To subscribe means to write underneath, as one's name; to Cargill, and the latter had agreed to sell, 12,000 tons of cane
sign at the end of a... document. That word may sometimes blackstrap molasses originating from Thailand at the price of
be construed to mean to give consent to or to attest $192 per metric ton, and that delivery would be made in April
or May 1997. After San Fernando Regala Trading delivered
As applied to the present case, this provision has two the letter of credit, it claimed that Cargill failed to comply
requirements: 1) to institute an action, the plaintiff must be with its obligations under the contract, which included an
the real party in interest; and 2) the action must be arbitration clause as follows:
prosecuted in the name of the real party in interest.
Necessarily, the purposes of this... provision are 1) to prevent "Any dispute which the Buyer and Seller may not be able to
the prosecution of actions by persons without any right, title settle by mutual agreement shall be settled by arbitration in
or interest in the case; 2) to require that the actual party the City of New York before the American Arbitration
entitled to legal relief be the one to prosecute the action; 3) Association. The Arbitration Award shall be final and binding
to avoid a multiplicity of suits; and 4) to discourage... on both parties."
litigation and keep it within certain bounds, pursuant to
Cargill moved to dismiss and/or suspend the court
sound public policy.
proceedings citing the arbitration clause. San Fernando
When the plaintiff is not the real party in interest, the case is Regala Trading argued that since it was seeking rescission of
dismissible on the ground of lack of cause of action. the contract, it was in effect repudiating the contract which
included the arbitration clause. Further, it argued that
The mere fact that petitioners were organized for the rescission constitutes a judicial issue, which requires the
purpose of advancing the interests and welfare of their exercise of judicial function and cannot be the subject of
members does not necessarily mean that petitioners have arbitration.
the authority to represent their members in legal...
proceedings, including the present arbitration proceedings. Decision
To be considered a pour autrui provision, an incidental The Supreme Court held that the provision to submit to
benefit or interest, which another person gains, is not arbitration any dispute arising between the parties is part of
sufficient. The contracting parties must have clearly and the contract and is itself a contract. The arbitration
deliberately conferred a favor upon a third person.[18] Even agreement is to be treated as a separate agreement and does
the clause stating... that respondents must secure the not automatically terminate when the contract of which it is
consent of the association if respondents grant better a part comes to an end. To reiterate a contrary ruling would
benefits to a Planter has for its rationale the protection of the suggest that a party's mere repudiation of the main contract
member Planter. The only interest of the association therein is sufficient to avoid arbitration; that is exactly the situation
is that its member Planter will not be put at a disadvantage... that the separability doctrine seeks to avoid.
vis a vis other Planters. Thus, the associations' interest in
San Fernando Regala Trading filed a complaint for rescission JORGE GONZALES and PANEL OF ARBITRATORS, vs.CLIMAX
of contract and damages with the trial court. In so doing, it MINING LTD., CLIMAX-ARIMCO MINING CORP., and
alleged that a contract existed. It was that contract which AUSTRALASIAN PHILIPPINES MINING INC.,
provided for an arbitration clause which expressed the
G.R. No. 161957 February 28, 2005
parties' intention that any dispute to arise between them, as
buyer and seller, should be referred to arbitration. It is for Petitioner Jorge Gonzales, as claimowner of mineral deposits
the arbitrator and not the court to decide whether a contract located within the Addendum Area of Influence in Didipio, in
between the parties exists or is valid. Under the the provinces of Quirino and Nueva Vizcaya, entered into a
circumstances, the argument that rescission is judicial in co-production, joint venture and/or production-sharing
nature is misplaced. letter-agreement designated as the May 14, 1987 Letter of
Intent with Geophilippines, Inc, and Inmex Ltd. Under the
agreement, petitioner, as claimowner, granted to
Geophilippines, Inc. and Inmex Ltd. collectively, the exclusive
right to explore and survey the mining claims for a period of
thirty-six (36) months within which the latter could decide to
take an operating agreement on the mining claims and/or
develop, operate, mine and otherwise exploit the mining
claims and market any and all minerals that may be derived
therefrom.