Gala, Lylanie

Sultan, Harey
Lim, Nikki
Libres, Michelle

ALTERNATIVE DISPUTE RESOLUTION (ADR) CASE DIGESTS

1. Chung Fu Industries (Philippines) Inc. v. Court of Appeals citing Umbao vs Yap (100 Phil
1008)

STIPULATION THAT ARBITRATOR'S AWARD SHALL BE FINAL AND UNAPPEALABLE; RULE AND
EXCEPTION

Facts:
On May 17, 1989, Petitioner 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 eventof 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.
However, respondent Roblecor failed to complete the work despite the extension of
time allowed it by Chung Fu. Subsequently, the latter had to take over the construction
when it had become evident that Roblecor was not in a position to fulfill its obligation.
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. Chung Fu moved to dismiss the
petition and further prayed for the quashing of the restraining order.
Subsequent negotiations between the parties eventually led to the formulation of an
arbitration agreement which, among others, provides:
"2. The parties mutually agree that the arbitration shall proceed in accordance with
the following terms and conditions: —
'd. The parties mutually agree that they will abide by the decision of the arbitrator
including any amount that may be awarded to either party as compensation,
consequential damage and/or interest thereon;
'e. The parties mutually agree that the decision of the arbitrator shall be final and
unappealable. Therefore, there shall be no further judicial recourse if either party
disagrees with the whole or any part of the arbitrator's award;
'f. As an exception to sub-paragraph (e), above, the parties mutually agree that
either party is entitled to seek judicial assistance for purposes of enforcing the
arbitrator's award;
Respondent Regional Trial Court approved the arbitration agreement thru its Order
of May 30, 1990. Thereafter, Engr. Willardo Asuncion was appointed as the sole arbitrator.
On June 30, 1990, Arbitrator Asuncion ordered petitioners to immediately pay
respondent contractor, the sum of P16,108,801.00. He further declared the award as final
and unappealable, pursuant to the Arbitration Agreement precluding judicial review of the
award.
Consequently, Roblecor moved for the confirmation of said award. On the other
hand, Chung Fu moved to remand the case for further hearing and asked for a
reconsideration of the judgment award claiming that Arbitrator Asuncion committed twelve
(12) instances of grave error by disregarding the provisions of the parties' contract.
Respondent lower court denied Chung Fu's Motion to Remand thus compelling it to
seek reconsideration therefrom but to no avail.
A motion for reconsideration of said resolution was filed by petitioner, but it was
similarly denied by respondent Court of Appeals. Hence, the instant petition.

Issue:
Whether or not respondents Court of Appeals and trial Judge gravely abused their
discretion and/or exceeded their jurisdiction, as well as denied due process and substantial
justice to petitioners, — (a) by refusing to exercise their judicial authority and legal duty to
review the arbitration award, and (b) by declaring that petitioners are estopped from
questioning the arbitration award allegedly in view of the stipulations in the parties'
arbitration agreement that "the decision of the arbitrator shall be final and unappealable"
and that "there shall be no further judicial recourse if either party disagrees with the whole
or any part of the arbitrator's award."

Held:
Yes. That there was a growing need for a law regulating arbitration in general was
acknowledged when Republic Act No. 876 (1953), otherwise known as the Arbitration Law,
was passed. "Said Act was obviously adopted to supplement — not to supplant — the New
Civil Code on arbitration. It expressly declares that 'the provisions of chapters one and two,
Title XIV, Book IV of the Civil Code shall remain in force.'" (Umbao vs Yap)
A court action may likewise be proper where the arbitrator has not been selected by
the parties. (Umbao vs Yap)
Under present law, may the parties who agree to submit their disputes to arbitration
further provide that the arbitrators' award shall be final, unappealable and executory?
Article 2044 of the Civil Code recognizes the validity of such stipulation, thus:.
"Any stipulation that the arbitrators' award or decision shall be final is valid, without
prejudice to Articles 2038, 2039 and 2040."
Similarly, the Construction Industry Arbitration Law provides that the arbitral award
"shall be final and inappealable except on questions of law which shall be appealable to the
Supreme Court."
Where the parties agree that the decision of the arbitrator shall be final and
unappealable as in the instant case, the pivotal inquiry is whether subject arbitration award
is indeed beyond the ambit of the court's power of judicial review.
We rule in the negative. It is stated explicitly under Art. 2044 of the Civil Code that
the finality of the arbitrators' award is not absolute and without exceptions. Where the
conditions described in Articles 2038, 2039 and 2040 applicable to both compromises and
arbitrations are obtaining, the arbitrators' award may be annulled or rescinded.
Additionally, under Sections 24 and 25 of the Arbitration Law, there are grounds for
vacating, modifying or rescinding an arbitrator's award. Thus, if and when the factual
circumstances referred to in the above-cited provisions are present, judicial review of the
award is properly warranted.
Even decisions of administrative agencies which are declared "final" by law are not
exempt from judicial review when so warranted.
After closely studying the list of errors, as well as petitioners' discussion of the same
in their Motion to Remand Case For Further Hearing and Reconsideration and Opposition to
Motion for Confirmation of Award, we find that petitioners have amply made out a case
where the voluntary arbitrator failed to apply the terms and provisions of the Construction
Agreement which forms part of the law applicable as between the parties, thus committing
a grave abuse of discretion. Furthermore, in granting unjustified extra compensation to
respondent for several items, he exceeded his powers - all of which would have constituted
ground for vacating the award under Section 24 (d) of the Arbitration Law.
But the respondent trial court's refusal to look into the merits of the case, despite
prima facie showing of the existence of grounds warranting judicial review, effectively
deprived petitioners of their opportunity to prove or substantiate their allegations. In so
doing, the trial court itself committed grave abuse of discretion. Likewise, the appellate
court, in not giving due course to the petition, committed grave abuse of discretion
2. Del Monte Corp. – USA v. Court of Appeals (351 SCRA 373)

ARBITRATION - VALID AND CONSTITUTIONAL;

DISPUTE BETWEEN THE PARTIES - ORDER COMPELLING THEM TO SUBMIT TO ARBITRATION

Facts:
On 1 July 1994, in a Distributorship Agreement, Petitioner DMC-USA and its
Managing Director for Export Sales Paul Derby, Jr. appointed respondent MMI as the sole
and exclusive distributor of its Del Monte products in the Philippines for a period of five (5)
years, renewable for two (2) consecutive five (5) year periods with the consent of the
parties.
The contract provided for arbitration of all disputes to be held in San Francisco,
California under the Rules of the American Arbitration Association. MMI, thru its Managing
Director Lily Sy, appointed Sabrosa Foods, Inc. (SFI) as its marketing arm.
Despite the agreement, Del Monte products were brought into the country by
parallel importers. Thus, the complaint for damages with prayer for the issuance of a writ of
preliminary attachment for violations of Articles 20, 21 and 23 of the Civil Code filed against
DMC-USA, its Managing Director Derby, its Regional Director Collins, its Head of credit
Services, Hidalgo and Dewey, Ltd., owner by assignment of its trademark here.
Petitioners moved to suspend proceedings invoking the arbitration clause in their
contract.
The trial court originally deferred consideration on the motion but later denied the
same on the ground that to allow suspension will only delay the determination of the issues
and delay the parties' rights to seek redress.
The Court of Appeals affirmed the decision of the trial court. It held that the acts
complained of required the interpretation of Article 21 of the Civil Code and that a full
blown trial is required in determining whether the petitioners violated the law.
Resort to this Court was made when petitioners' motion for reconsideration was
denied.

Issue:
Whether or not the dispute between the parties warrants an order compelling them
to submit to arbitration.

Held:
No.
There is no doubt that arbitration is valid and constitutional in our jurisdiction. 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 therefrom and the relationship of the parties is part of that
contract and is itself a contract. As a rule, contracts are respected as the law between the
contracting parties and produce effect as between them, their assigns and heirs.
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 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.
WHEREFORE, the petition is DENIED.
3. La Naval Drug Corp. v. Court of Appeals (236 SCRA 78)

REPUBLIC ACT NO. 876; ARBITRATION – HOW GOVERNED;

JURISDICTION OVER THE PERSON, SUBJECT MATTER AND THE NATURE OF THE ACTION.

Arbitrations, in particular, is governed by a special law, Republic Act 876, suppletory

to which are laws and rules of general application. This case before us concerns the
jurisdiction of courts, in relation to the provisions of Section 6 of Republic Act No. 876, and, in
that respect, the applicability of the doctrine of estoppel.

Facts:
Respondent Yao is the present owner of a commercial building, a portion of which is
leased to petitioner under a contract of lease executed on December 23, 1983 with the
former owner thereof, La Proveedora, Inc., which contract expired on April 30, 1989.
However, petitioner exercised its option to lease the same building for another five years.
But petitioner and respondent Yao disagreed on the rental rate, and to resolve the
controversy, the latter, thru written notices to the former, expressed his intention to submit
their disagreement to arbitration, in accordance with Republic Act 876, otherwise known as
the Arbitration Law, and paragraph 7 of their lease contract, providing that:
"'7. . . . Should the parties fail to agree on the rate of rentals, the same shall be
submitted to a group of Arbitrators composed of three (3) members, one to be
appointed by LESSOR, another by LESSEE and the third one to be agreed upon by the
two arbitrators previously chosen and the parties hereto shall submit to the decision
of the arbitrators.'
"Thus, on May 6, 1989, respondent Yao appointed Domingo Alamarez, Jr. as his
arbitrator, while on June 5, 1989, petitioner chose Atty. Casiano Sabile as its arbitrator. The
confirmation of the appointment of Aurelio Tupang, as third arbitrator, was held in
abeyance because petitioner instructed Atty. Sabile to defer the same until its Board of
Directors could convene and approve Tupang's appointment. Respondent Yao theorizes that
this was petitioner's design to delay the arbitration proceedings, in violation of the
Arbitration Law, and the governing stipulations of their contract of lease.
This prompted Yao to go to court to demand the arbitrators to proceed with the
arbitration. Yao went to the regional trial court (Angeles City) and the case was filed as a
summary proceeding case under R.A. 876. Yao also prayed for an award for damages in his
favor.
In its answer, La Naval asserted that the case should be dismissed as it was filed
prematurely; La Naval questioned Yao’s claim for damages as it averred that the same
should be litigated independently and not in the same summary proceeding case. However,
La Naval also posed a counterclaim.
The RTC resolved the matter regarding the arbitrators (it appointed a third
arbitrator). The RTC also ruled that La Naval is estopped from questioning Yao’s claim for
damages for being out of jurisdiction as La Naval itself filed a counterclaim for damages.

Issue:
Whether or not the RTC has jurisdiction over the claims for damages between
parties.
Held:
No.
While the appellate court has agreed with petitioner that, under Section 6 of
Republic Act No. 876, a court, acting within the limits of its special jurisdiction, may in this
case solely determine the issue of whether the litigants should proceed or not to arbitration,
it, however, considered petitioner in estoppel from questioning the competence of the
court to additionally hear and decide in the summary proceedings private respondent's
claim for damages, it (petitioner) having itself filed similarly its own counterclaim with the
courta quo. LLphil
It is hardly disputable that when a court is called upon to exercise limited and special
jurisdiction, that court cannot stray to matters outside the area of its declared authority or
beyond what has been expressly invested by law (Elumbaring vs. Elumbaring, 12 Phil. 384,
387), particularly, such as in this instance, where the proceedings are summary in nature.
Prefatorily, recalling the distinctions, pertinent to the case, between the court's lack
of jurisdiction over the person of the defendant, on the one hand, and its lack of jurisdiction
over the subject matter or the nature of the action, upon the other hand, should be useful.
In summary, it is our considered view, as we now so hereby express, that —
(1) Jurisdiction over the person must be seasonably raised, i.e., that it is pleaded in a
motion to dismiss or by way of an affirmative defense in an answer. Voluntary appearance
shall be deemed a waiver of this defense. The assertion, however, of affirmative defenses
shall not be construed as an estoppel or as a waiver of such defense.
(2) Where the court itself clearly has no jurisdiction over the subject matter or the
nature of the action, the invocation of this defense may be done at any time. It is neither for
the courts nor the parties to violate or disregard that rule, let alone to confer that
jurisdiction, this matter being legislative in character. Barring highly meritorious and
exceptional circumstances, such as hereinbefore exemplified, neither estoppel nor waiver
shall apply.
In the case at bench, the want of jurisdiction by the court is indisputable, given the
nature of the controversy. The arbitration law explicitly confines the court's authority only
to pass upon the issue of whether there is or there is no agreement in writing providing for
arbitration. In the affirmative, the statute ordains that the court shall issue an order
"summarily directing the parties to proceed with the arbitration in accordance with the
terms thereof." If the court, upon the other hand, finds that no such agreement exists, "the
proceeding shall be dismissed." The proceedings are summary in nature.
All considered, the court a quo must then refrain from taking up the claims of the
contending parties for damages, which, upon the other hand, may be ventilated in separate
regular proceedings at an opportune time and venue. The circumstances obtaining in this
case are far, we hold, from justifying the application of estoppel against either party. cdll
WHEREFORE, the decision of the Court of Appeals and the orders of the trial court in
question are SET ASIDE.
4. Insular Savings Bank v. Far East Bank & Trust Company (492 SCRA 145)

DECISION OR AWARD RENDERED BY THE ARBITRATION COMMITTEE;

ALTERNATIVE DISPUTE RESOLUTION METHODS OR ADRS

Facts:
On December 11, 1991, Far East Bank and Trust Company (Respondent) filed a
complaint against Home Bankers Trust and Company (HBTC) with the Philippine Clearing
House Corporation's (PCHC) Arbitration Committee docketed as Arbicom Case No. 91-069.
Respondent sought to recover 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. HBTC
sent these checks to respondent for clearing by operation of the PCHC clearing system.
Thereafter, respondent dishonored the checks for insufficiency of funds and returned the
checks to HBTC. However, the latter refused to accept them since the checks were returned
by respondent after the reglementary regional clearing period.
Meanwhile, on January 17, 1992, before the termination of the arbitration
proceedings, respondent filed another complaint but this time with the Regional Trial Court
(RTC) in Makati City docketed as Civil Case No. 92-145 for Sum of Money and Damages with
Preliminary Attachment. The complaint was filed not only against HBTC but also against
Robert Young, Eugene Arriesgado and Victor Tancuan (collectively known as Defendants),
who were the president and depositors of HBTC respectively. Aware of the arbitration
proceedings between respondent and petitioner, the RTC, in an Omnibus Order dated April
30, 1992, suspended the proceedings in the case against all the defendants pending the
decision of the Arbitration Committee.
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 Regional Trial Court erred in dismissing the petition of petitioner
for lack of jurisdiction on the ground that it should have been docketed as a separate case.

Held:
No.
As provided in the PCHC Rules, the findings of facts of the decision or award
rendered by the Arbitration Committee shall be final and conclusive upon all the parties in
said arbitration dispute. Under Article 2044 of the New Civil Code, the validity of any
stipulation on the finality of the arbitrators' award or decision is recognized. However,
where the conditions described in Articles 2038, 2039 and 2040 applicable to both
compromises and arbitrations are obtaining, the arbitrators' award may be annulled or
rescinded. Consequently, the decision of the Arbitration Committee is subject to judicial
review.
Furthermore, 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.
In this instance, petitioner did not avail of any of the abovementioned remedies
available to it. Instead it filed a petition for review with the RTC where Civil Case No. 92-145
is pending pursuant to Section 13 of the PCHC Rules to sustain its action. Clearly, it erred in
the procedure it chose for judicial review of the arbitral award.
Jurisdiction over the subject matter is conferred by law and not by the consent or
acquiescence of any or all of the parties or by erroneous belief of the court that it exists.
In the instant case, petitioner and respondent have agreed that the PCHC Rules
would govern in case of controversy. However, since the PCHC Rules came about only as a
result of an agreement between and among member banks of PCHC and not by law, it
cannot confer jurisdiction to the RTC. Thus, the portion of the PCHC Rules granting
jurisdiction to the RTC to review arbitral awards, only on questions of law, cannot be given
effect.
Consequently, the proper recourse of petitioner from the denial of its motion for
reconsideration by the Arbitration Committee is to file either a motion to vacate the arbitral
award with the RTC, a petition for review with the Court of Appeals under Rule 43 of the
Rules of Court, or a petition for certiorari under Rule 65 of the Rules of Court.
Alternative dispute resolution methods or ADRs – like arbitration, mediation,
negotiation and conciliation – are encouraged by the Supreme Court. By enabling parties to
resolve their disputes amicably, they provide solutions that are less time-consuming, less
tedious, less confrontational, and more productive of goodwill and lasting relationships. It
must be borne in mind that arbitration proceedings are mainly governed by the Arbitration
Law and suppletorily by the Rules of Court.
WHEREFORE, in light of the foregoing, the petition is DENIED.
5. Reyes v. Balde II (498 SCRA 186)

CONSTRUCTION INDUSTRY ARBITRATION LAW (CIAC)

Facts:
On October 20, 2002, respondent-spouses Cesar and Carmelita Esquig entered into a
Design-Build Construction Agreement with petitioner Charles Bernard H. Reyes, doing
business under the name and style of CBH Reyes Architects, for the architectural design and
construction of a 2-storey residence in Tahanan Village, Paranaque City.
In accordance with the contract, spouses Esquig paid the amount of P1,050,000 as down
payment. Thereafter, construction commenced.
The relationship between petitioner and respondent spouses went on smoothly until
sometime in January 2003 when the latter left for the United States and designated their co-
respondent, Rosemarie Papas, as their representative. According to petitioner, Papas
meddled with the construction works by demanding changes and additional works which
entailed additional cost. Papas also refused to pay petitioner's progress billing and the salary
of the laborers. Petitioner thereafter prepared an accounting report of all the additional
works and their corresponding costs, however, Papas denied all the items in the list and
refused to pay the same. Worse, on May 8, 2003, Papas wrote the Board of Directors of
Tahanan Village Homeowner's Association requesting for the cancellation of the
contractor's work permit.
Thus, on May 26, 2003, petitioner filed a complaint for Accounting, Collection of Sum
of Money, Rescission of Contract with Damages against spouses Esquig and Rosemarie
Papas with the Regional Trial Court of Muntinlupa City.
On July 15, 2003, respondents filed a motion to dismiss Civil Case No. 03-110 on the
ground that the court has no jurisdiction over the subject matter of the case. They claimed
that the Design-Build Construction Agreement contained an arbitration clause, thus any
dispute arising therefrom should be brought before the CIAC.
On even date, respondents also filed a complaint before the CIAC against the
petitioner. Respondents alleged that petitioner unreasonably delayed the construction and
refused to finish the project.
Instead of submitting an answer, petitioner filed with the CIAC a motion to dismiss
on grounds of lack of jurisdiction to hear and decide the case as well as the pendency of the
case before the trial court involving the same subject matter.
In an Order dated October 17, 2003, CIAC denied petitioner's motion to dismiss, holding
that since the Design-Build Construction Agreement contained an arbitration clause, any
dispute arising from said contract is within CIAC's jurisdiction.
Petitioner filed a motion for reconsideration which was denied by CIAC. Thereafter,
CIAC constituted the Arbitral Tribunal and directed the same to carry on with the arbitration
proceedings in accordance with CIAC Rules.
Meanwhile, on February 27, 2004, the Regional Trial Court of Muntinlupa City,
Branch 203 issued an Order denying the motion to dismiss filed by respondents. The trial
court held that it has jurisdiction over the complaint for accounting, rescission of contract
and damages. Petitioner then filed with the CIAC a motion to terminate proceedings but the
same was denied.
Thus, petitioner filed a petition for certiorari and prohibition before the Court of
Appeals and it rendered that the assailed Decision dismissing the petition for lack of merit. It
held that CIAC properly acquired jurisdiction over the subject property.

Issue:
Which body has jurisdiction over the present controversy — the Regional Trial Court
or the CIAC?

Held:
CIAC.
Executive Order (EO) No. 1008 entitled, "Construction Industry Arbitration Law"
provided for an arbitration mechanism for the speedy resolution of construction disputes
other than by court litigation. It recognized the role of the construction industry in the
country's economic progress as it utilizes a large segment of the labor force and contributes
substantially to the gross national product of the country.
Section 4 of E.O. No. 1008 provides:
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 dispute arises before or after the
completion of the contract, or after the abandonment or breach thereof. These
disputes may involve government or private contracts. For the Board to acquire
jurisdiction, the parties to a dispute must agree to submit the same 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.
Section 1, Article III of the CIAC Rules of Procedure Governing Construction
Arbitration likewise provides that recourse to the CIAC may be availed of whenever a
contract contains a clause for the submission of a future controversy to arbitration.
We agree with the findings of the Court of Appeals that the Design-Build
Construction Agreement mutually entered into by the parties contain an arbitration clause.
Clearly, the presence of the arbitration clause in the parties' contract vests
jurisdiction on the CIAC on all controversies arising from such contract. The arbitral clause in
the agreement is a commitment by 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. Where
the jurisdiction of CIAC is properly invoked, the failure or refusal of herein petitioner to
arbitrate shall not affect the proceedings. Arbitration proceedings shall continue
notwithstanding the absence or lack of participation of petitioner, and the award shall be
made after receiving the evidence of the claimant.
With respect to petitioner's contention that the action is purely civil in nature hence,
jurisdiction rests with the Regional Trial Court, the same must fail. Since the action is rooted
on alleged violations of the agreement, it is embraced by the term "construction dispute".
Besides, Section 23 of E.O. No. 1008 expressly provides that all provisions of existing
laws, proclamations, decrees, letters of instructions and executive orders contrary to or
inconsistent with E.O. No. 1008 are repealed or modified accordingly. E.O. No. 1008 which
vests jurisdiction to the CIAC over construction disputes is a special law; hence, it takes
precedence over Batas Pambansa Blg. 129 or the Judiciary Reorganization Act of 1980, a
general law which vests jurisdiction to the Regional Trial Courts over civil actions in which
the subject of the litigation is incapable of pecuniary estimation.
Thus, considering our findings that the CIAC and not the RTC which has jurisdiction
over the instant controversy, the injunction against the Presiding Judge of the Regional Trial
Court of Muntinlupa City, Branch 203 from further proceeding with Civil Case No. 03-110
must be made permanent. All the proceedings therein are declared null and void for lack of
jurisdiction.
It bears to stress that being an inexpensive, speedy and amicable method of settling
disputes, arbitration — along with mediation, conciliation and negotiation — is encouraged
by the Supreme Court. 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.
WHEREFORE, in view of the foregoing, the instant petition is DENIED.
6. LM Power Engineering Corp. v. Capitol Industrial Construction Groups Inc. (399 SCRA
562)

CONSTRUCTION INDUSTRY ARBITRATION COMMISSION (CIAC); HAS JURISDICTION TO

DECIDE A CONSTRUCTION DISPUTE WHEN CONSTRUCTION CONTRACT HAS AN ARBITRAL
CLAUSE

Alternative dispute resolution methods or ADRs — like arbitration, mediation,

negotiation and conciliation — are encouraged by the Supreme Court. By enabling parties to
resolve their disputes amicably, they provide solutions that are less time-consuming, less
tedious, less confrontational, and more productive of goodwill and lasting relationships.

Facts:
On February 22, 1983, 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.
On April 25, 1985, 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.
Upon completing its task under the Contract, petitioner billed respondent in the
amount of P6,711,813.90. Contesting the accuracy of the amount of advances and billable
accomplishments listed by the former, the latter refused to pay. Respondent also took
refuge in the termination 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.
Because of the dispute, petitioner filed with the Regional Trial Court (RTC) of Makati
(Branch 141) a Complaint for the 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 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.
On appeal, the CA reversed the RTC and ordered the referral of the case to
arbitration. The appellate court held as arbitrable the issue of whether 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.

Issues:
A. Whether or not there exist[s] a controversy/dispute between petitioner and
respondent regarding the interpretation and implementation of the Sub-Contract
Agreement dated February 22, 1983 that requires prior recourse to voluntary arbitration;
B. In the affirmative, whether or not the requirements provided in Article III of CIAC
Arbitration Rules regarding request for arbitration have been complied with.

Arguments:
1. Petitioner claims that there is no conflict regarding the interpretation or the
implementation of the Agreement. Thus, without having to resort to prior arbitration, it is
entitled to collect the value of the services it rendered through an ordinary action for the
collection of a sum of money from Respondent.
On the other hand, Respondent contends that there is a need for prior arbitration as
provided in the Agreement. This is because there are some disparities between the parties’
positions regarding the extent of the work done, the amount of advances and billable
accomplishments, and the set off of expenses incurred by Respondent in its take-over of
Petitioner’s work.
2. According to Petitioner, assuming arguendo that the dispute is arbitrable, the failure to
file a formal request for arbitration with the CIAC precluded the latter from acquiring
jurisdiction over the question.

Held:
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.”

RATIO DECIDENDI:
First Issue: Whether Dispute Is Arbitrable
We side with respondent. Essentially, the dispute arose from the parties'
incongruent positions on whether certain provisions of their Agreement could be applied to
the facts. The instant case involves technical discrepancies that are better left to an arbitral
body that has expertise in those areas. In any event, the inclusion of an arbitration clause in
a contract does not ipso facto divest the courts of jurisdiction to pass upon the findings of
arbitral bodies, because the awards are still judicially reviewable under certain conditions.
Clearly, the resolution of the dispute between the parties herein requires a referral
to the provisions of their Agreement. Within the scope of the arbitration clause are
discrepancies as to the amount of advances and billable accomplishments, the application of
the provision on termination, and the consequent set-off of expenses.
A review of the factual allegations of the parties reveals that they differ on the following
questions: (1) Did a take-over/termination occur? (2) May the expenses incurred by
respondent in the take-over be set off against the amounts it owed petitioner? (3) How
much were the advances and billable accomplishments?
The resolution of the foregoing issues lies in the interpretation of the provisions of the
Agreement.
The issue as to the correct amount of petitioner's advances and billable
accomplishments involves an evaluation of the manner in which the parties completed the
work, the extent to which they did it, and the expenses each of them incurred in connection
therewith. Arbitrators also need to look into the computation of foreign and local costs of
materials, foreign and local advances, retention fees and letters of credit, and taxes and
duties as set forth in the Agreement.
Being an inexpensive, speedy and amicable method of settling disputes, arbitration
— along with mediation, conciliation and negotiation — is encouraged by the Supreme
Court. 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. 28 Any doubt should be resolved in favor of arbitration. 29

Second Issue: Prior Request for Arbitration

Section 1 of Article II of the old Rules of Procedure Governing Construction
Arbitration indeed required the submission of a request for arbitration.
On the other hand, Section 1 of Article III of the new Rules of Procedure Governing
Construction Arbitration has dispensed with this requirement and 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 this wise:
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.
Since petitioner has already filed a Complaint with the RTC without prior recourse to
arbitration, the proper procedure to enable the CIAC to decide on the dispute is to request
the stay or suspension of such action, as provided under RA 876 [the Arbitration Law].
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.
7. G.R. No. 120105 March 27, 1998
BF CORPORATION, petitioner,
vs.
COURT OF APPEALS, SHANGRI-LA PROPERTIES, INC., RUFO B. COLAYCO, ALFREDO C.
RAMOS, MAXIMO G. LICAUCO III and BENJAMIN C. RAMOS, respondents.

Facts:

Petitioner BF Corporation and respondent Shangri-la Properties, Inc. (SPI) executed an

Article of Agreement for the construction of a shopping mall complex. Delay occurred in the
construction of the mall and caused disagreements between the parties regarding their
respective liabilities. The parties held a conference but failed to settle. Petitioner then filed a
complaint for collection of the balance due against SPI and its co-defendants which,
however, moved to suspend the proceedings claiming that their contract provided for an
arbitration clause embodied in the Conditions of Contract. The validity of that document
containing the arbitration clause was assailed in that it was only initiated by petitioner's
representatives. The trial court, although finding the existence of an arbitration clause,
denied petitioner's motion to suspend proceedings. SPI then filed a petition
for certiorari with the Court of Appeals which in turn stayed the proceedings in the lower
court. The Court of Appeals, contrary to the findings of the lower court, found that private
respondents were not in default in invoking the provisions of the arbitration clause and that
the absence of initials of one party or his representative does not militate against its
effectivity where the main contract containing said arbitration clause had been duly signed
by the parties. Hence, this recourse, petitioner further contending that the order of the
lower court denying the motion to suspend is a resolution on the merits that can be
elevated to a higher court in an ordinary appeal and not by certiorari. CaATDE
Issue:
1. WHETHER THE COURT OF APPEALS ERRED IN ISSUING THE EXTRAORDINARY WRIT OF
CERTIORARI ALTHOUGH THE REMEDY OF APPEAL WAS AVAILABLE TO
RESPONDENTS.
2. WHETHER THE COURT OF APPEALS ERRED IN FINDING GRAVE ABUSE OF
DISCRETION IN THE FACTUAL FINDINGS OF THE TRIAL COURT THAT:
(i) THE PARTIES DID NOT ENTER INTO AN AGREEMENT TO ARBITRATE.
(ii) ASSUMING THAT THE PARTIES DID ENTER INTO THE AGREEMENT TO
ARBITRATE, RESPONDENTS ARE ALREADY IN DEFAULT IN INVOKING THE
AGREEMENT TO ARBITRATE."
Held:
The Supreme Court held that where a rigid application of the rule that certiorari cannot be a
substitute for appeal will result in a manifest or miscarriage of justice, the provisions of the
Rules of Court which are technical rules may be relaxed.
A contract need not be contained in a single writing and may be encompassed in several
instruments even though every instrument is not signed by the parties, since it is sufficient if
the unsigned instruments are clearly identified or referred to and made part of the signed
instrument or instruments.
"Reasonableness" is a relative term and it depends on the attendant circumstances. Hence,
a period of one month from the time the parties held a conference to the time the party
invoked the arbitration clause is reasonable.
Republic Act No. 876 (Arbitration Law) merely suspends proceedings and does not divest
courts of its jurisdiction. After arbitration, the lower court may confirm the award made by
the arbitrator. aHSCcE
8. Korea Technologies Co., Ltd. Vs. Hon. Albert A. Lerma, et al. , G.R. No. 143581. January
7, 2008

FACTS:

Petitioner KOGIES and respondent PGSMC executed a Contract whereby KOGIES would set
up an LPG Cylinder Manufacturing Plant for respondent. Respondent unilaterally cancelled
the contract on the ground that petitioner had altered the quantity and lowered the quality
of the machineries and equipment it delivered. Petitioner opposed informing the latter that
PGSMC could not unilaterally rescind their contract nor dismantle and transfer the
machineries and equipment on mere imagined violations by petitioner. Petitioner then filed
a Complaint for Specific Performance against respondent before the RTC. Respondent filed
its Answer with Compulsory Counterclaim asserting that it had the full right to dismantle
and transfer the machineries and equipment because it had paid for them in full as
stipulated in the contract. KOGIES filed a motion to dismiss respondent’s counterclaims
arguing that when PGSMC filed the counterclaims, it should have paid docket fees and filed
a certificate of non-forum shopping, and that its failure to do so was a fatal defect. The RTC
dismissed the petitioner’s motion to dismiss respondent’s counterclaims as these
counterclaims fell within the requisites of compulsory counterclaims.

ISSUE:

WON payment of docket fees and certificate of non-forum shopping were required in the
respondent’s Answer with counterclaim?

HELD:

NO. The counterclaims of PGSMC were incorporated in its Answer with Compulsory
Counterclaim in accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure,
the rule that was effective at the time the Answer with Counterclaim was filed. Sec. 8 on
existing counterclaim or cross-claim states, “A compulsory counterclaim or a cross-claim
that a defending party has at the time he files his answer shall be contained therein.” As to
the failure to submit a certificate of forum shopping, PGSMC’s Answer is not an initiatory
pleading which requires a certification against forum shopping under Sec. 524 of Rule 7,
1997 Revised Rules of Civil Procedure. It is a responsive pleading, hence, the courts a quo
did not commit reversible error in denying KOGIES’ motion to dismiss PGSMC’s compulsory
counterclaims. At the time PGSMC filed its Answer incorporating its counterclaims against
KOGIES, it was not liable to pay filing fees for said counterclaims being compulsory in
nature. We stress, however, that effective August 16, 2004 under Sec. 7, Rule 141, as
amended by A.M. No. 04-2-04-SC, docket fees are now required to be paid in compulsory
counterclaim or cross-claims.
9. FIESTA WORLD MALL CORP v. LINDBERG PHILS Inc.

G.R 152471; August 18, 2006

FACTS:

Fiesta World Mall Corporation, petitioner, owns and operates Fiesta World Mall located at
Barangay Maraouy, Lipa City;while Linberg Philippines,Inc., respondent, is a corporation that
builds and operates power plants.

On January 19, 2000, respondent filed with the Regional Trial Court (RTC), Branch 267, Pasig
City, a Complaint for Sum of Money against petitioner.

The complaint alleges that on November 12, 1997, petitioner and respondent executed a
build-own-operate agreement, entitled “Contract Agreement for Power Supply Services, 3.8
MW Base Load Power Plant” (the Contract).

Under this Contract, respondent will construct, at its own cost, and operate as owner a
power plant,and to supply petitioner power/electricity at its shopping mall in Lipa City.

Petitioner, on the other hand, will pay respondent “energy fees” to be computed in
accordance with the Seventh Schedule of the Contract

The complaint further alleges that respondent constructed the power plant in Lipa City at a
cost of about P130,000,000.00. In November 1997, the power plant became operational
and started supplying power/electricity to petitioner’s shopping mall in Lipa City. In
December 1997, respondent started billing petitioner.

As of May 21, 1999, petitioner’s unpaid obligation amounted to P15,241,747.58, exclusive of

interest. However, petitioner questioned the said amount and refused to pay despite
respondent’s repeated demands.

In its Answer with Compulsory Counterclaim, petitioner specifically denied the allegations in
the complaint, claiming that respondent failed to fulfill its obligations under the Contract by
failing to supply all its power/fuel needs.

From November 10, 1998 until May 21, 1999, petitioner personally shouldered the cost of
fuel. Petitioner also disputed the amount of energy fees specified in the billings made by
respondent because the latter failed to monitor, measure, and record the quantities of
electricity delivered by taking photographs of the electricity meter reading prior to the
issuance of its invoices and billings, also in violation of the Contract.

Moreover, in the computation of the electrical billings, the minimum off-take of energy (E2)
was based solely on the projected consumption as computed by respondent.

However, based on petitioner’s actual experience, it could not consume the energy
pursuant to the minimum off-take even if it kept open all its lights and operated all its
machinery and equipment for twenty-four hours a day for a month. This fact was admitted
by respondent. While both parties had discussions on the questioned billings, however,
“there were no earnest efforts to resolve the differences in accordance with the arbitration
clause provided for in the Contract.”

Finally, as a special affirmative defense in its answer, petitioner alleged that respondent’s
filing of the complaint is premature and should be dismissed on the ground of non-
compliance with paragraph 7.4 of the Contract which provides:

7.4 Disputes

If FIESTA WORLD disputes the amount specified by any invoice, it shall pay the undisputed
amount on or before such date(s), and the disputed amount shall be resolved by arbitration
of three (3) persons, one (1) by mutual choice, while the other two (2) to be each chosen by
the parties themselves, within fourteen (14) days after the due date for such invoice and all
or any part of the disputed amount paid to LINBERG shall be paid together with interest
pursuant to Article XXV from the due date of the invoice. It is agreed, however, that both
parties must resolve the disputes within thirty (30) days, otherwise any delay in payment
resulting to loss to LINBERG when converted to $US as a result of depreciation of the Pesos
shall be for the account of FIESTA WORLD. Corollarily, in case of erroneous billings,
however, LINBERG shall be liable to pay FIESTA WORLD for the cost of such deterioration,
plus interest computed pursuantto Art. XXV from the date FIESTA WORLD paid for the
erroneous billing. (Underscoring supplied)

Thereafter, petitioner filed a Motion to Set Case for Preliminary Hearing on the ground that
respondent violated the arbitration clause provided in the Contract, thereby rendering its
cause of action premature.

This was opposed by respondent, claiming that paragraph 7.4 of the Contract on arbitration
is not the provision applicable to this case; and that since the parties failed to settle their
dispute, then respondent may resort to court action pursuant to paragraph 17.2 of the same
Contract which provides:

17.2 Amicable Settlement

The parties hereto agree that in the event there is any dispute or difference between them
arising out of this Agreement or in the interpretation of any of the provisions hereto, they
shall endeavor to meet together in an effort to resolve such dispute by discussion between
them but failing such resolution the Chief Executives of LINBERG and FIESTA WORLD shall
meet to resolve such dispute or difference and the joint decision of such shall be binding
upon the parties hereto, and in the event that a settlement of any such dispute or
difference is not reached, then the provisions of Article XXI shall apply.

In its Order dated October 3, 2000, the trial court denied petitioner’s motion for lack of
merit.

Petitioner then filed a Motion for Reconsideration but it was denied in an Order dated
January 11, 2001.

Dissatisfied, petitioner elevated the matter to the Court of Appeals via a Petition for
Certiorari.
On December 12, 2001, the appellate court rendered its Decision dismissing the petition
and affirming the challenged Orders of the trial court.

Petitioner’s Motion for Reconsideration of the above Decision was likewise denied by the
appellate.

Hence, the instant Petition for Review on Certiorari.

ISSUE:

Whether the filing with the trial court of respondent’s complaint is premature

HELD:

YES, the filing with the trial court of the complaint is premature.

Paragraph 7.4 of the Contract, quoted earlier, mandates that should petitioner dispute any
amount of energy fees in the invoice and billings made by respondent, the same“shall be
resolved by arbitration of three (3) persons, one (1) by mutual choice, while the other two
(2) to be each chosen by the parties themselves.” The parties, in incorporating such
agreement in their Contract, expressly intended that the said matter in dispute must first be
resolved by an arbitration panel before it reaches the court. They made such arbitration
mandatory.

It is clear from the records that petitioner disputed the amount of energy fees demanded by
respondent. However, respondent, without prior recourse to arbitration as required in the
Contract, filed directly with the trial court its complaint, thus violating the arbitration clause
in the Contract.

It bears stressing that such arbitration agreement is the law between the parties. Since that
agreement is binding between them, they are expected to abide by it in good faith. And
because it covers the dispute between them in the present case, either of them may compel
the other to arbitrate. Thus, it is well within petitioner’s right to demand recourse to
arbitration.

We cannot agree with respondent that it can directly seek judicial recourse by filing an
action against petitioner simply because both failed to settle their differences amicably.
Suffice it to state that there is nothing in the Contract providing that the parties may
dispense with the arbitration clause. Article XXI on jurisdiction cited by respondent, i.e.,
that “the parties hereto submit to the exclusive jurisdiction of the proper courts of Pasig
City” merely provides for the venue of any action arising out of or in connection with the
stipulations of the parties in the Contract.

Moreover, we note that the computation of the energy fees disputed by petitioner also
involves technical matters that are better left to an arbitration panel who has expertise in
those areas. Alternative dispute resolution methods or ADRs – like arbitration, mediation,
negotiation and conciliation – are encouraged by this Court. By enabling the parties to
resolve their disputes amicably, they provide solutions that are less time-consuming, less
tedious, less confrontational, and more productive of goodwill and lasting relationships.
10 Maria Luisa Park Association, Inc. Vs. Almendras

Facts:

Respondents purchased a residential lot from MRO Development Corporation. They later
on filed an application to construct a residential house with petitioner. Petitioner approved
said application subject to a deed of restriction.

Conflict between the parties ensued when petitioner discovered the non‐compliance of
respondents with the deed of restriction.

Petitioner ordered them to make the rectification of the structure.

Respondents refused to heed to petitioner’s order and filed a complaint for injunction,
declaratory relief, annulment of provisions of Articles and By‐laws with prayer for issuance
of a TRO/ Preliminary injunction.

ISSUE:

Whether or not the respondents’ petition for declaratory relief is proper?

RULING:

The SC ruled in the negative. SC indicated that it is apparent that although the complaint
was denominated as one for declaratory relief/annulment of contracts, the allegations
therein reveal otherwise.

SC highlighted that the respondents neither asked for the interpretation of the questioned
by‐laws nor did they allege that the same is doubtful or ambiguous and require judicial
construction.

The SC further added that what respondents really seek to accomplish is to have a
particular provision of the petitioner’s by‐laws nullified and thereafter absolve them from
any violations of the same.
11. SEA-LAND SERVICE, INC., petitioner, vs. COURT OF APPEALS, A.P.
MOLLER/MAERSK LINE and MAERSK-TABACALERA SHIPPING AGENCY
(FILIPINAS), INC., respondents.

Facts:

Sea-Land, a foreign shipping and forwarding company licensed to do business in the

Philippines, received from Sea-borne Trading Company in California, a shipment consigned
to Sen Hiap Hing, the business name used by Cue. The shipper not having declared the value
of the shipment , no value was indicated in the bill of lading. The shipment was discharged
in Manila, and while awaiting transshipment to Cebu, the cargo was stolen and never
recovered.

The trial court sentenced Sea-Land to pay Cue P186,048 representing the Philippine
currency value of the lost cargo, P55, 814 for unrealized profit and P25,000 for attorney’s
fees. CA affirmed the trial court’s decision.

Issue:

Whether or not Sea-Land is liable to pay Cue.

Held:

There is no question of the right of a consignee in a bill of lading to recover from the carrier
or shipper for loss of, or damage to, goods being transported under said bill, although that
document may have been drawn up only by the consignor and the carrier without the
intervention of the consignee.

Since the liability of a common carrier for loss of or damage to goods transported by it
under a contract of carriage os governed by the laws of the country of destination and the
goods in question were shipped from the United States to the Philippines, the liability of
Sea-Land has Cue is governed primarily by the Civil Code, and as ordained by the said Code,
supplementary, in all matters not cluttered thereby, by the Code of Commerce and special
laws. One of these supplementary special laws is the Carriage of goods by Sea Act (COGSA),
made applicable to all contracts for the carriage by sea to and from the Philippines Ports in
Foreign Trade by Comm. Act. 65.

Even if Section 4(5) of COGSA did not list the validity and binding effect of the liability
limitation clause in the bill of lading here are fully substantial on the basis alone of Article
1749 and 1750 of the Civil Code. The justices of such stipulation is implicit in its giving the
owner or shipper the option of avoiding accrual of liability limitation by the simple
expedient of declaring the value of the shipment in the bill of lading.

The stipulation in the bill of lading limiting the liability of Sea-Land for loss or damages to
the shipment covered by said rule to US$500 per package unless the shipper declares the
value of the shipment and pays additional charges is valid and binding on Cue.
12. BENGUET CORPORATION v DENR-MAB

G.R. No. 163101 February 13, 2008

FACTS:

On June 1, 1987, Benguet and J.G. Realty entered into a RAWOP, wherein J.G. Realty was
acknowledged as the owner of four mining claims respectively named as Bonito-I, Bonito-II,
Bonito-III, and Bonito-IV, with a total area of 288.8656 hectares, situated in Barangay
Luklukam, Sitio Bagong Bayan, Municipality of Jose Panganiban, Camarines Norte.

Thus, on August 9, 1989, the Executive Vice-President of Benguet, Antonio N. Tachuling,

issued a letter informing J.G. Realty of its intention to develop the mining claims. However,
on February 9, 1999, J.G. Realty, through its President, Johnny L. Tan, then sent a letter to
the President of Benguet informing the latter that it was terminating the RAWOP on the
following grounds:

a. The fact that your company has failed to perform the obligations set forth in the
RAWOP, i.e., to undertake development works within 2 years from the execution of the
Agreement; b. Violation of the Contract by allowing high graders to operate on our claim.
c. No stipulation was provided with respect to the term limit of the RAWOP. d. Non-
payment of the royalties thereon as provided in the RAWOP.

On June 7, 2000, J.G. Realty filed a Petition for Declaration of Nullity/Cancellation of the
RAWOP with the Legaspi City POA, Region V, docketed as DENR Case No. 2000-01 and
entitled J.G. Realty v. Benguet.

DECISION OF LOWER COURTS: *POA: declared the RAWOP cancelled. *MAB: affirmed POA.

ISSUES:

(1) Should the controversy have first been submitted to arbitration before the POA took
cognizance of the case?; (2) Was the cancellation of the RAWOP supported by evidence?;
and (3) Did the cancellation of the RAWOP amount to unjust enrichment of J.G. Realty at
the expense of Benguet?

HELD:

On correctness of appeal: Petitioner having failed to properly appeal to the CA under Rule
43, the decision of the MAB has become final and executory. On this ground alone, the
instant petition must be denied.

(1) YES, the case should have first been brought to voluntary arbitration before the POA.

Secs. 11.01 and 11.02 of the RAWOP pertinently provide:

11.01 Arbitration

Any disputes, differences or disagreements between BENGUET and the OWNER with
reference to anything whatsoever pertaining to this Agreement that cannot be amicably
settled by them shall not be cause of any action of any kind whatsoever in any court or
administrative agency but shall, upon notice of one party to the other, be referred to a
Board of Arbitrators consisting of three (3) members, one to be selected by BENGUET,
another to be selected by the OWNER and the third to be selected by the aforementioned
two arbitrators so appointed.

11.02 Court Action

No action shall be instituted in court as to any matter in dispute as hereinabove stated,

except to enforce the decision of the majority of the Arbitrators

A contractual stipulation that requires prior resort to voluntary arbitration before the
parties can go directly to court is not illegal and is in fact promoted by the State.

To reiterate, availment of voluntary arbitration before resort is made to the courts or quasi-
judicial agencies of the government is a valid contractual stipulation that must be adhered
to by the parties.

In other words, in the event a case that should properly be the subject of voluntary
arbitration is erroneously filed with the courts or quasi-judicial agencies, on motion of the
defendant, the court or quasi-judicial agency shall determine whether such contractual
provision for arbitration is sufficient and effective. If in affirmative, the court or quasi-
judicial agency shall then order the enforcement of said provision.

In sum, on the issue of whether POA should have referred the case to voluntary arbitration,
we find that, indeed, POA has no jurisdiction over the dispute which is governed by RA 876,
the arbitration law.

HOWEVER, ESTOPPEL APPLIES. the Court rules that the jurisdiction of POA and that of MAB
can no longer be questioned by Benguet at this late hour. What Benguet should have done
was to immediately challenge the POA's jurisdiction by a special civil action for certiorari
when POA ruled that it has jurisdiction over the dispute. To redo the proceedings fully
participated in by the parties after the lapse of seven years from date of institution of the
original action with the POA would be anathema to the speedy and efficient administration
of justice.

(2) The cancellation of the RAWOP was supported by evidence.

(3) There is no unjust enrichment in the instant case. There is no unjust enrichment when
the person who will benefit has a valid claim to such benefit.

The principle of unjust enrichment under Article 22 requires two conditions: (1) that a
person is benefited without a valid basis or justification, and (2) that such benefit is derived
at another's expense or damage.

Clearly, there is no unjust enrichment in the instant case as the cancellation of the RAWOP,
which left Benguet without any legal right to participate in further developing the mining
claims, was brought about by its violation of the RAWOP. Hence, Benguet has no one to
blame but itself for its predicament.

OBITER DICTA:

(1) Difference between compulsory & voluntary arbitration --

In Reformist Union of R.B. Liner, Inc. vs. NLRC, compulsory arbitration has been defined both
as “the process of settlement of labor disputes by a government agency which has the
authority to investigate and to make an award which is binding on all the parties, and as a
mode of arbitration where the parties are compelled to accept the resolution of their
dispute through arbitration by a third party.” While a voluntary arbitrator is not part of the
governmental unit or labor department's personnel, said arbitrator renders arbitration
services provided for under labor laws.

There is a clear distinction between compulsory and voluntary arbitration. The arbitration
provided by the POA is compulsory, while the nature of the arbitration provision in the
RAWOP is voluntary, not involving any government agency.
13. G.R. No. 152878. May 5, 2003
RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs.
MAGWIN MARKETING CORPORATION, NELSON TIU, BENITO SY
and ANDERSON UY,respondents.

It must be emphasized however that once the dismissal attains the attribute of
finality, the trial court cannot impose legal fees anew because a final and executor dismissal
although without prejudice divests the trial court of jurisdiction over the civil case as well as
any residual power to order anything relative to the dismissed case; it would have to wait
until the complaint is docketed once again.

FACTS:
RCBC filed a complaint for recovery of sum of money with writ of preliminary
attachment against Magwin and 4 others. The writ was partially satisfied. Petitioner did not
cause the case to be set for pre-trial. For about 6 months the parties tried to settle through
loan restricting program but only one of the defendants signed the agreement.
RTC Makati dismissed the case without prejudice for failure to prosecute for
unreasonable length of time. A motion for reconsideration is filed informing the court of the
on-going amicable settlement. The judgment was set aside and the plaintiffs are directed to
submit the compromise agreement.
Motion to set the case for pre-trial was filed by petitioner for the failure of the parties to
compromise. The trial court denied the motion. The CA approved the decision and said that
the order of trial court setting aside is dependent on two conditions.
1) Submission of compromise agreement within 15 days, and
2) Failure to submit shall cause the imposition of payment of docket fees for refilling of
the case
The CA said that the order of the RTC was been set aside because a party need not pay
docket fees for refilling if the original case is revived.

ISSUE:

Whether docket fee is necessary.

HELD:

There is no substantial policy requiring petitioner to pay again the docket fees when
it had already discharge the obligation simultaneously with filing a complaint for sum of
money. The procedure in dismissed cases when refilled is the same as it was initially filed. It
is a re-enactment of the past proceedings.

The addition of second sentence “failure on part of plaintiff to submit agreement will
cause to payment of docket fee for refilling” is not a direction to pay but a statement of
event that may result in its imposition. Such payment is not obligatory in civil cases since
docket fees are deluged only after dismissal becomes executory.
 Once dismissal attained finality, the trial court cannot impose legal fees again
because executory dismissal divest the trial court jurisdiction as well as residual powers to
order anything relative to the case. It would have to wait till the case is decided again. In
that case, no need to file docket fees for continuation of hearing wont set aside order of
dismissal and reinstatement of complaint.
14. G.R. No. 126619
UNIWIDE SALES REALTY AND RESOURCES CORPORATION, petitioner,
vs.
TITAN-IKEDA CONSTRUCTION AND DEVELOPMENT CORPORATION, respondent.

Arbitration has been defined as "an arrangement for taking and abiding by the
judgment of selected persons in some disputed matter, instead of carrying it to established
tribunals of justice, and is intended to avoid the formalities, the delay, the expense and
vexation of ordinary litigation.

FACTS:

This case involved Titan-Ikeda who entered into 3 construction agreement/ contract
/project with Uniwide. Later Titan-Ikeda filed an action for sum of money against Uniwide
with the RTC because Uniwide allegedly failed to pay certain claims billed by Titan after the
completion of the 3 projects. Uniwide moved for the dismissal/suspension of the
proceeding for them to first undergo arbitration. The Arbitrators issued terms of reference
which was signed by the parties, (Uniwide did not attempt to modify the TOR to
accommodate its belated counterclaim on deadlines for liquidated damages.)Titan then
refiled the case with CIAC.
CIAC Decision: Project 1: Uniwide is absolved of any liability.Project 2: Uniwide is
absolved of any liability for VAT payment and for the account of Titan, and Titan is absolved
from liability for defective construction.Project 3: Uniwide id held liable for unpaid balance
(5,158,364.63) plus 12% interest/annum and to pay the full VAT for the additional work
where no written authorization was presented.
CIAC likewise rejected the claim on liquidated damages.
After Uniwide’s motion for reconsideration was denied by CIAC, it filed a petition for
review with CA but same was denied, thus, Uniwide filed a petition for review under rule 45
to seek partial reversal of the decision of CA which modified the decision of CIAC. Uniwide
claims that CIAC should have applied procedural rules such as section 5, Rule 10 with more
liberality because it was an administrative tribubal free from all rigid technicalities of
regular courts because CA held that the issue on liquidated damages should be left for
determination in future proceedings.

ISSUE:

Whether or not CIAC should have applied the Rules of Court in the arbitration proceeding.

RULING: Rule of Procedure Governing Construction Arbitration promulgated by the CIAC

contains no provision on the application of the Rules of Court to arbitration proceedings,
even in a suppletory capacity.Such importation of the Rules of Court provision on
amendment to conform to evidence would contravene the spirit, if not the letter of the CIAC
rules. This is for the reason that the formulation of the Terms of Reference is done with the
active participation of the parties and their counsel themselves. The TOR is further required
to be signed by all the parties, their respective counsel and all the members of the Arbitral
Tribunal. Unless the issues thus carefully formulated in the Terms of Reference were
expressly showed to be amended, issues outside thereof may not be resolved. As already
noted in the Decision, "no attempt was ever made by the [Uniwide] to modify the TOR in
order to accommodate the issues related to its belated counterclaim" on this issue.
Arbitration has been defined as "an arrangement for taking and abiding by the judgment of
selected persons in some disputed matter, instead of carrying it to established tribunals of
justice, and is intended to avoid the formalities, the delay, the expense and vexation of
ordinary litigation.
15. PHILROCK, INC., petitioner, vs. CONSTRUCTION INDUSTRY
ARBITRATION COMMISSION and Spouses VICENTE and NELIA
CID, respondents.

Section 4 of Executive Order 1008 expressly vests in the CIAC original and exclusive
jurisdiction over disputes arising from or connected with construction contracts entered into
by parties that have agreed to submit their dispute to voluntary arbitration.
The Court will not countenance the effort of any party to subvert or defeat the
objective of voluntary arbitration for its own private motives. After submitting itself to
arbitration proceedings and actively participating therein, petitioner is estopped from
assailing the jurisdiction of the CIAC, merely because the latter rendered an adverse decision.

FACTS:

A complaint for damages was filed with the RTC by the Cid spouses against Philrock, Inc. and
seven of its officers and engineers in connection with the construction of the former's
house. The same was dismissed and referred to the CIAC pursuant to the parties’
Agreement to Arbitrate.

Due to disagreements on the issue whether moral and exemplary damages and tort should
be included along with breach of contract and the inclusion of the seven officers and
engineers therein who are not parties to the Agreement to Arbitrate, the case was
remanded to the trial court who, however, declared that it no longer had jurisdiction. The
case was remanded back to the CIAC and resumed preliminary conferences.

Philrock argued that said Order was based on a mistaken premise that 'the proceedings in
the CIAC fell through because of the refusal of [Petitioner] Philrock to include the issue of
damages therein,' whereas the true reason for the withdrawal of the case from the CIAC
was due to Philrock's opposition to the inclusion of its seven officers and engineers, who did
not give their consent to arbitration, as party defendants.

Private respondent Nelia Cid manifested that she was willing to exclude the seven officers
and engineers of Philrock as parties to the case so as to facilitate or expedite the
proceedings. With such manifestation from the Cid spouses, the Arbitral Tribunal denied
Philrock's request for the suspension of the proceedings.

And the proceedings therein continued with the exclusion of the seven officers. Terms of
Reference to settle the differences of the parties by an Arbitral Tribunal was signed and
later, the CIAC rendered a decision in favor of the Cid spouses. Petitioner contested the
jurisdiction of the CIAC to hear the arbitration case
due to the parties' withdrawal of their consent to arbitrate and assailed its decision.

However, the Court of Appeals upheld the same reasoning that CIAC acquires jurisdiction
when the parties agree to submit their dispute to voluntary arbitration which is based on
the principle that once acquired, jurisdiction remains "until the full termination of the case
unless a law provides the contrary."
Hence, this petition.

ISSUE:

Whether or not the CIAC could take jurisdiction over the case after the case had
been dismissed by both the RTC and the CIAC.

RULING:

YES. Section 4 of Executive Order 1008 expressly vests in the CIAC original and
exclusive jurisdiction over disputes arising from construction contracts entered into by
parties that have agreed to submit their dispute to voluntary arbitration. Here, the parties
agreed to arbitrate in the CIAC with the issue of exclusion of the seven officers settled.
Petitioner continued participating in the arbitration proceedings and even signed the Terms
of Reference. Petitioner was stopped in questioning the jurisdiction of the CIAC.
16. METRO CONSTRUCTION, INC., petitioner, vs. CHATHAM
PROPERTIES, INC., respondent .

Under Circular No. 1-91, appeals from the arbitral awards of the CIAC may be
brought to the Court of Appeals, and not to the Supreme Court alone. The grounds for the
appeal are likewise broadened to include appeals on questions of facts and appeals involving
mixed questions of fact and law.

FACTS:
On April 21, 1994, respondent and petitioner entered into a contract for the
construction of the Chatham House in Makati City. In April 1998, petitioner sought to collect
from respondent a sum of money for unpaid progress billings and other charges and
instituted a request for adjudication of its claims with the Construction Industry Arbitration
Commission (CIAC). Among others, the parties submitted for CIAC's resolution the issue on
whether or not petitioner failed to complete and/or deliver the project within the approved
completion date and, if so, whether petitioner was liable for liquidated damages. After due
hearing, the CIAC rendered judgment in favor of petitioner and directed the respondent to
pay petitioner P16,126,922.91. The CIAC held that the provision of the contract insofar as
the Overall Schedule is concerned cannot be justifiably applied in the instant case in view of
the implied takeover of the project by respondent. Accordingly, the CIAC found it
unnecessary to rule on whether MCI completed and/or delivered the project within the
approved completion schedule of the project since respondent failed to observe the
antecedent acts required for the termination of the contract, as set forth in the Construction
Agreement. The CIAC, however, found petitioner liable for liquidated damages. Based on
the CIAC's assessment, petitioner's responsibility was based on its delay in the concreting
milestone.

Respondent instituted a petition for review with the Court of Appeals. The Court of
Appeals upheld the decision of the CIAC except on the matter of liquidated damages. In its
decision, the appellate court held that there was no takeover by respondent and that
petitioner exercised complete control, authority and responsibility over the construction.
The appellate court also found petitioner liable for liquidated damages but made a contrary
conclusion and declared that petitioner was in delay based on the overall schedule of
completion of the project. Thus, it directed petitioner to pay respondent the sum of
P4,935,578.31. Petitioner moved for reconsideration, but the appellate court denied the
same for lack of merit.

ISSUE:
The core issue in this case is whether under existing law and rules the Court of
Appeals can also review findings of facts of the Construction Industry Arbitration
Commission (CIAC).

RULING:
Hence, this instant petition for review. Petitioner alleged that the Court of Appeals,
in reviewing and reversing the CIAC's factual findings, contravened Section 19 of Executive
Order (E.O.) No. 1008, which provides that the arbitral award of the CIAC is final and
unappealable, except on questions of law, which are appealable to the Supreme Court.
 The Court rejected petitioner's contention holding that under Circular No. 1-91,
appeals from the arbitral awards of the CIAC may be brought to the Court of Appeals, and
not to the Supreme Court alone. The grounds for the appeal are likewise broadened to
include appeals on questions of facts and appeals involving mixed questions of fact and law.
The jurisdiction of the Court of Appeals over appeals from final orders or decisions of the
CIAC is further fortified by the amendments to B.P. Blg. 129, as introduced by R.A. No. 7902.
The Court affirmed the CIAC's findings and arbitral award. The Court found that the
evidence taken as a whole or in their totality revealed that there was an implied takeover by
respondent on the completion of the project.
17. G.R. No. 169332 February 11, 2008
ABS-CBN BROADCASTING CORPORATION, petitioner,
vs.
WORLD INTERACTIVE NETWORK SYSTEMS (WINS) JAPAN CO., LTD., respondent.

Proper issues that may be raised in a petition for review under Rule 43 pertain to
errors of fact, law or mixed questions of fact and law. While a petition for certiorari under
Rule 65 should only limit itself to errors of jurisdiction, that is, grave abuse of discretion
amounting to a lack or excess of jurisdiction. Moreover, it cannot be availed of where appeal
is the proper remedy or as a substitute for a lapsed appeal.

FACTS:

ABS-CBN Broadcasting Corporation (ABS-CBN) entered into a licensing agreement

with World Interactive Network Systems (WINS) to distribute and sublicense the distribution
of the television service known as "The Filipino Channel" (TFC) in Japan. ABS-CBN undertook
to transmit the TFC programming signals to WINS which the latter received through its
decoders and distributed to its subscribers. A dispute arose between the parties when ABS-
CBN accused WINS of inserting nine episodes of WINS WEEKLY into the TFC programming.
ABS-CBN claimed that these were "unauthorized insertions" constituting a material breach
of their agreement. WINS filed an arbitration suit pursuant to the arbitration clause of its
agreement with ABS-CBN. It contended that the airing of WINS WEEKLY was made with
petitioner's prior approval. It also alleged that petitioner only threatened to terminate their
agreement because it wanted to renegotiate the terms thereof to allow it to demand higher
fees. It also prayed for damages for petitioner's alleged grant of an exclusive distribution
license to another entity, NHK (Japan Broadcasting Corporation).The parties appointed
Professor Alfredo F. Tadiar to act as sole arbitrator.The arbitrator found in favor of World
Interactive Network Systems. ABS-CBN 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.
WINS, on the other hand, filed a petition for confirmation of arbitral award before the RTC
of Quezon City. The CA dismissed ABS-CBN’s petition for lack of jurisdiction. It stated that as
the terms or 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.

ISSUE:

Whether or not a 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.

HELD:

The assigned errors reveals that the real issues calling for the CA's resolution were
less the alleged grave abuse of discretion exercised by the arbitrator and more about the
arbitrator’s appreciation of the issues and evidence presented by the parties. Therefore, the
issues clearly fall under the classification of errors of fact and law — questions which may be
passed upon by the CA via a petition for review under Rule 43. 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 (in which case a petition for review under Rule 43 would be
proper) and grave abuse of discretion (because of which a petition for certiorari under Rule
65 would be permissible).

Section 24 of RA 876 clearly provides that the RTC must issue an order vacating an
arbitral award only "in any one of the . . . cases" enumerated therein. Under the legal maxim
in statutory construction expressiouniusestexclusioalterius, the explicit mention of one thing
in a statute means the elimination of others not specifically mentioned. 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.

Proper issues that may be raised in a petition for review under Rule 43 pertain to
errors of fact, law or mixed questions of fact and law. While a petition for certiorari under
Rule 65 should only limit itself to errors of jurisdiction, that is, grave abuse of discretion
amounting to a lack or excess of jurisdiction. Moreover, it cannot be availed of where appeal
is the proper remedy or as a substitute for a lapsed appeal.

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.
The petition is DENIED.
18. G.R. No. 152878. May 5, 2003
ORMOC SUGARCANE PLANTERS ASSOCIATION, INC. (OSPA),OCCIDENTAL LEYTE FARMERS
MULTI-PURPOSE COOPERATIVE, INC. (OLFAMCA), UNIFARM MULTI-PURPOSE
COOPERATIVE, INC. (UNIFARM) and ORMOC NORTH DISTRICT IRRIGATION MULTI-
PURPOSE COOPERATIVE, INC. (ONDIMCO),Petitioners,
-versus-
THE COURT OF APPEALS (Special Former Sixth Division), HIDECO SUGAR MILLING CO.,
INC., and ORMOC SUGAR MILLING CO., INC., Respondents

The formal requirements of an agreement to arbitrate are therefore the following:

(a) it must be in writing and (b) it must be subscribed by the parties or
their representatives. To subscribe means to write underneath, as ones name; to sign at the
end of a document. That word may sometimes be construed to mean to give consent to or to
attest.

FACTS:

Petitioners are associations organized by and whose members are individual sugar
planters (Planters). Respondents Hideco Sugar Milling Co., Inc. (Hideco) and Ormoc Sugar
Milling Co, Inc. (OSCO) are sugar centrals engaged in grinding and milling sugarcane
delivered to them by numerous individual sugar planters, who may or may not be members
of an association such as petitioners.

Petitioners assert that their relationship is governed by milling contracts. To buttress

this claim, petitioners presented representative samples of the milling contracts. Petitioners
claimed that respondents violated the Milling Contract when they gave to independent
planters who do not belong to any association the 1% share, instead of reverting said share
to the centrals. Thereafter, petitioner filed a twin petitions with the RTC for Arbitration
under R.A. 876, Recovery of Equal Additional Benefits, Attorneys Fees and Damages, against
HIDECO and OSCO.
Respondents filed a motion to dismiss on ground of lack of cause of action because
they had no milling contract. The RTC convinced that there is an existing milling contract
between the petitioners and respondents and issued a Joint Order denying the motion to
dismiss, declaring the existence of a milling contract between the parties, and directing
respondents to nominate two arbitrators to the Board of Arbitrators.
Upon denial of the motion of the respondent, respondents elevated the case to the
CA through a Petition for Certiorari with Prayer for the Issuance of Temporary Restraining
Order and/or Writ of Preliminary Injunction. The CA held that petitioners neither had an
existing contract with respondents nor were they privy to the milling contracts between
respondents and the individual Planters. In the main, the CA concluded that petitioners had
no legal personality to bring the action against respondents or to demand for arbitration.
Petitioners filed a motion for reconsideration, but it too was denied. Thus, the instant
petition.

ISSUE:
Whether or not petition for certiorari under Rule 65 of the Rules of Court is proper.
Whether or not the petitioner has a legal standing.
RULING:

Petitioners filed the instant petition for certiorari under Rule 65 of the Rules of
Court, to challenge the judgment of the CA under Section 1 of Rule 65 states:

Section 1. Petition for Certiorari. When any tribunal, board or officer

exercising judicial or quasi-judicial functions has acted without or in excess of
its jurisdiction, or with grave abuse of discretion amounting to lack or excess
of its or his jurisdiction and there is no appeal, or any plain, speedy and
adequate remedy in the course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with certainty and
praying that judgment be rendered annulling or modifying the proceedings of
such tribunal, board or officer, and granting such incidental relief as law and
justice require. xxx xxx xxx (emphasis ours)

The instant recourse is improper because the resolution of the CA was a final order
from which the remedy of appeal was available under Rule 45 in relation to Rule 56. The
existence and availability of the right of appeal proscribes resort to certiorari because one of
the requirements for availment of the latter is precisely that there should be no appeal. It is
elementary that for certiorari to prosper, it is not enough that the trial court committed
grave abuse of discretion amounting to lack or excess of jurisdiction; the requirement that
there is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law
must likewise be satisfied.] The proper mode of recourse for petitioners was to file a
petition for review of the CAs decision under Rule 45.

Even assuming that all the petitioners were able to present milling contracts in favor
of their members, it is undeniable that under the arbitration clause in these contracts it is
the parties thereto who have the right to submit a controversy or dispute to arbitration.

Under section 4 of R.A. 876 provides that the formal requirements of an agreement
to arbitrate are the following: (a) it must be in writing and (b) it must be subscribed by the
parties or their representatives. This claim has no leg to stand on since petitioners did not
sign the milling contracts at all, whether as a party or as a representative of their member
Planters. The individual Planter and the appropriate central were the only signatories to the
contracts and there is no provision in the milling contracts that the individual Planter is
authorizing the association to represent him/her in a legal action in case of a dispute over
the milling contracts.

Moreover, even assuming that petitioners are indeed representatives of the member
Planters who have milling contracts with the respondents and assuming further that
petitioners signed the milling contracts as representatives of their members, petitioners
could not initiate arbitration proceedings in their own name as they had done in the
present case. As mere agents, they should have brought the suit in the name of the
principals that they purportedly represent. Even if Section 4 of R.A. No. 876 allows the
agreement to arbitrate to be signed by a representative, the principal is still the one who
has the right to demand arbitration.
19. Gonzales vs Climax Mining LTD
DOCTRINE OF SEPARABILITY
Facts:
Jorge Gonzales, as claimowner of mineral deposits, entered into a co-production, joint
venture and/or production-sharing letter-agreement with Geophilippines, Inc, and Inmex
Ltd. Under the agreement, Petitioner granted to Geophilippines, Inc. and Inmex Ltd.
collectively, the exclusive right to explore and survey the mining claims for a period of 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. The exploration of the mining claims
extended for another period of three years.

Gonzales, Arimco Mining Corporation, Geophilippines Inc., Inmex Ltd., and

Aumex Philippines, Inc. signed a document designated as the Addendum to the May 14,
1987 Letter of Intent and February 28, 1989 Agreement with Express Adhesion
Thereto (hereafter, the Addendum Contract). Under the Addendum Contract, Arimco
Mining Corporation would apply to the Government of the Philippines for permission to
mine the claims as the Government’s contractor under a Financial and Technical Assistance
Agreement (FTAA). Arimco Mining Corporation obtained the FTAA and carried out work
under the FTAA.

Gonzales filed before the Panel of Arbitrators, Region II, Mines and Geosciences
Bureau of the DENR, against respondents Climax-Arimco Mining Corporation (Climax-
Arimco), Climax, and APMI, a Complaint seeking the declaration of nullity or termination of
the Addendum Contract, the FTAA, the Operating and Financial Accommodation Contract,
the Assignment, Accession Agreement, and the Memorandum of Agreement. Petitioner
Gonzales prayed for an unspecified amount of actual and exemplary damages plus
attorney’s fees and for the issuance of a temporary restraining order and/or writ
of preliminary injunction to restrain or enjoin respondents from further implementing
the questioned agreements. He sought said reliefs on the grounds of "FRAUD, OPPRESSION
and/or VIOLATION of Section 2, Article XII of the CONSTITUTION perpetrated by these
foreign RESPONDENTS, conspiring and confederating with one another and with each
other…."

The Panel of Arbitrators dismissed the Complaint for lack of jurisdiction. Petitioner
moved for reconsideration and this was granted, the Panel believing that the case involved
a dispute involving rights to mining areas and a dispute involving surface owners, occupants
and claim owners/concessionaires. According to the Panel, although the issue raised in the
Complaint appeared to be purely civil in nature and should be within the jurisdiction of the
regular courts, a ruling on the validity of the assailed contracts would result to the grant or
denial of mining rights over the properties; therefore, the question on the validity of the
contract amounts to a mining conflict or dispute. Hence, the Panel granted the Motion for
Reconsideration with regard to the issues of nullity, termination, withdrawal or damages,
but with regard to the constitutionality of the Addendum Agreement and FTAA, it held that
it had no jurisdiction. Respondents assailed the orders of the Panel of Arbitrators via a
petition for certiorari before the Court of Appeals. The Court of Appeals granted the
petition, declaring that the Panel of Arbitrators did not have jurisdiction over the complaint
filed by petitioner. The jurisdiction of the Panel of Arbitrators, said the Court of Appeals, is
limited only to the resolution of mining disputes, defined as those which raise a question of
fact or matter requiring the technical knowledge and experience of mining authorities. It
was found that the complaint alleged fraud, oppression and violation of the Constitution,
which called for the interpretation and application of laws, and did not involve any mining
dispute. The Court of Appeals also observed that there were no averments relating to
particular acts constituting fraud and oppression. Also, the Court of Appeals noted that
fraud and duress only make a contract voidable, not inexistent, hence the contract remains
valid until annulled. The Court of Appeals was of the opinion that the petition should have
been settled through arbitration under Republic Act No. 876 (The Arbitration Law)
as stated in the Addendum Contract.

Petitioner filed this Petition for Review on Certiorari Under Rule 45 assailing the
decision and resolution of the Court of Appeals.

Issue:

WON the dispute between the parties should be brought for arbitration under Rep. Act No.
876.

Held: No. Arbitration before the Panel of Arbitrators is proper only when there is a
disagreement between the parties as to some provisions of the contract between them,
which needs the interpretation and the application of that particular knowledge and
expertise possessed by members of that Panel. It is not proper when one of the parties
repudiates the existence or validity of such contract or agreement on the ground of fraud or
oppression as in this case. The validity of the contract cannot be subject of arbitration
proceedings. Allegations of fraud and duress in the execution of a contract are matters
within the jurisdiction of the ordinary courts of law. These questions are legal in nature
and require the application and interpretation of laws and jurisprudence which is
necessarily a judicial function.

The case should not be brought under the ambit of the Arbitration Law. The question
of validity of the contract containing the agreement to submit to arbitration will affect the
applicability of the arbitration clause itself. A party cannot rely on the contract and claim
rights or obligations under it and at the same time impugn its existence or validity. Indeed,
litigants are enjoined from taking inconsistent positions. As previously discussed, the
complaint should have been filed before the regular courts as it involved issues which are
judicial in nature.
20. Agan vs Philippine International Air Terminals Co.
PARTIES NOT BOUND IN THE ARBITRATION AGREEMENT

Facts:
On October 5, 1994, Asia's Emerging Dragon Corp. (AEDC) submitted an unsolicited
proposal to the Government for the development of Ninoy Aquino International Airport
International Passenger Terminal III (NAIA IPT III) under a build-operate-and-transfer
arrangement pursuant to RA 6957, as amended.
It was endorsed to the National Economic Development Authority (NEDA), which, in
turn, reviewed and approved it for bidding. The Paircargo Consortium was the only company
that submitted a competitive proposal. AEDC questioned, among others, the financial
capability of Paircargo Consortium. However, the Pre-Qualification Bids and Awards
Committee (PBAC) had prequalified the Paircargo Consortium to undertake the project.
Later, Paircargo Consortium incorporated into Philippine International Airport Terminals Co.,
(PIATCO). And for failure of AEDC to match the price proposal submitted by PIATCO, the
project was awarded to PIATCO. On July 12, 1997, the Government signed the 1997
Concession Agreement.
Thereafter, the Amended and Restated Concession Agreement (ARCA) and three
Supplements thereto were signed by the Government and PIATCO. Consequently, the
workers of the international airline service providers, claiming that they stand to lose their
employment upon the implementation of the said agreements, filed before this Court a
petition for prohibition docketed as G.R. No. 155001.
Later, the service providers joined their cause. Congressmen Salacnib Baterina,
Clavel Martinez and Constantino Jaraula, alleging that the said contracts compelled
government expenditure without appropriation, filed a similar petition docketed as G.R. No.
155547. And several employees of the MIAA likewise filed a petition docketed as G.R. No.
155661 assailing the legality of these agreements.

Issue: Whether or not the petitioners are bound with the arbitration clause.

Held: NO. It is established that petitioners in the present cases who have presented
legitimate interests in the resolution of the controversy are not parties to the PIATCO
Contracts. Accordingly, they cannot be bound by the arbitration clause provided for in the
ARCA and hence, cannot be compelled to submit to arbitration proceedings. A speedy and
decisive resolution of all the critical issues in the present controversy, including those raised
by petitioners, cannot be made before an arbitral tribunal. The object of arbitration is
precisely to allow an expeditious determination of a dispute. This objective would not be
met if this Court were to allow the parties to settle the cases by arbitration as there are
certain issues involving non-parties to the PIATCO Contracts which the arbitral tribunal will
not be equipped to resolve.
21. Salas Jr. vs. Laperal Realty Corp.
PARTIES TO AN ARBITRATION AGREEMENT

The arbitration agreements as valid, binding, enforceable and not contrary to public policy
so much so that 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.

FACTS:
Augusto Salas, Jr. was the registered owner of a vast tract of land in Lipa City,
Batangas. He entered into an Owner-Contractor Agreement with Respondent Laperal Realty
Corporation to render and provide complete (horizontal) construction services on his land.
Said agreement contains an arbitration clause, to wit:
“ARTICLE VI. ARBITRATION.
All cases of dispute between CONTRACTOR and OWNER’S representative shall be referred to
the committee represented by:
1. One representative of the OWNER;
2. One representative of the CONTRACTOR;
3. One representative acceptable to both OWNER and CONTRACTOR.”
Salas, Jr. then executed a Special Power of Attorney (SPA)in favor of Respondent Laperal
Realty to exercise general control, supervision and management of the sale of his land, for
cash or on installment basis. By virtue thereof, Respondent Laperal Realty subdivided said
land and sold portions thereof to Respondents Rockway Real Estate Corporation and South
Ridge Village, Inc. in 1990; to Respondent spouses Abrajano and Lava and Oscar Dacillo in
1991; and to Respondents Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capalan in
1996 (Respondent Lot Buyers hereinafter).
Back in 1989, Salas, Jr. left his home in the morning for a business trip to Nueva
Ecija. He, however, never returned on that unfaithful morning. Seven years later or in 1996,
his wife, Teresita Diaz-Salas filed with the RTC of Makati City a verified Petition for the
Declaration of Presumptive Death, which Petition was granted.
In 1998, 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 Respondents.
Respondent Laperal Realty filed a Motion to Dismiss on the ground that Petitioners failed to
submit their grievance to arbitration as required under Article VI of the Owner-Contractor
Agreement. Respondent spouses Abrajano and Lava and Respondent Dacillo filed a
Joint Answer with Counterclaim and Crossclaim praying for dismissal of Petitioners’
Complaint for the same reason.
The RTC then issued the herein assailed Order dismissing Petitioners’ Complaint for
non-compliance with the foregoing arbitration clause.
Hence the present Petition for Review on Certiorari under Rule 45.
 ARGUMENTS:
Petitioners argue that (1) their causes of action did not emanate from the Owner-Contractor
Agreement, (2) that their causes of action for cancellation of contract and accounting are
covered by the exception under the Arbitration Law, and (3) that failure to arbitrate is not a
ground for dismissal.
Petitioners claim that they suffered lesion of more than one-fourth (1/4) of the value of
Salas, Jr.’s land when Respondent Laperal Realty subdivided it and sold portions thereof to
Respondent Lot Buyers. Thus, they instituted action against both Respondent Laperal Realty
and Respondent Lot Buyers for rescission of the sale transactions and reconveyance to them
of the subdivided lots. They argue that rescission, being their cause of action, falls under
the exception clause in Sec. 2 ofRepublic Act No. 876 which provides that “such submission
[to] or contract [of arbitration] shall be valid, enforceable and irrevocable, save upon such
grounds as exist at law for the revocation of any contract”.

ISSUE:

Whether or not the arbitration clause under Article VI of the Owner-Contractor Agreement
is binding upon the Respondent Lot Buyers?

RULING:
NO. Respondent Lot Buyers are neither parties to the Agreement nor the latter’s assigns or
heirs. Consequently, the right to arbitrate as provided in Article VI of the Agreement was
never vested in Respondent Lot Buyers.Respondent Laperal Realty, on the other hand, as a
contracting party to the Agreement, has the right to compel Petitioners to first arbitrate
before seeking judicial relief. However, to split the proceedings into arbitration for
Respondent Laperal Realty and trial for the Respondent Lot Buyers, or to hold trial in
abeyance pending arbitration between Petitioners and Respondent Laperal Realty, would in
effect result in multiplicity of suits, duplicitous procedure and unnecessary delay. On the
other hand, 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 single and
complete proceeding.

Arbitration is the “wave of the future” in dispute resolution. To brush aside a contractual
agreement calling for arbitration in case of disagreement between parties would be a step
backward.

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 are certainly bound
by the Agreement. If Respondent Laperal Realty, had assigned its rights under the
Agreement to a third party, making the former, the assignor, and the latter, the assignee,
such assignee would also be bound by the arbitration provision since assignment involves
such transfer of rights as to vest in the assignee the power to enforce them to the same
extent as the assignor could have enforced them against the debtor or, in this case, against
the heirs of the original party to the Agreement. However, Respondent Lot Buyers are NOT
assignees of the rights of Respondent Laperal Realty under the Agreement to develop Salas,
Jr.’s land and sell the same. They are, rather, buyers of the land that Respondent Laperal
Realty was given the authority to develop and sell under the Agreement. As such, they are
NOT “assigns” contemplated in Art. 1311 of the New Civil Code which provides that
“contracts take effect only between the parties, their assigns and heirs”.

In the same vein, Petitioners’ contention that rescission, being their cause of action, falls
under the exception clause in Sec. 2 of Republic Act No. 876 is without merit. For while
rescission, as a general rule, is an arbitrable issue, they impleaded in the suit for rescission
the Respondent Lot Buyers who are neither parties to the Agreement nor the latter’s assigns
or heirs. Consequently, the right to arbitrate as provided in Article VI of the Agreement was
never vested in Respondent Lot Buyers.
22. Transfield Philippines Inc. vs. Luzon Hydro Corporation
INDEPENDENCE DOCTRINE

Facts:
Transfield Philippines (Transfield) entered into a turn-key contract with Luzon Hydro
Corp. (LHC).Under the contract, Transfield were to construct a hydro-electric plants in
Benguet and Ilocos. Transfield was given the sole responsibility for the design, construction,
commissioning, testing and completion of the Project. The contract provides for a period for
which the project is to be completed and also allows for the extension of the period
provided that the extension is based on justifiable grounds such as fortuitous event. In order
to guarantee performance by Transfield, two stand-by letters of credit were required to be
opened. During the construction of the plant, Transfield requested for extension of time
citing typhoon and various disputes delaying the construction. LHC did not give due course
to the extension of the period prayed for but referred the matter to arbitration committee.
Because of the delay in the construction of the plant, LHC called on the stand-by letters of
credit because of default. However, the demand was objected by Transfield on the ground
that there is still pending arbitration on their request for extension of time.

Issue:

Whether or not LHC can collect from the letters of credit despite the pending arbitration
case

Held:
YES. Transfield’s argument that any dispute must first be resolved by the parties, whether
through negotiations or arbitration, before the beneficiary is entitled to call on the letter of
credit in essence would convert the letter of credit into a mere guarantee.
The independent nature of the letter of credit may be: (a) independence in toto where the
credit is independent from the justification aspect and is a separate obligation from the
underlying agreement like for instance a typical standby; or (b) independence may be only
as to the justification aspect like in a commercial letter of credit or repayment standby,
which is identical with the same obligations under the underlying agreement. In both cases
the payment may be enjoined if in the light of the purpose of the credit the payment of the
credit would constitute fraudulent abuse of the credit.
Jurisprudence has laid down a clear distinction between a letter of credit and a guarantee in
that the settlement of a dispute between the parties is not a pre-requisite for the release of
funds under a letter of credit. In other words, the argument is incompatible with the very
nature of the letter of credit. If a letter of credit is drawable only after settlement of the
dispute on the contract entered into by the applicant and the beneficiary, there would be no
practical and beneficial use for letters of credit in commercial transactions.
The engagement of the issuing bank is to pay the seller or beneficiary of the credit once the
draft and the required documents are presented to it. The so-called “independence
principle” assures the seller or the beneficiary of prompt payment independent of any
breach of the main contract and precludes the issuing bank from determining whether the
main contract is actually accomplished or not. Under this principle, banks assume no liability
or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect
of any documents, or for the general and/or particular conditions stipulated in the
documents or superimposed thereon, nor do they assume any liability or responsibility for
the description, quantity, weight, quality, condition, packing, delivery, value or existence of
the goods represented by any documents, or for the good faith or acts and/or omissions,
solvency, performance or standing of the consignor, the carriers, or the insurers of the
goods, or any other person whomsoever.
23. EQUITABLE PCI BANKING CORPORATION vs. . RCBC CAPITALCORPORATION

SETTING ASIDE AN ARBITRAL AWARD

The Court Will Not Overturn an Arbitral Award Unless it Was Made in Manifest
Disregard of the Law

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 Agreement (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. 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.
Sometime in September 2000, RCBC had Bankard’s accounts audited, creating for the
purpose an audit team and the 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
inJanuary 2001. Thereafter RCBC informed petitioners of its having overpaid the purchase
price of the subject shares, claiming that there was an overstatement of valuation of
accounts amounting to PhP 478 million, resulting in theover payment 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).RCBC, in accordance with Sec. 10 of the SPA, filed
a Request for Arbitration dated May 12, 2004 with the International Chamber of
Commerce-International Court of Arbitration (ICC-ICA). In the request, RCBC charged
Bankard with deviating from, contravening and not following generally accepted accounting
principles and practices in maintaining their books. 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 . On the matter of prescription, the tribunal held that
RCBC’s claim is not time -barred, the claim properly falling under the contemplation of Sec.
5(g) and not Sec. 5(h).
As such, the tribunal concluded, RCBC’s claim was filed within the three (3)-year period
under Sec. 5(g) and that the six (6)-month period under Sec. 5(h) did not apply. The tribunal
also exonerated RCBC from laches, the latter having sought relief within the three (3)-year
period prescribed in the SPA. Notably, the tribunal considered the rescission of the SPA and
ASPA as impracticable and "totally out of the question." RCBC filed with the RTC a Motion to
Confirm 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 .

Issue:
Whether or Not there is manifest disregard of the law by the ICC-ICA

Held:
NO. The petition must be denied. This is a procedural miscue for petitioners who
erroneously bypassed the Court of Appeals (CA) in pursuit of its appeal. While this
procedural gaffe has not been raised by RCBC, still we would be remiss in not pointing out
the proper mode of appeal from a decision of the RTC confirming, vacating, setting aside,
modifying, or correcting an arbitral award.
Rule 45 is not the remedy available to petitioners as the proper mode of appeal assailing the
decision of the RTC confirming as arbitral award is an appeal before the CA pursuant to Sec.
46 of Republic Act No. (RA) 9285, otherwiseknown as the Alternative Dispute Resolution Act
of 2004, or completely, An Act to Institutionalize the Use of an Alternative Dispute
Resolution System in the Philippines and to Establish the Office for Alternative Dispute
Resolution, and for other Purposes , promulgated on April 2, 2004 and became effective on
April 28, 2004 after its publication on April 13, 2004.
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 uphold an arbitral
award
24. NATIONAL POWER CORPORATION V. HON. ROSE MARIE ALONZO-LEGASTO
SETTING ASIDE AN ARBITRAL AWARD

FACTS:
National Power Corporation( NPC) and FIRST UNITED CONSTRUCTORS CORPORATION(FUCC)
Entered into a project for excavation. FUCC needed to do blasting works to continue with
the project. NPC agreed that it will issue an extra work order for the blasting works and
subsequently pay FUCC but this did not happen. The two entered into a compromise
agreement and agreed that NPC will pay the undisputed unpaid claims and that they will
submit the agreement to an arbitration board to settle the amount to be paid. After the
arbitration issued its ruling, NPC questioned the award which included the blasting works
(no extra work order issued for it) allegedly due to promissory estoppel.

1. NPC and First United Constructors Corporation (FUCC) entered into a construction of
power facilities, one in Cawayan area and the other in Bacon, Sorsogon. The price for
grading excavation was P76.00 per cubic meter.
2. After commencement of the excavation, FUCC requested that it be allowed to blast
to the design grade of 495 meters above sea level as its dozers and rippers could no
longer excavate. It also requested that it be paid P1346 per cubic meter
3. NPC, after creating a task force to review the blasting works, offered to pay P458.07
per cubic meter, which FUCC accepted in a letter.
4. FUCC eventually abandoned the project. NPC decided to take over the project to
stave-off huge pecuniary and non-monetary losses. FUCC, in order to prevent this
filed an action for specific performance and damages with preliminary injunction
and TRO against NPC.
5. RTC qc issued a TRO and later a writ of preliminary injunction.
a. NPC filed a petition for certiorari before the CA. CA granted petition and set
aside the lower court’s order
6. FUCC filed before the SC a petition for review assailing the decision of the CA but
pending the resolution of the SC, NPC and FUCC entered into a compromise
agreement.
a. In the compromise agreement, NPC shall pay the undisputed unpaid billings
of FUCC in connection with the project; that NPC shall have the right to
preceed with the works by re-bidding it; upon final resolution of the
arbitration, the parties shall mutually terminate the contract among others
b. That the claims will be settled through 2 stages
i. One is the signing of the compromise agreement which they whill
submit for approval by this court
ii. It shall submit by arbitration to settle the price of the blasting,
damages and all other unresolved claims by the parties. The 3-man
commission was headed by Mr. Carmelo Sison
7. The compromise agreement was approved by the court and the case was then
referred to arbitration where it was held that an award of P118,681,328.28 as just
compensation plus 10% thereof for attorney’s fees and expenses of litigation was
due. (NPC already paid 36,550,000 so they only owe FUCC P82,131,328.28)
 8. FUCC filed a motion for execution while NPC filed a motion to vacate award by the
arbitration board. Judge Alonzo-Legasto approved the motion for execution.
9. NPC went to the CA alleging grave abuse of discretion(GAD).
a. CA: no GAD. The arbitration board acted pursuant to its powers under the
compromise agreement. That NPC failed to prove by evidence that Mr. Sison
was biased. That although the blasting was not part of the unit price for the
project and that there was no perfected contract for it, FUCC relied on the
representation of NPC’s officials that the extra work order should be
submitted to its board of directors for approval and that the blasting works
would be paid. CA ruled that
FUCC is entitled to just compensation on grounds of equity and promissory
estoppel
10. NPC went up to the SC with basically the same arguments before the CA. one of
these arguments is that the claim for blasting works was not approved by authorized
officials, that the approval of extra work by authorized officials is required for an
extra work order is issued.

ISSUE: Whether or not the arbitral award should be vacated

HELD: NO. NPC’s only ground was the alleged bias of Mr. Sison, which it failed to
prove by evidence at the lower court. Hence they cannot depart from the ruling
upholding the award.

Petitioner contends that the Arbitration Board, trial court and the appellate court unduly
relied on the memorandum of Mr. Umali which was allegedly not marked as an exhibit. We
note, however, that this memorandum actually forms part of the record of the case as
Exhibit "DDD." Moreover, both the Arbitration Board and the Court of Appeals found that
Mr. Umali's proposal is the best evidence on record as it is supported by detailed cost
estimates that will serve as basis to determine just compensation.

While the Arbitration Board found that FUCC did not present evidence showing the
amount it paid to its blasting sub-contractor, it did present testimony to the effect that it
incurred other costs and expenses on top of the actual blasting cost. Hence, the amount of
P430.00 per cubic meter indicated in FUCC's Contract of Agreement with Dynamic is not
controlling.

Moreover, FUCC presented evidence showing that in two (2) other projects where
blasting works were undertaken, petitioner paid the contractors P1,346 per cubic meter for
blasting and disposal of solid rocks in the Palinpinon project and P1,144.51 per cubic meter
for rock excavation in the Hermosa Balintawak project. Besides, while petitioner claims that
in a contract with Wilper Construction for the construction of the Tayabas sub-station, the
price agreed for blasting was only P96.13, petitioner itself did not present evidence in
support of this claim.

Parenthetically, the point raised by petitioner that its subsequent contractor, Phesco,
did not undertake blasting works in excavating the same rock formation is extraneous and
irrelevant. The fact is that petitioner allowed FUCC to blast and undertook to pay for the
blasting works.

At this point, we hearken to the rule that the findings of the Arbitration Board, affirmed
by the trial court and the Court of Appeals and supported as they are by substantial
evidence, should be accorded not only respect but finality. Accordingly, the amount of
P763.00 per cubic meter fixed by the Arbitration Board and affirmed by the appellate court
as just compensation should stand.
25. Cargill Philippines Inc vs San Fernando Regala Trading
DOCTRINE OF SEPARABILITY

Facts:

San Fernando Regala Trading filed before the trial court a complaint for rescission of
contract with damages against Cargill Philippines, Inc. In its complaint, San Fernando Regala
Trading alleged that it was engaged in buying and selling molasses and that Cargill was one
of its suppliers.

San Fernando Regala Trading alleged that it purchased from Cargill, and the latter had
agreed to sell, 12,000 tons of cane blackstrap molasses originating from Thailand at the
price of $192 per metric ton, and that delivery would be made in April or May 1997.

After San Fernando Regala Trading delivered the letter of credit, it claimed that Cargill failed
to comply with its obligations under the contract, which included an arbitration clause as
follows:
"Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall
be settled by arbitration in the City of New York before the American Arbitration Association.
The Arbitration Award shall be final and binding on both parties."
Cargill moved to dismiss and/or suspend the court proceedings citing the arbitration clause.
San Fernando Regala Trading argued that since it was seeking rescission of the contract, it
was in effect repudiating the contract which included the arbitration clause. Further, it
argued that rescission constitutes a judicial issue, which requires the exercise of judicial
function and cannot be the subject of arbitration.

Issue: Whether or not the Arbitration Clause is a separate contract?

Held:
YES. The provision to submit to arbitration any dispute arising between the parties is part of
the contract and is itself a contract. The arbitration agreement is to be treated as a separate
agreement and does not automatically terminate when the contract of which it is a part
comes to an end. To reiterate 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 seeks to avoid.

San Fernando Regala Trading filed a complaint for rescission of contract and damages with
the trial court. In so doing, it alleged that a contract existed. It was that contract which
provided for an arbitration clause which expressed the parties' intention that any dispute to
arise between them, as buyer and seller, should be referred to arbitration. It is for the
arbitrator and not the court to decide whether a contract between the parties exists or is
valid. Under the circumstances, the argument that rescission is judicial in nature is
misplaced.