HEIRS OF ALFREDO ZABALA, represented by MENEGILDA ZABALA, ROLANDO ZABALA, MANUEL ZABALA, MARILYN ZABALA, and ADELINA ZABALA, Petitioners, - versus HON. COURT OF APPEALS, VICENTE T. MANUEL AND/OR HEIRS OF VICENTE T. MANUEL,
thereof. The RTC also directed Zabala to pay respondent actual damages, moral damages, and attorney’s fees. The RTC found that Zabala did not, in fact, file an answer to the Complaint. Thus, under Section 6 of the Revised Rules on Summary Procedure, respondent was entitled to judgment on the pleadings. Based on the G.R. No. 189602 allegations in respondent’s Complaint, the RTC held that respondent was entitled to the reliefs prayed for. Present: Zabala then filed a Petition for Review before the Court of Appeals (CA). CORONA, On December 19, 2008, the CA promulgated a Decision upholding the VELASCO, JR., RTC’s reversal of the MTCC’s Order. The CA held that, based on the allegations in the NACHURA, Complaint, the requirement for prior conciliation proceedings under the Local PERALTA, and Government Code was inapplicable to the suit before the MTCC, the action being one MENDOZA, for ejectment and damages, with application for a writ of preliminary injunction, even without the use of those actual terms in the Complaint. However, the CA granted Zabala’s prayer for the deletion of the awards for actual and moral damages, and for Promulgated: attorney’s fees. Zabala filed a Motion for Reconsideration, which the CA denied in a Resolution dated August 26, 2009. On October 9, 2009, Zabala’s heirs filed this Verified Petition for Certiorari. They prayed for the annulment of the CA’s December 19, 2008 Decision and August 26, 2009 Resolution, and for the reinstatement of the MTCC’s May 27, 2003 Order. In the alternative, they prayed that the Court remand the records to the MTCC, so that they could file their Answer, and that due proceedings be undertaken before judgment. In a Resolution dated November 18, 2009, respondents were required to file their Comment on the Petition. The parties now present before this Court a Compromise Agreement, viz.: COMPROMISE AGREEMENT THE PARTIES represented by their lawyers, respectfully submit the following compromise agreement: 1. Private respondents acknowledge that the owner of the subject parcel of land and the improvements thereon are the petitioners[;] 2. Private respondents filed an ejectment case against the said owners before the lower court which granted the reliefs sought for (due to failure of petitioners to file their answer)[;] 3. For and in consideration of the amount of Two Hundred Thousand Pesos (P200,000.00), receipt of the same is acknowledged hereof, private respondents hereby abandon the decision rendered in their favor by the lower courts and instead waive all their rights and interests to the subject property particularly their right to possession of the same and thus, hereby assure that petitioners Zabalas will have a peaceful, continuous and notious (sic) possession of the subject property. WHEREFORE, it is respectfully prayed of the Honorable Court that this Compromise Agreement be duly approved.
x-----------------------------------------------------------------------------------------x RESOLUTION NACHURA, J.: The parties to this Petition for Certiorari seek this Court’s approval of their Compromise Agreement. On April 1, 2002, respondent Vicente T. Manuel filed a Complaint for ejectment with damages against Alfredo Zabala before the Municipal Trial Court in Cities (MTCC) of Balanga, Bataan. Respondent alleged that he was in actual and peaceful possession of a fishpond (Lot No. 1483) located in Ibayo, Balanga City. On October 15, 2001, Zabala allegedly entered the fishpond without authority, and dumped soil into the fishpond without an Environment Compliance Certificate. Zabala continued such action until the time of the filing of the Complaint, killing the crabs and the bangus that respondent was raising in the fishpond. Thus, respondent asked that Zabala be restrained from touching and destroying the fishpond; that Zabala be ejected therefrom permanently; and for actual and moral damages and attorney’s fees. Zabala promptly moved for the dismissal of the Complaint for noncompliance with the requirement under the Local Government Code to bring the matter first to barangay conciliation before filing an action in court. Respondent subsequently filed a Motion for Judgment on the ground of petitioner’s failure to file a responsive pleading or answer. The MTCC, in an Order dated May 27, 2003, granted Zabala’s motion and dismissed the Complaint, holding that respondent indeed violated the requirement of barangay conciliation. Respondent then appealed the ruling to the Balanga, Bataan Regional Trial Court (RTC). In a decision dated March 30, 2004, the RTC reversed the MTCC’s May 27, 2003 Order and rendered judgment directing Zabala, his heirs or subalterns to immediately vacate Lot No. 1483 and restore respondent to his peaceful possession
Balanga City for Manila, April 8, 2010. For the petitioner heirs of Alfredo Zabala For the respondents Vicente Manuel and/or Heirs of Vicente Manuel
By: (Signed) MENEGILDA ZABALA
Assisted by: (Signed) ATTY. VICTOR P. DE DIOS, JR. Counsel for petitioners
ATTY. ANTONIO M. ORTIGUERA Counsel for respondents
Under Article 2028 of the Civil Code, a compromise agreement is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. Compromise is a form of amicable settlement that is not only allowed, but also encouraged in civil cases. Contracting parties may establish such stipulations, clauses, terms, and conditions as they deem convenient, provided that these are not contrary to law, morals, good customs, public order, or public policy. Thus, finding the above Compromise Agreement to have been validly executed and not contrary to law, morals, good customs, public order, or public policy, we approve the same. WHEREFORE, the foregoing premises considered, the Compromise Agreement is hereby APPROVED and judgment is hereby rendered in accordance therewith. By virtue of such approval, this case is now deemed TERMINATED. No pronouncement as to costs. SO ORDERED.
Agreement", which was marked as Exhibit "L". On 31 October 1979, the trial court handed down a Decision petitioner the dispositive portion of which reads:
in favor of the
G.R. No. 97240 October 16, 1992 JESUS T. DAVID, petitioner, vs.THE COURT OF APPEALS and VALENTIN AFABLE, JR., respondents.
WHEREFORE, judgment is hereby rendered against the defendant, Valentin Afable, Jr., ordering him to pay to the plaintiff the sum of P66,500.00 plus the legal rate of interest thereon from July 24, 1974 up to the time the same is fully paid plus the amount of P5,000.00 as for attorney's fees and to pay the costs of the suit. 3 Upon petitioner's motion for reconsideration questioning the date when interest should begin to run, the trial court issued an Order 4 on 20 June 1980 amending the dispositive portion of the decision by declaring that the interest shall be reckoned from 4 January 1966 pursuant to the so-called Compromise Agreement. On 10 October 1980, the trial court issued a writ of execution. Private respondent filed a petition for relief from judgment which, however, was denied. He then filed a motion to reconsider the said denial order which was also subsequently denied. A copy of this last denial order was received by the private respondent on 1 March 1983. The following day, private respondent filed a notice of appeal. On 2 August 1984, the trial court elevated the records of the case to the respondent Court of Appeals. The case was docketed therein as CA-G.R. CV No. 06532. As summarized by the respondent Court of Appeals in its 28 July 1989 decision, issues raised by the private respondent before it were:
DAVIDE, JR., J.: Can the Court of Appeals, in a judgment sustaining the trial court's denial of the petition for relief from judgment, validly amend or modify the decision sought to be overturned by such petition? This is the basic issue which confronts this Court in the instant case. Stripped of unnecessary details, the facts of this case, as gathered from pleadings, are as follows: Due to dishonor of five (5) checks with a total value of P52,800.00 which private respondent issued in favor of the petitioner after the former failed to deliver 2,500 cavans of palay deposited with him by the latter or pay the amount of P54,000.00 representing the value thereof, and to comply with the obligation in respect to the set of earnings and a diamond ring delivered by petitioner's wife on 20 May 1964, petitioner instituted two (2) criminal cases for estafa and filed an independent civil action for a sum of money with preliminary attachment against the private respondent before the then Court of First Instance (now Regional Trial Court) of Manila. The latter was docketed as Civil Case No. 94781 and was assigned to Branch 26 thereof. On 8 December 1965, private respondent executed a document entitled Compromise Agreement which reads: COMPROMISE AGREEMENT In consideration of Mr. Jesus T. David consenting to another postponement of our criminal cases (estafa) now pending trial before the Court of First Instance of Manila, I hereby promise to pay him the sum of SIXTY SIX THOUSAND FIVE HUNDRED (P66,500.00) PESOS on or before January 4th, 1966; and for the purpose of finally settling amicably this case. Manila, December 18, 1965.
1. Whether or not the defendant-appellant was correctly declared in default correctly rendered below; 2. Whether or not a Petition for Relief From Judgment is available to the defendantappellant; 3. Whether or not the execution of the Decision appealed from was validly ordered; 4. Whether or not the Amended Complaint dated May 24, 1975 should have been dismissed on the grounds of lack of cause of action, prescription, and res judicata; and 5. Whether or not granting ex gratia argumenti the validity of the Decision in question, the same correctly awarded damages and attorney's fees in favor of the plaintiff-appellee. 6 Respondent Court correctly resolved the first four (4) issues explicitly against respondent. More specifically, anent the second issue, it declared: This brings us to the second issue: whether or not a Petition for Relief is an available remedy. Under Rule 38 of the Rules of Court, a petition for relief from judgment "must be accompanied with affidavit showing the fraud, accident, mistake or excusable negligence relied upon, and the facts constituting the petitioner's good and substantial cause of action or defense, as the case may be." Said grounds must be established in order to be convincing. The alleged excusable negligence, accident or mistake relied upon by defendant-appellant could have been avoided with ordinary prudence. The alleged fraud could not have been committed by plaintiff-appellee through mere inaction since he is not duty bound to personally notify the defendant
On 27 May 1975, petitioner filed an Amended Complaint which makes specific reference to this so-called Compromise Agreement. On 14 August 1979, the trial court issued an order declaring the private respondent "as in default" for his failure to appear at the pre-trial and allowing the petitioner to present his evidence ex-parte. The latter offered in evidence the "Compromise
It was only on 18 April 1990 that the respondent Court promulgated a Resolution 10 denying the said petition on the ground that the interest could not run from 4 January 1966 because the private respondent had not incurred in delay. and which everyone of them prefers to the hope of gaining. It contemplates the execution of a formal act after payment shall have been made. petition for relief will not lie. In support thereof. 1975. the appellate court. March 29.500. Gaddi. THE RESPONDENT COURT OF APPEALS ERRED IN IGNORING DOCUMENTARY EVIDENCE ON THE RECORD WHICH HAS NOT BEEN DENIED NOR ( sic) CONTRADICTED. B. What the court received was the evidence for the petitioner which included the so-called "compromise agreement" (marked as Exhibit "L"). Such was the incontrovertible fact.00 on or before 4 January 1966 as a step towards the amicable settlement of the case. As to the propriety of the award of attorney's fees. 1974. It would be different if the defendant is not in default. The doctrine relied on by the petitioner and underscored by numerous case citations — that a compromise agreement constitutes the law between the parties and that a judgment based thereon is immediately final and executory — is unfortunately inapplicable in this petition. more appropriately. it is but a mere promise to pay P66. which is from May 27. THE RESPONDENT COURT OF APPEALS ERRED IN MODIFYING THE DECISION OF THE REGIONAL TRIAL COURT IN A MANNER WHICH CONTRADICTED THE TERMS OF
. 1966 instead of July 24. What the private respondent signed on 18 December 1975 is not a compromise agreement although it is captioned as such. at the same time modify the decision sought to be overturned by such a petition. C. Rather. having sustained — and correctly — the trial court's denial of the private respondent's petition for relief from judgment. Since it was only the private respondent who signed the agreement. the date of the filing of the amended complaint based on the so-called Compromise Agreement. In the absence of proof of extrajudicial demand. where a party has been declared in default. for preventing or putting an end to a lawsuit. Costs against defendant-appellant. on the question of the validity of the award of damages and attorney's fees. by itself. in view of all the foregoing considerations. being substantially in accordance with law. the decision of the Court a quo. 7 As to the fifth issue. settle the case or put an end to it." 15 The so-called Compromise Agreement sought neither to avoid litigation nor explicitly put an end to the cases already commenced between the parties. the real issue is whether or not the respondent Court. who. could. Petitioner filed a motion to reconsider this resolution Appeals denied on 4 February 1991. Under the first paragraph of Article 1169 of the Civil Code. A compromise is a contract whereby the parties. since plaintiff-appellee was compelled to litigate in order to protect his interest. L-30860. It does not. It appears in this case that the amount of damages awarded is in accordance with the relief prayed for in the Amended Complaint except that the legal interest should be computed from the date of the filing of the complaint. 8 Accordingly the Court of Appeals decreed as follows: WHEREFORE. It is obvious that the petitioner does not have a full understanding of a compromise agreement and a judgment based thereon. avoid a litigation or put an end to one already commenced. it made the following disquisitions: Finally. (Mario vs. 1979 adjusting the date for computing the legal interest to start from January 4. although not specified in his pleadings. 1975. The parties did not submit any separate compromise agreement for approval by the court. the Court a quo correctly granted the relief as prayed for. Bad faith cannot be presumed from inaction where there is no duty to act. 12
JUDICIAL (sic) COMPROMISE AGREEMENT WHICH HAS ALREADY LONG BECOME FINAL AND EXECUTORY. adjust their difficulties by mutual consent in the manner which they agree on. this petition for review under Rule 45 of the Rules of Court wherein petitioner submits the following assignment of errors: A. there being no proof of extrajudicially demand. the amount of damages that should be adjudged against him cannot exceed the amount alleged in the complaint even if the complainants are able to prove during the reception of evidence a higher amount of damages. by making reciprocal concessions. The answer is in negative.of court processes. judgment was rendered on the basis of such evidence as thus adduced. D. shall be the date wherefrom computation of interest shall commence. Clearly. 1972). defendant-appellant further challenged the amendment of the decision of October 31. no judgment based on compromise agreement was rendered by the trial court. amended the dispositive portion of the decision appealed from by declaring that the interest should run only from the date of the filing of the Amended Complaint. the date of filing the amended complaint. balanced by the danger of losing. is hereby affirmed with slight modification to reflect the date of computing the legal interest to be from May 27. It is not incumbent upon him to search for the address of defendant so that the latter may be properly notified by the Court. The filing of the petition for relief from judgment with the trial court was an equivocal admission on the private respondent's part that his period to appeal from the decision had already expired. 14 It is "an agreement between two or more persons. a motion for reconsideration) from judgment to set aside the aforementioned modification decreed by the respondent Court of Appeals on the ground that since the trial court's decision was already final. plaintiff may be granted any relief that is supported by the evidence. 13 There is so much circuitry in these assigned errors. petitioner filed a petitioner for relief (which should have been. 9 On 3 October 1989. it may not be considered a bilateral contract. as per original decision. THE RESPONDENT COURT OF APPEALS ERRED IN AMENDING THE LOWER COURT'S DECISION WITHOUT ITS HAVING BEEN THE SUBJECT OF ANY ASSIGNMENT OR ERROR BY THE APPELLANT IN THE CASE. The rule is. besides a petition
which the respondent Court of
Hence. The grounds not having been clearly established. the debtor incurs in delay from the time the creditor judicially or extrajudicially demands the fulfillment of the obligation. which was 27 May 1975. THE RESPONDENT COURT OF APPEALS ERRED IN COMMITTING A VIRTUAL BUT GROSS VIOLATION OF LAW BY REFUSING TO ENFORCE A JUDICIAL COMPROMISE AGREEMENT WHICH IS THE LAW BETWEEN THE PARTIES THERETO. it could no longer be amended. To the mind of this Court. This is not the kind of fraud contemplated by law. It is precisely for this reason that the trial court awarded attorney's fees and ordered the private respondent to pay interest plus the costs of the suit.
and regardless of whether the modification is attempted to be made by the court rendering it or by the highest Court of the land. a party may also assail the judgment on the merits. The only recognized exceptions are the corrections of clerical errors or the making of the so-called nunc pro tunc entries which cause no prejudice to any party. even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law. "[N]othing is more settled in the law than that when a final judgment becomes executory. That portion of the challenged decision of the respondent Court of Appeals in C.
. cannot be construed as allowing the review of the decision on the specific ground therein indicated if the denial of the petition for relief by the trial court is sustained by the appellate court. The respondent Court then erred in modifying the decision of the trial court. for the reason abovestated. The judgment may no longer be modified in any respect. 06532 of 29 July 1989 modifying the decision of the trial court with respect to the date when interest should commence to run is hereby SET ASIDE and NULLIFIED. It can neither amend nor modify it. however.for relief from judgment 16 or loss of the right to appeal. xxx xxx xxx A judgment denying relief under Rule 38 is subject to appeal. and. the affirmance by the respondent Court of the denial of the petition is a confirmation of the existence of a final and executory judgment. it is thereby becomes immutable and unalterable. CV No. This provision. of course." 17 Respondent Court may have had in mind the second paragraph of Section 2 of Rule 41 which allows a party who appeals from an order denying a petition for relief to assail the judgment on the merits on the ground that the same is not supported by the evidence or is contrary to law.R. it had nothing more to do save to dismiss the appeal and make pronouncement that the decision of the trial court had long become firm. and in the course thereof.-G. WHEREFORE. SO ORDERED. Said decision provides as follows: Sec. where the judgment is void. Having sustained the trial court's denial of the petition for relief filed under Rule 38 of the rules of Court. 2 Judgments or orders subject to appeal. final and executory. the petition is GRANTED.A. It may only be done if the appellate court overturns such denial. Costs against the private respondent. upon the ground that it is not supported by the evidence or it is contrary to law.
"(5) Such other classes of disputes which the Prime Minister may in the interest of justice determine upon recommendation of the Minister of Justice and the Minister of Local Government. 2.D. otherwise known as the Katarungang Pambarangay Law. Luis S. 1990. REGIONAL TRIAL COURT OF BULACAN AND MILA CONTRERAS. 223602 in the name of Agapito Candido married to Sagraria Lozada. No. On May 11. cities and provinces. 1991 and August 9. It appears on record that petitioners Emiliana and Francisca Candido are the only legitimate children of spouses Agapito Candido and Florencia Santos as shown by the certificates 2 of the latter's Record of Marriage and the petitioners' Record of Birth. No. Branch 18 in Civil Case No. — The Lupon of each barangay shall have authority to bring together the parties actually residing in the same city or municipality for amicable settlement of all disputes except: "(1) Where one party is the government. vs. The petition is impressed with merit. or it does not have a certification that no conciliation or settlement had been reached by the parties. without prejudice. the dispositive portion of which reads. No."
G. the case could be dismissed on motion. DECISION NOCON. In the instant case. or it does not allege prior availment of said conciliation process. On November 6. petitioners instituted an action with the Regional Trial Court of Bulacan. Maximina Candido. 1508 provides: "SEC. BRANCH 18. as follows: "WHEREFORE. 1990. 1508). The Lupon of the barangay ordinarily has the authority to settle amicably all types of disputes involving parties who actually reside in the same municipality. Diaz for petitioners. 1508 as she resides in the same municipality with the petitioners. Register of Deeds of Bulacan and private respondent Mila Contreras to annul the Deed of Extra-judicial Settlement of Estate with Sale. T-
.HONORABLE DEMETRIO MACAPAGAL. No. Alberto M. PRESIDING JUDGE. or a fine exceeding P200. 120656-M issued in the name of private respondent and to reinstate TCT No. NO.D. Hence.D. REMEDIAL LAW. petitioners filed a Motion for Reconsideration 6 which was denied in an Order 7 dated August 9. it is clear that the barangay court or Lupon has jurisdiction over disputes between parties who are actual residents of barangays located in the same city or municipality or adjoining barangays of different cities or municipalities. 1991 of the trial court dismissing the complaint of petitioners Emiliana and Francisca Candido against private respondent Mila Contreras on the ground of lack of jurisdiction for petitioners' failure to comply with the mandatory barangay conciliation process required by Presidential Decree No. petitioners. On December 5. let this case be. 697-M-90 against Sagraria Lozada. petitioners' father eventually left his legitimate family and lived with Sagraria Lozada until his death on May 6. No. reside in the same municipality of Obando. On July 10. city or province. 1991. 1990. Eduardo Candido. J p: This is a petition for certiorari to annul and set aside the Orders 1 dated July 10. "(3) Offenses punishable by imprisonment exceeding 30 days. RULE. Maximina Candido and Eduardo Candido who represented themselves to be the sole heirs of the late Agapito Candido executed a Deed of Extra-judicial Settlement of Estate with Sale 3 covering parcels of land owned by the latter and sold to private respondent Mila Contreras in whose name said properties are now registered under TCT No. Subject matters for amicable settlement. Section 2 of P. 1508. as it is hereby DISMISSED in so far as defendant Mila Contreras is concerned for lack of prior referral of the dispute before the Katarungang Pambarangay. However. SYLLABUS 1. to cancel TCT No. KATARUNGANG PAMBARANGAY (P. 697-M-90 reside in different municipalities and cities. 101328. private respondent filed a Motion to Dismiss 4 on the ground that petitioners failed to comply with the mandatory conciliation process required under P. the trial court issued an Order. — From the provisions of P.00. this petition alleging grave abuse of discretion on the part of the respondent judge dismissing private respondent in the complaint instituted by the petitioners notwithstanding the fact that the other defendants in Civil Case No. April 7.R. 1508 where the other co-defendants reside in barangays of different municipalities. Jorge Candido. or any subdivision or instrumentality thereof: "(2) Where one party is a public officer or employee. EMILIANA CANDIDO AND FRANCISCA CANDIDO. Gorge Candido. and the dispute relates to the performance of his official functions. "(4) Offenses where there is no private offended party.SECOND DIVISION
120656-M." 5 Thereafter. the fact that petitioners and private respondent. Virginia Candido. SCOPE OF POWER. 1993.D. as prayed for. 1991. 1987. Cuvin for private respondent. Sagraria Lozada. Where the complaint does not state that it is one of the excepted cases. Bulacan does not justify compulsory conciliation under P.D. 1508. Virginia Candido. respondents.
Novaliches. . Rizal.D. It would not serve the purpose of the law in discouraging litigation among members of the same barangay through conciliation where the other parties reside in barangays other than the one where the Lupon is located and where the dispute arose. Niño. The Lupon of the barangay ordinarily has the authority to settle amicably all types of disputes involving parties who actually reside in the same municipality. the fact that petitioners and private respondent. SO ORDERED. Where the complaint does not state that it is one of the excepted cases. Virginia and Maximina Candido at Road 2. 1991 and August 9. 1991 dismissing Civil Case No. Doña Faustina Village. cities and provinces. In the instant case. 3. at the election of the complainant. section 3 of the same law provides: "SEC. Municipality of Obando. the petition is GRANTED and the appealed Orders of the trial court dated July 10. Mila Contreras at San Pascual. No.
. Bulacan does not justify compulsory conciliation under P. reside in the same municipality of Obando. or it does not have a certification that no conciliation or settlement had been reached by the parties. all disputes which involve real property or any interest therein shall be brought in the barangay where the real property or any part thereof is situated. Quezon City. . Bulacan while defendants' residences are as follows: Sagraria Lozada and Jorge Candido at Javier Compound.D. Petitioners can immediately file the case in court. the case could be dismissed on motion. 8 In the instant case. Those involving actual residents of different barangays within the same city or municipality shall be brought in the barangay where the respondent or any of the respondents actually resides. The case is remanded to the Regional Trial Court of Bulacan for further proceedings and to REINSTATE private respondent Mila Contreras as defendant in Civil Case No. 697M-90. Bo. No. and the Registrar of Deeds of Bulacan at his official address in Bulacan." From the foregoing provisions of P. However. petitioners alleged in their complaint that they are residents of Barrio Paliwas. Taytay. 1508 where the other co-defendants reside in barangays of different municipalities. "The Lupon shall have no authority over disputes: (1) involving parties who actually reside in barangays of different cities or municipalities. city or province. except where such barangays adjoin each other. 1508. Venue. Municipality of Obando. San Bartolome. . WHEREFORE. Municipality of Obando.Further. it is clear that the barangay court or Lupon has jurisdiction over disputes between parties who are actual residents of barangays located in the same city or municipality or adjoining barangays of different cities or municipalities. or it does not allege prior availment of said conciliation process. — Disputes between or among persons actually residing in the same barangay shall be brought for amicable settlement before the Lupon of said barangay. No costs. Sto. Eduardo Candido at 388 Barrio Paliwas. Bulacan. 697-M-90 in so far as defendant Mila Contreras is concerned are hereby annulled and set aside. Bulacan.
A becoming regard for this judicial hierarchy by the petitioner and her lawyers ought to have led them to file the petition with the proper Regional Trial Court. as the offended parties therein. the Office of the Provincial Prosecutor of Rizal filed two informations for slight physical injuries against the petitioner with the MTC of Makati. 4 The argument degenerated into a scuffle between the petitioner. On the said date. shelves. the court believes that the accused had already waived the right to a reconciliation proceedings before the barangay of Valenzuela. No. the petitioner submitted the required counter-affidavits. Provincial Prosecutor of Pasig. and finally. Metro Manila. No. Makati considering that accused and complainant are residents of different barangays. No. the private respondents filed a complaint with the barangay captain of Valenzuela. 1993. that the
DAVIDE. Albon & Serrano Law Office for petitioner. The barangay captain then reset the confrontation to 26 May 1993. to comply with Section 6 of P. and Atayde and several of Atayde's employees. mandamus. the petitioner was not able to remove all her movable properties. petitioner. on the one hand.
.A. Metro Manila on April 17. 11 On 18 June 1993. 9 In her own counter-affidavit. Metro Manila. No.D. She operated and maintained therein a beauty parlor. On 21 April 1993. CASTRO. and an airconditioning casing. that the aboveentitled cases were filed directly with this court by the public prosecutor on May 11. prohibition. and the Regional Trial Courts have concurrent original jurisdiction to issue writs of certiorari. SUSANNA ATAYDE and WINNIE JAVIER. 10 She also attached to it a certification by the barangay captain of Valenzuela. Metro Manila. On 14 June 1993. 1023. MAXIMO C. On 2 July 1993. public respondent Judge Contreras handed down an order denying the motion to dismiss. 3 The sublease contract expired on 15 April 1993. Makati. HON. Presiding Judge. MAURO M. a mirror.. frames. and habeas corpus. 145233 and 145234 and assigned to Branch 61 thereof. Makati.D. on the other. 1993. dated 18 May 1993. JR. Metro Manila. quo warranto. only the petitioner appeared. At the outset. Makati. 111416 September 26. 1023 6 and 1024. Contreras of Branch 61 of the Metropolitan Trial Court (MTC) of Makati. We have already ruled that while it is true that this Court.: Assailed in this petition for certiorari under Rule 65 of the Rules of Court is the order dated 2 July 1993 of public respondent Judge Maximo C. the petitioner filed a motion to dismiss Criminal Cases Nos. 1508 and Section 18 of the 1991 Revised Rule on Summary Procedure requiring prior referral of disputes to the Lupong Tagapamayapa of the proper barangay. Velez for private respondents. a shampoo bowl. Petitioner subleased from respondent Susanna Atayde (hereinafter Atayde) the other half of the second floor of a building located at corner Reposo and Oliman Streets. 1508 on prior referral to the Lupong Tagapamayapa and pursuant to Section 18 of the 1991 Revised Rule on Summary Procedure.R. such concurrence does not accord litigants unrestrained freedom of choice of the court to which application therefor may be directed. In the first place. 1993 nothing has been achieved by the barangay (Annex "2" of the Counter-Affidavit of the accused). 145233 and 145234 for slight physical injuries. 2 The antecedent facts as disclosed by the pleadings of the parties are not complicated. At this stage of the proceedings. Branch 61. it must be stated that were it not for the importance of the issue to be resolved in the light of the revised law on katarungang pambarangay provided for in the Local Government Code of 1991 (R. 145233 and 145234 for non-compliance with the requirement of P. this offense is about to prescribe. the court believes. the offense subject of these cases accussed in Makati. including private respondent Winnie Javier (hereinafter Javier). which were docketed as Criminal Cases Nos. pertinent portions of which read: The court finds the motion to be without sufficient merit. the Court of Appeals.
On 17 April 1993. the petitioner specifically alleged the prematurity of the filing of the criminal cases for failure to undergo conciliation proceedings as she and the private respondents are residents of Manila. 8 On 11 May 1993.HON. denying the petitioner's motion to dismiss Criminal Cases Nos. vs. 5 On 23 April 1993. respondents. public respondent Judge Contreras of Branch 61 ordered the petitioner to submit her counter-affidavit and those of her witnesses. that the offense charged occurred in the Municipality of Makati. 1994 FELICIDAD UY. 1 this Court would have declined to accept the invocation of its original jurisdiction to issue the extraordinary writ prayed for. 7 The confrontation of the parties was scheduled by the barangay captain for 28 April 1993. and the accused and her witnesses had already filed their counter-affidavits and documents. However.FIRST DIVISION
G. that Barangay Valenzuela of the Municipality of Makati had started the conciliation proceedings between the parties but as of May 18. an argument arose between the petitioner and Atayde when the former sought to withdraw from the subleased premises her remaining movable properties such as cabinets. Under the foregoing circumstances. J. CONTRERAS. that there was an ongoing conciliation between Atayde and the petitioner in Barangay Case No. On 21 May 1993. There is a hierarchy of courts determinative of the venue of appeals which should also serve as a general determinant of the proper forum for the application for the extraordinary writs. Makati. Ramon M. The motion to dismiss is based on the failure of the private respondents. Metropolitan Trial Court. 7160) which took effect on 1 January 1992. and so holds. the private respondent had themselves medically examined for the alleged injuries inflicted on them by the petitioner. which was docketed as Barangay Cases Nos.
However. Hence this special civil action for certiorari.D. nevertheless. and 412 of the Local Government Code of 1991 in relation to Section 7. Sec. Any legal question which may confront the punong barangay in resolving objections to venue herein referred to may be submitted to the Secretary of Justice or his duly designated representative whose ruling thereon shall be binding. Title I.
(c) Offenses punishable by imprisonment exceeding one (1) year or a fine exceeding Five thousand pesos (P5. — . moved that it be excused from filing a memorandum. even assuming arguendo that prior referral to the lupon applies to the case of private respondent Atayde. this Court gave due course to the petition and required the parties to submit their respective memoranda. 1508 which was enacted on 11 June 1978. Pertinent portions of Chapter 7. 1508. — The luppon of each barangay shall have authority to bring together the parties actually residing in the same city or municipality for amicable settlement of all disputes except: (a) Where one party is the government or any subdivision or instrumentality thereof. at anytime before trial. Exception Thereto. the latter had. Sec. Moreover. 409. The petitioner replied to the comments of the private respondents and of the Office of the Solicitor General. and the dispute relates to the performance of his official functions. The Office of the Solicitor General. (d) Those arising at the workplace where the contending parties are employed or at the institution where such parties are enrolled for study shall be brought in the barangay where such workplace or institution is located.complainants may go directly to the court where their complaint is about to prescribe or barred by statute of limitations pursuant to Section 6 of PD 1508. xxx xxx xxx (c) Suspension of prescriptive period of offenses. That such interruption shall not exceed sixty (60) days from the filing of the complaint with the punong barangay. Book III thereof. (b) Those involving actual residents of different barangays within the same city or municipality shall be brought in the barangay where the respondent or any of the respondents actually resides. however. The law on the katarungang pambarangay was originally governed by P. — While the dispute is under mediation. except where such barangay units adjoin each other and the parties thereto agree to submit their differences to amicable settlement by appropriate lupon. Objections to venue shall be raised in the mediation proceedings before the punong barangay. 409." 12 A motion to reconsider the above order was denied on 5 August 1993. (c) All disputes involving real property or any interest therein shall be brought in the barangay where the real property or the larger portion thereof is situated. No. The petitioner contends that the respondent judge committed grave abuse of discretion amounting to lack of jurisdiction when he denied the motion to dismiss considering that the private respondents failed to comply with the mandatory requirement of P. (d) Offenses where there is no private offended party. Subject Matter for Amicable Settlement. conciliation. now embodied in Section 412 of the Local Government Code of 1991 and further required under the 1991 Revised Rule on Summary Procedure. In their Comment. In the Resolution of 16 May 1994. substantially complied with the requirement. No. The court in which non-criminal cases not falling within the authority of the lupon under this Code are filed may. Rule VI of the Rules Implementing P. (f) Disputes involving parties who actually reside in barangays of different cities or municipalities. specifically Chapter 7. No. Venue. As a consequence of this revision.00). No. 13 revised the law on the katarungang pambarangay. at the election of the complainant. 410. 145233 and 145234 should be dismissed for non-compliance with Sections 408. otherwise. 408. the Office of the Solicitor General agrees with the petitioner that Criminal Cases Nos. the Local Government Code of 1991. the private respondents contend that the denial of the motion to dismiss is proper because prior referral of the dispute to the lupon is not applicable in the case of private respondent Javier since she and the petitioner are not residents of barangays in the same city or municipality or of adjoining barangays in different cities or municipalities and that referral to the lupon is not likewise required if the case may otherwise be barred by the statute of limitations. . Procedure for Amicable Settlement. Book III thereof read as follows: Sec. . in view of its prior submission. (b) Where one party is a public officer or employee. (e) Where the dispute involves real properties located in different cities or municipalities unless the parties thereto agree to submit their differences to amicable settlement by an appropriate lupon. The prescriptive periods shall resume upon receipt by the complainant of the complaint or the certificate of repudiation or of the certification to file action issued by the lupon or pangkat secretary: Provided. 410.D. 1508. the same shall be deemed waived. or arbitration. The petition is impressed with merit. motu proprio refer the case to the lupon concerned for amicable settlement. Title I.D. the prescriptive periods for offenses and cause of action under existing laws shall be interrupted upon filing of the complaint with the punong barangay. — (a) Disputes between persons actually residing in the same barangay shall be brought for amicable settlement before the lupon of said barangay.
. 1508 was expressly repealed pursuant to Section 534(b) of the Code.D. (g) Such other classes of disputes which the President may determine in the interest of justice or upon the recommendation of the Secretary of Justice.000. The private respondents filed a rejoinder to the petitioner's reply to their comment and a reply to the comment of the Office of the Solicitor General. P. In its Comment. which the petitioner and the private respondents complied with.
or proceeding involving any matter within the authority of the lupon shall be filed or instituted directly in court or any other government office for adjudication. which is covered by paragraph (d). Appearance of Parties in Person . Section 409 of the Local Government code." What is referred to as receipt by the complainant of the complaint is unclear.00 in P. xxx xxx xxx Sec. 415. it could have been a drafting oversight. shall not exceed sixty days. convenience is the raison d'etre of the rule on venue. conciliation. in the above quoted Section 11 of the Rules and Regulations issued by the Secretary of Justice. Failure to appear. — No complaint.00. delivery of personal property. It increased the authority of the lupon in criminal offenses from those punishable by imprisonment not exceeding thirty days or a fine not exceeding P200. It discourages any intentional delay of the referral to a date close to the expiration of the prescriptive period and then invoking the proximity of such expiration as the reason for immediate recourse to the courts. unless there has been a confrontation between the parties before the lupon chairman or the pangkat. and shall bar the complainant from seeking judicial recourse for the same cause of action as that dismissed. Suspension of prescriptive period of offenses and cause of action . The third feature is aimed at maximizing the effectiveness of the mediation. Sanctions The complaint may be dismissed when complainant. As to venue. — a. or arbitration process. justice would be achieved at less expense to the litigants. and peace and order therein enhanced. and support pendente lite. — The parties may go directly to court in the following instances: (1) Where the accused is under detention. 1508 to those offenses punishable by imprisonment not exceeding one year or a fine not exceeding P5. cordial relationships among protagonists in a small community would be restored. 3. the parties must appear in person without the assistance of counsel or representative. and (4) Where the action may otherwise be barred by the statute of limitations. the Secretary of Justice promulgated the Katarungang Pambarangay Rules to implement the revised law on katarungang pambarangay. be from receipt by the complainant of the certificate of repudiation or the certification to file action issued by the lupon or the pangkat secretary.D. The running of the
prescriptive periods shall resume upon receipts by the complainant of the certificate of repudiation or of the certification to file action issued by the Lupon or Pangkat Secretary: Provided. After the expiration of the aforesaid period of sixty days. The first feature has necessarily broadened the jurisdiction of the lupon and if the mediation and conciliation process at that level would be effectively pursued. The second feature. Such dismissal ordered by the Punong Barangay/Pangkat Chairman after giving the complainant an opportunity to explain his non-appearance shall be certified to by the Lupon or Pangkat Secretary as the case may be. This rule provides convenience to the parties. attachment. refuses or willfully fails to appear without justifiable reason on the date set for mediation. such that the resumption of the running of the prescriptive period shall. 2. xxx xxx xxx Sec. petition. Such suspension. That barangay may not be the appropriate venue in either paragraph (a) or paragraph (b) of the said section. shall be brought in the barangay where such workplace or institution is located. that such interruption shall not exceed sixty (60) days from the filing of the complaint with the Punong Barangay. (2) Where a person has otherwise been deprived of personal liberty calling for habeas corpus proceedings. Procedural rules including those relating to venue are designed to insure a fair and convenient hearing to the parties with complete justice between them as a result. (3) Where actions are coupled with provisional remedies such as preliminary injunction. Accordingly. Sections 8 and 11 of Rule VI (Amicable Settlement of Disputes) thereof provide in part as follows: SECTION 8. except for minors and incompetents who may be assisted by their next-of-kin who are not lawyers. conciliation. It may thus be observed that the revised katarungang pambarangay law has at least three new significant features. 412. Pursuant to the authority vested in him under Section 421 of the Code. it provides that disputes arising at the workplace where the contending parties are employed or at the institution where such parties are enrolled for study.000. — (a) Pre-condition to filing of complaint in court. however. to wit: 1. — In all katarungang pambarangay proceedings. No. the filing of the case in court or government office for adjudication shall be subject to the provision of paragraph (b) (4) of Rule VIII of these Rules. 14 Elsewise stated. It also affords the parties sufficient time to cool off and face each other with less
. (b) Where parties may go directly to court . Paragraph (c) of Section 410 of the law. properly. suffers from some ambiguity when it provides that the prescriptive periods "shall resume upon receipt by the complainant of the complaint or the certificate of repudiation or of the certification to file action issued by the lupon or pangkat secretary. or arbitration process.xxx xxx xxx Sec. Conciliation. however. obviously. also broadens the authority of the lupon in the sense that appropriate civil and criminal cases arising from incidents occurring in workplaces or institutions of learning shall be brought in the barangay where such workplace or institution is located. — The prescriptive periods for offenses and causes of action under existing laws shall be interrupted upon filing of the complaint with the Punong Barangay. action. and that no conciliation or settlement has been reached as certified by the lupon secretary or pangkat secretary as attested to by the lupon chairman or pangkat chairman or unless the settlement has been repudiated by the parties thereto. after due notice. conciliation or arbitration. It provides for the suspension of the prescriptive periods of offenses during the pendency of the mediation. 11. the phrase " the complaint or" is not found. few cases would reach the regular courts. however.
Where. They are actual residents in the same barangay and their disputes does not fall under any of the excepted cases. Pogoy. shall be dismissed without prejudice. however. Morata vs. This Court said so in Garces vs. realizing the weakness of their position under P. Referral to Lupon. 126 SCRA 217 (1983) have held that P. jurisdictional. as in the said cases. non-compliance with which would deprive a court of its jurisdiction either over the subject matter or over the person of the defendant. The filing then of Criminal Cases Nos. this petition would not have reached us and taken valuable attention and time which could have been devoted to more important cases. Had he done so. and (c) even assuming that the law applies insofar as Atayde is concerned. which is condemnable for it disregards the virtue of candor. 145233 and 145234 with the said court on 11 May 1993 was premature and. we have held in the past that prior recourse to the conciliation procedure required under P. more specifically on the provisions on the Katarungang pambarangay. executive and judicial departments of the Philippines. In view of the private respondents' failure to appear at the first scheduled mediation on 28 April 1993 for which the mediation was reset to 26 May 1993. No. she has substantially complied with it. 1508. de Borromeo vs. 125 SCRA 444 (1983). Moreover. no complaint for slight physical injuries could be validly filed with the MTC of Makati at any time before such date. 18. Respondent judge did not do any better. No.D." (Emphasis omitted) Such non-compliance is not. Section 410 of the Code. Makati. In Peregrina vs. the private respondents. may otherwise be barred by the statute of limitations. the prescriptive period was automatically suspended for a maximum period of sixty days from 23 April 1993 when the private respondents filed their complaints with the lupon of Valenzuela Makati. 17 Furthermore. No. this Court promulgated the Revised Rule on Summary Procedure. Rule 129 of the Rules of Court. courts are mandatorily required to take judicial notice of "the official acts of the legislative. The Office of the Provincial Prosecutor of Rizal should have exerted enough diligence to inquire from the private respondents if prior referral to the lupon was necessary before filing the informations. He cannot justify its denial by taking refuge under Section 6 of P. Noncompliance with that condition precedent could affect the sufficiency of the plaintiff's cause of action and make his complaint vulnerable to dismissal on the ground of lack of cause of action or prematurity. the fact of non-compliance with and non-observance of such procedure has been seasonably raised as an issue before the court first taking cognizance of the complaint. No. cases where this Court ruled that the failure of the defendant to seasonably invoke non-referral to the appropriate lupon operated as a waiver thereof. In their Comment. dismissal of the action is proper. The petitioner further invoked the aforequoted Section 18. however. The condition is analogous to exhaustion of administrative remedies. The parties herein fall squarely within the ambit of P.D.D. While P.D. the private respondents are estopped from disavowing the authority of the body which they themselves had sought. (b) the law does not apply when the action. the subsequent issuance of the certification to file action by the barangay. Panis. The complaint becomes vulnerable to a motion to dismiss. ever mindful that under Section 1. the petitioner and the respondent had in mind only P. cured the defect. xxx xxx xxx The precise technical effect of failure to comply with the requirement of P. when such defect was initially present when the case was first filed in the trial court. He should have taken judicial notice thereof. Section 412(b)(4) of the Local Government Code of 1991) which states that the parties may go directly to court where the action is about to prescribe. In the proceeding before the court a quo. changed tack. 1508 is not a jurisdictional requirement. Their act of trifling with the authority of the lupon by unjustifiably failing to attend the scheduled mediation hearings and instead
. 1508 has been repealed by the Local Government Code of 1991. they assert that the said law is not applicable to their cases before the court a quo because (a) the petitioner and respondent Atayde are not residents of barangays in the same city or municipality.D. Section 412 of the Local Government Code. This provision shall not apply to criminal cases where the accused was arrested without a warrant. However. 1508 where applicable is much the same effect produced by non-exhaustion of administrative remedies.D. (emphasis omitted) There were.D. Even in her instant petition." We have ruled that a judge is called upon to exhibit more than just a cursory acquaintance with the statutes and procedural rules. No. lacking which the case can be dismissed. Go. Makati. respondent Judge Contreras should have granted the motion to dismiss the criminal cases. The sixty-day suspension of the prescriptive period could spell the difference between peace and a full-blown. and Vda. None knew of the repeal of the decree by the Local Government Code of 1991." 20 Yet. the controversy there alleged is not ripe for judicial determination. which constituted substantial compliance with the said requirement. 1508. wearisome. 21 He should have applied the revised katarungang pambarangay law under the Local Government Code of 1991. 18 On 15 October 1991.D. 1508 (more properly. 1508 since they did refer their grievances to what might be a wrong forum under the decree. pursuant to paragraph (a). the petitioner invokes the decree and Section 18 of the Revised Rule on Summary Procedure. the jurisprudence built thereon regarding prior referral to the lupon as a pre-condition to the filing of an action in court remains applicable because its provisions on prior referral were substantially reproduced in the Code. 15 this Court stated: Thus.emotionalism and more objectivity which are essential ingredients in the resolution of their dispute. in a deliberate effort to be cunning or shrewd. This is because. the complaint becomes afflicted with the vice of prematurity. pursuant to paragraph (c). they assert that on 20 April 1993 Atayde "filed a complaint against petitioner before the barangay council of Barangay Valenzuela. 1508 where there is no showing of compliance with such requirement. — Cases requiring referral to the Lupon for conciliation
under the provisions of Presidential Decree No. Court of Appeals: 16 In fine. or the lack of earnest efforts to compromise suits between family members. is distressing. in compliance with the requirement of the Katarungang Pambarangay Law under the Local Government Code. of course. 19 Section 18 thereof provides: Sec. No. having brought the dispute before the lupon of barangay Valenzuela. His total unawareness of the Local Government Code of 1991. and expensive litigation between the parties. 1508 makes the conciliation process at the Barangay level a condition precedent for the filing of a complaint in Court. as earlier stated. and may be revived only after such requirement shall have been complied with.
government prosecutors should exercise due diligence in ascertaining compliance with it. on 23 April 1993 and automatically suspended for a period of sixty days. 145233 and 145234 were filed with the court a quo. The Orders of respondent Judge of 2
July 1993 and 5 August 1993 in Criminal Cases Nos. or until 22 June 1993. Costs against the private respondents. and trial courts should not hesitate to impose the appropriate sanctions for non-compliance thereof." These penalties are light under Article 25 of the Revised Penal Code and would prescribe in two months pursuant to Article 90.filing the complaint right away with the trial court cannot be countenanced for to do so would wreak havoc on the barangay conciliation system. she submitted to it and attended the scheduled conciliation on 28 April 1993 and invoked the pre-condition of referral to the lupon in her counter-affidavit. 145233 and 145234 were allegedly inflicted on 17 April 1993. Makati. after failing to appear at the initial confrontation and long after the criminal cases were filed. this Court wishes to emphasize the vital role which the revised katarungang pambarangay law plays in the delivery of justice at the barangay level. SO ORDERED. there was substantial compliance with the requirement of referral to the lupon. 24 The request is dated 23 June 1993. the offense for which she may be liable would only be slight physical injuries under paragraph (2). both entitled "People of the Philippines vs. Parties to disputes cognizable by the lupon should. Evidently. considering that the accused and the complainant are residents of different barangays. Before closing these cases. Section 412 of the Local Government Code. The respondent judge thus acted with grave abuse of discretion in refusing to dismiss Criminal Cases Nos. 145233 and 1452334. Granting arguendo that the petitioner did inflict the alleged physical injuries." The petitioner did not waive the reconciliation proceedings before the lupon of Valenzuela. Makati. considering that per the medical certificates 22 the injuries sustained by the private respondents would "heal" in nine days "in the absence of complication" and there is no showing that the said injuries incapacitated them for labor or would require medical attendance for such period. 25 or nearly one and a half months after Criminal Cases Nos. stability. WHEREFORE. the prescriptive period therefor would have expired two months thereafter. since the slight physical injuries charged in Criminal Cases Nos.
. a certification to file action is issued. in any event. Evidently. Accordingly. Felicidad Uy" are hereby SET ASIDE and the respondent Judge is hereby DIRECTED to DISMISS said cases within ten (10) days from receipt of a copy of this decision. Neither are we persuaded by the reasoning of the respondent Judge that the petitioner "had already waived the right to a reconciliation proceedings before the barangay of Valenzuela. the instant petition is GRANTED. there was no basis for the invocation by the respondent judge of the exception provided for in paragraph (b). this was done to support their contention in the said court that. with sincerity. 145233 and 145234. 23 Nor would this Court accept the contention of the private respondent that the parties could not agree on a compromise and that they had to request the barangay captain to issue a certification to file action. Article 266 of the Revised Penal Code. the private respondents would still have fifty-six days within which to file their separate criminal complaints for such offense. The penalty therefor would only be " arresto menor or a fine not exceeding 200 pesos and censure. and in effectively preventing or reducing expensive and wearisome litigation. If no mediation or conciliation could be reached within the said period of suspension and. It must be stressed that the private respondents. Nevertheless. had no right to demand the issuance of a certification to file action. its running was tolled by the filing of the private respondents' complaints with the lupon of Valenzuela. accordingly. and progress therein. exhaust the remedies provided by that law. Makati. in promoting peace.
Complainant. She accused respondent judge of unduly delaying for LEONARDO-DE CASTRO. neglect of duty. however. R-595 entitled Felicisima Rivera-Diaz v.. 2008. 2010. Section 10 thereof provides: SEC. JJ. He insisted that complainant was just trying to circumvent the Katarungang Pambarangay Law. Complainant further pointed out that the case had already been previously referred to the lupon. the members of the Lupong Tagapamayapa of Barangay North Poblacion declared that barangay conciliation between the parties failed to reach a settlement. Gestopa. Cebu. respondent judge insisted that he has the authority to refer it back to barangay for conciliation. 10-2262-MTJ] Dissatisfied. considering that the parties are not residents of the same barangay or municipality. should the court find it necessary to clarify certain material facts. 2009. an Order was issued directing the parties to appear before the Philippine Mediation Center (PMC) for mediation. issue an order specifying the matters to be clarified. claimed that she is no longer a resident of Naga. MTJ-11-1786 On July 20.versus -
JUDGE GERARDO E. The instant administrative case was. Municipal Trial Court (MTC). A. Naga. Since complainant cannot attend the conference because of her heart ailment. Naga. Talisay City. Complainant alleged that respondent judge exhibited gross ignorance of the law in referring the case back to barangay conciliation when clearly CARPIO. for incompetence. She stressed that she is no longer a resident of Naga and is now actually residing in Dumlog. as evidenced by the Certification to File Action dated May 20. complainant filed the instant administrative complaint against Present: Judge Gestopa. No. [Formerly OCA IPI No. 2011.
. The Rule on Summary Procedure clearly and undoubtedly provides for the period within which judgment should be rendered.M. and require the parties to submit affidavits or other evidence on the said matters within ten (10) days from receipt of said order. Elmer Llanes. admitted that on November 16. gross ignorance of the law. On February 17. In fact. DIAZ. 2009. 2008. she requested that the case be transferred to another ABAD. The antecedent facts are as follows: Complainant alleged that on April 27. June 22. GESTOPA. On July 8.00). a Certification to File Action in court had been issued on May 20. Diaz against Judge Gerardo E. Jr. docketed as Case No. Complainant's counsel objected and moved for mediation instead. Complainant. Rendition of judgment. Respondent judge. which was issued by Barangay North Poblacion and attached to the complainant's motion for reconsideration. Complainant moved for reconsideration. the Office of the Court Administrator (OCA) directed Judge Promulgated: Gestopa to submit his Comment on the complaint against him. She further claimed that respondent judge PERALTA. to appear in her behalf. Respondent judge pointed out that while complainant denied that she is a resident of Naga. Judge Gestopa concluded that since the subject property is in Naga. thus.” In a Memorandum dated January 12.000.
x--------------------------------------------------x DECISION PERALTA. 10. Judgment shall be rendered within fifteen (15) days after the receipt of the last clarificatory affidavits. There is no doubt that Civil Case No. Judge Gestopa denied the motion for reconsideration. to give way for the possible amicable settlement of the parties. Judge Gestopa recommended the case for barangay conciliation. the case was scheduled for pre-trial conference. She further admitted that she did not attach the
. During the conference. it is therefore proper to refer the case for barangay conciliation. Spouses Ruel & Diana Betito and Isidro Pungkol . Spouses Ruel & Diana Betito and Isidro Pungkol. Cebu.Within thirty (30) days after receipt of the last affidavits and position papers. 2009. RULING The findings of the OCA are well taken. She argued that the referral of the case to the lupon is a violation of the Rules on Summary Procedure. 2010. or the expiration of the period for filing the same. Respondent. Chairperson she is not a resident of Naga. Cebu. appeared to be biased. JR. Municipal Trial Court. or the
FELICISIMA R.. recommended to be redocketed as a regular administrative matter against Judge Gestopa. and conduct unbecoming of a judge relative to Civil Case No. J. However. Thus. J. R-595 was a case of unlawful detainer covered by the Revised Rules on Summary Procedure. likewise. months the resolution of the case. she however actually sought barangay conciliation. during the said period. she filed an unlawful detainer case before the MTC of Naga. . 2010. it may. the OCA found Judge Gestopa guilty of gross ignorance of the law and procedure. and court. Cebu. MENDOZA.: Before us is an administrative complaint filed by complainant Felicisima R. R-595.. Judge Gestopa argued that the referral of the case to the barangay for conciliation was made in good faith. 2009. the court shall render judgment. On May 5. 2011 In his Comment dated August 2. entitled Felicisima Rivera-Diaz v. and that complainant has always been a resident of Naga. and recommended that he be fined in the amount of Forty Thousand Pesos (P40.SECOND DIVISION
certificate to the complaint since she believed that the same was not required anymore. the PMC submitted the Mediator's Report of “Unsuccessful Mediation. she instead sent her nephew. on the other hand. However. pursuant to Section 408 (g) of the Local Government Code.
. To do otherwise would ultimately defeat the very essence of the creation of the Rules on Summary Procedure.. The court shall not resort to the clarificatory procedure to gain time for the rendition of the judgment. The reason is because the Rule on Summary Procedure was promulgated for the purpose of achieving "an expeditious and inexpensive determination of cases. 7.00 for his failure to decide a case within the required period. there was no reason anymore to refer the case back to the barangay for the sole purpose of amicable settlement. to wit: SEC. respondent judge was fined in the amount of P10. Cebu. to wit: in In Re: A. Renato M. the Court finds Judge Gerardo E. The defendant who appears in the absence of the plaintiff shall be entitled to judgment on his counterclaim in accordance with Section 6 hereof.. because the abovementioned Sections 7 and 8 provided already for such action. . the court shall issue an order stating the matters taken up therein..000. Record of preliminary conference. Gestopa.. MTJ-00-1303. GUILTY of Gross Ignorance of the Law and is hereby FINED in the amount of Twenty-One Thousand Pesos (P21. Gestopa." The fact that unlawful detainer cases fall under summary procedure. for a similar offense. Judge Gerardo E. . respondent's act of referring the case to barangay conciliation rendered its purpose moot and academic.000..00 but not more than P40. Jr. We are unconvinced. we deem it proper to impose a fine in the amount of P21. In this case. We have held in numerous cases that the failure to apply elementary rules of procedure constitutes gross ignorance of the law and procedure. the plaintiff shall be entitled to judgment in accordance with Section 6 hereof. gross ignorance of the law or procedure is a serious charge for which the respondent judge shall be penalized with either (a) dismissal. respondent judge was fined in the amount of P1.00..M.. the rules violated were basic procedural rules.Whether. likewise.Whether the parties have arrived at an amicable settlement. Time and again. b).Within five (5) days after the termination of the preliminary conference. leaving no room for interpretation.A clear specification of material facts which remain controverted.00. a preliminary conference shall be held. 2001. with a STERN WARNING that a repetition of the same or similar offenses in the future shall be dealt with more severely. If a sole defendant shall fail to appear.. To further strengthen and emphasize the objective of expediting the adjudication of cases falling under the Revised Rules on Summary Procedure. d). (b) suspension from office.. December 13. Under Rule 140 of the Rules of Court. in Farrales v. This is in keeping with the spirit of the rule which aims to achieve an expeditious and inexpensive determination of the cases falling thereunder... and e).000. considering that the matter falls under the Rule on Summary Procedure. All cross-claims shall be dismissed.The stipulations or admissions entered into by the parties. the referral of said subject civil case to the lupon is saliently an unsound exercise of discretion. judgment may be rendered without the need of further proceedings. 8. because as previously noted.00. WHEREFORE. We cannot accept the justifications made by respondent judge.. speedy resolution thereof is thus deemed a matter of public policy. Judge Gerardo E. Jr. No. -s It is thus very clear that the period for rendition of judgments in cases falling under summary procedure is 30 days. or (c) a fine of more than P20. in A.
a)... in which event the judgment shall be rendered within thirty (30) days from issuance of the order. This Rule shall not apply where one of two or more defendants sued under a common cause of action who had pleaded a common defense shall appear at the preliminary conference. Municipal Trial Court. on the basis of the pleadings and the stipulations and admissions made by the parties. Jr .. Casia v. MTJ-99-1181. August 11. c).Such other matters intended to expedite the disposition of the case. considering respondent judge's two previous administrative infractions. Naga.
Section 8 of said Rule reads in full:
SEC. and if so.... the terms thereof. Thus. Vidala Saceda v. the presence of what it considered to be a valid Certification to File Action in court due to unsuccessful conciliation. The rules on pre-trial in ordinary cases shall be applicable to the preliminary conference unless inconsistent with the provisions of this Rule. No. 1999. All that was needed for respondent to do was to apply them. we have reiterated that the rules of procedure are clear and unambiguous. Preliminary conference.M. Camarista. including but not limited to:
..Not later than thirty (30) days after the last answer is filed. We note that he had been previously penalized in two other administrative cases due to his failure to decide the cases falling under the Rules on Summary Procedure within the reglementary period. Respondent judge argued that such referral to the barangay is justified by Section 408 (g) of the Local Government Code. the Court explained that while the last paragraph of the afore-cited provision apparently gives the Court discretion to refer the case to the lupon for amicable settlement although it may not fall within the authority of the lupon. Sections 7 and 8 mandated preliminary conference which is precisely for the purpose of giving room for a possible amicable settlement.000. SO ORDERED. Furthermore.00).. considering that complainant had already manifested in court.. considering that this is not the first time that he seemed to be at loss as to how to correctly interpret the Rules on Summary Procedure. Indeed.. Neither good faith nor lack of malice will exonerate respondent.000. albeit belatedly.expiration of the period for filing the same. Gestopa. appearance of parties.000. The failure of the plaintiff to appear in the preliminary conference shall be a cause for the dismissal of his complaint.
R. Branch 88. Branch 32. respondent. the spouses Aquino did not receive the proceeds thereon or benefited therefrom. 17450 for it did not stand to be injured or benefited by the suit. DECISION CHICO-NAZARIO. the MeTC rendered a Decision in Civil Case No. of failure to comply with barangay conciliation proceedings.12 On appeal. in its assailed Decision and Resolution. AURE1. J. it is hereby affirmed in its entirety. Aure contended that the MeTC erred in dismissing his Complaint with prejudice on the ground of non-compliance with barangay conciliation process. The RTC likewise validated the ruling of the MeTC that the main issue involved in Civil Case No. which dismissed respondent Ernesto Aure’s (Aure) complaint for ejectment on the ground. Inc. affirming the Decision 6 of the Metropolitan Trial Court (MeTC) of Quezon City. Aure appealed the adverse RTC Decision with the Court of Appeals arguing that the lower court erred in dismissing his Complaint for lack of cause of action. (Aure Lending) filed a Complaint for ejectment against Aquino before the MeTC docketed as Civil Case No. Aure Lending Investors. 15 On 17 October 2001. finding no reversible error in the appealed judgment. even after Aure successfully secured a loan. Aquino is now before this Court via the Petition at bar raising the following issues:
LIBRADA M. premises considered. He was not given the opportunity to rectify the procedural defect by going through the barangay mediation proceedings and. the RTC affirmed the dismissal of the Complaint on the same ground that the dispute was not brought before the Barangay Council for conciliation before it was filed in court. Aure shall secure a loan from a bank or financial institution in his own name using the subject property as collateral and turn over the proceeds thereof to the spouses Aquino. premises considered. the RTC stressed that the barangay conciliation process is a conditio sine qua non for the filing of an ejectment complaint involving residents of the same barangay. No. petitioner. Aquino admitted that there was a sale but such was governed by the Memorandum of Agreement11 (MOA) signed by Aure. 2008
DISMISSED. inter alia. The MeTC observed that Aure and Aquino are residents of the same barangay but there is no showing that any attempt has been made to settle the case amicably at the barangay level. hereby ordered
. Quezon City.16 In a Resolution dated 8 May 2002. The MeTC further observed that Aure Lending was improperly included as plaintiff in Civil Case No. Hence.9 In her Answer. The decretal part of the Court of Appeals Decision reads: WHEREFORE. vs. Let the records be remanded back to the court a quo for further proceedings – for an eventual decision of the substantive rights of the disputants.S. Aure asserted that misjoinder of parties was not a proper ground for dismissal of his Complaint and that the MeTC should have only ordered the exclusion of Aure Lending as plaintiff without prejudice to the continuation of the proceedings in Civil Case No. 205447 registered with the Registry of Deeds of Quezon City (subject property). reversed the Decision 5 of the Regional Trial Court (RTC) of Quezon City.THIRD DIVISION G. among other grounds. 153567 February 18. AQUINO. Aure and Aure Lending alleged that they acquired the subject property from Aquino and her husband Manuel (spouses Aquino) by virtue of a Deed of Sale 8 executed on 4 June 1996. The appellate court. The dispositive portion of the MeTC Decision reads: WHEREFORE.ERNEST S. In their Complaint. The subject of the present controversy is a parcel of land situated in Roxas District. as it is. The appellate court declared that the failure of Aure to subject the matter to barangay conciliation is not a jurisdictional flaw and it will not affect the sufficiency of Aure’s Complaint since Aquino failed to seasonably raise such issue in her Answer. 63733. [Aquino’s] counterclaim is likewise dismissed. Aure claimed that after the spouses Aquino received substantial consideration for the sale of the subject property. As stated in the MOA. However. Undaunted. On 20 April 1999. thereafter. The Court of Appeals further ruled that mere allegation of ownership does not deprive the MeTC of jurisdiction over the ejectment case for jurisdiction over the subject matter is conferred by law and is determined by the allegations advanced by the plaintiff in his complaint. 17450 lacks cause of action for Aure and Aure Lending do not have any legal right over the subject property.and the decisions of the trial courts below REVERSED and SET ASIDE. with an area of 449 square meters and covered by Transfer Certificate of Title (TCT) No.10 Aquino countered that the Complaint in Civil Case No. Aquino (Aquino). seeking the reversal and the setting aside of the Decision 3 dated 17 October 2001 and the Resolution 4 dated 8 May 2002 of the Court of Appeals in CA-G. the petition is hereby GRANTED .13 Aure’s Motion for Reconsideration was denied by the RTC in an Order 14 dated 27 February 2001.: Before this Court is a Petition for Review on Certiorari2 under Rule 45 of the Revised Rules of Court filed by petitioner Librada M. 17450 is incapable of pecuniary estimation and cognizable by the RTC. reversing the MeTC and RTC Decisions and remanding the case to the MeTC for further proceedings and final determination of the substantive rights of the parties. In a Decision dated 14 December 2000. the Court of Appeals rendered a Decision. 17450 until the final determination thereof. Aure further asseverated that mere allegation of ownership should not divest the MeTC of jurisdiction over the ejectment suit since jurisdiction over the subject matter is conferred by law and should not depend on the defenses and objections raised by the parties.R. and failure to comply therewith constitutes sufficient cause for the dismissal of the action. 17450 in favor of Aquino and dismissed the Complaint for ejectment of Aure and Aure Lending for noncompliance with the barangay conciliation process. the action was converted from a mere detainer suit to one "incapable of pecuniary estimation" which properly rests within the original exclusive jurisdiction of the RTC. Finally. the RTC ruled: WHEREFORE. mere assertion of ownership by the defendant in an ejectment case will not oust the MeTC of its summary jurisdiction over the same. they refused to vacate the same. the MeTC ruled that since the question of ownership was put in issue.7 Aure and E. Finally. 17450. SP No. Hence. refile the Complaint. the Court of Appeals denied the Motion for Reconsideration interposed by Aquino for it was merely a rehash of the arguments set forth in her previous pleadings which were already considered and passed upon by the appellate court in its assailed Decision. let this case be.
and (4) Where the action may otherwise be barred by the statute of limitations. 7160.(a) Pre-condition to filing of complaint in court . 18 To ensure this objective. according to the conceptor of the system. 1508) is much the same effect produced by non-exhaustion of administrative remedies -.000. and support pendente lite. – The parties may go directly to court in the following instances: (1) Where the accused is under detention. There is no dispute herein that the present case was never referred to the Barangay Lupon for conciliation before Aure and Aure Lending instituted Civil Case No. II. We do not agree. it should also be compulsory. (g) Such other classes of disputes which the President may determine in the interest of justice or upon the recommendation of the Secretary of Justice. (3) Where actions are coupled with provisional remedies such as preliminary
injunction. otherwise known as the Katarungang Pambarangay Law. (c) Conciliation among members of indigenous cultural communities. (e) Where the dispute involves real properties located in different cities or municipalities unless the parties thereto agree to submit their differences to amicable settlement by an appropriate lupon. – No complaint. otherwise known as The Local Government Code. WHETHER OR NOT NON-COMPLIANCE WITH THE BARANGAY CONCILIATION PROCEEDINGS IS A JURISDICTIONAL DEFECT THAT WARRANTS THE DISMISSAL OF THE COMPLAINT. – The lupon of each barangay shall have authority to bring together the parties actually residing in the same city or municipality for amicable settlement of all disputes except: (a) Where one party is the government or any subdivision or instrumentality thereof.I. (b) Where one party is a public officer or employee.00). With this primary objective of the barangay justice system in mind. hence. and the dispute relates to the performance of his official functions. and the controversy there alleged is not ripe
. 412. Subject Matter for Amicable Settlement. (f) Disputes involving parties who actually reside in barangays of different cities or municipalities. and the policy behind it would be better served if an out-of-court settlement of the case is reached voluntarily by the parties. which took effect on 1 January 1992. the late Chief Justice Fred Ruiz Castro. is essentially arbitration in character. action. This could be accomplished through a proceeding before the barangay courts which. 408. and that no conciliation or settlement has been reached as certified by the lupon secretary or pangkat secretary as attested to by the lupon chairman or pangkat chairman or unless the settlement has been repudiated by the parties thereto. Section 6 of Presidential Decree No. unless there has been a confrontation between the parties before the lupon chairman or the pangkat. or proceeding involving any matter within the authority of the lupon shall be filed or instituted directly in court or any other government office for adjudication. 1508 is to reduce the number of court litigations and prevent the deterioration of the quality of justice which has been brought by the indiscriminate filing of cases in the courts. She likewise avers that this objection was timely raised during the pre-trial and even subsequently in her Position Paper submitted to the MeTC. dismissible. The pertinent provisions of the Local Government Code making conciliation a precondition to filing of complaints in court. 1508. The said section has been declared compulsory in nature. 1508 is now incorporated in Republic Act No. Exception Therein . (2) Where a person has otherwise been deprived of personal liberty calling for habeas corpus proceedings. (c) Offenses punishable by imprisonment exceeding one (1) year or a fine exceeding Five thousand pesos (P5. except where such barangay units adjoin each other and the parties thereto agree to submit their differences to amicable settlement by an appropriate lupon. petition. read: SEC. It is true that the precise technical effect of failure to comply with the requirement of Section 412 of the Local Government Code on barangay conciliation (previously contained in Section 5 of Presidential Decree No. The barangay justice system was established primarily as a means of easing up the congestion of cases in the judicial courts. 150819 requires the parties to undergo a conciliation process before the Lupon Chairman or the Pangkat ng Tagapagkasundo as a precondition to filing a complaint in court subject to certain exceptions 20 which are inapplicable to this case. 17 The primordial objective of Presidential Decree No. attachment. In fact.the complaint becomes afflicted with the vice of pre-maturity. (d) Offenses where there is no private offended party. WHETHER OR NOT ALLEGATION OF OWNERSHIP OUSTS THE MeTC OF ITS JURISDICTION OVER AN EJECTMENT CASE. The only issue to be resolved is whether non-recourse to the barangay conciliation process is a jurisdictional flaw that warrants the dismissal of the ejectment suit filed with the MeTC. delivery of personal property.. (b) Where parties may go directly to court . SEC. no allegation of such barangay conciliation proceedings was made in Aure and Aure Lending’s Complaint before the MeTC. it would be wholly in keeping with the underlying philosophy of Presidential Decree No. and to make it truly effective. Aquino posits that failure to resort to barangay conciliation makes the action for ejectment premature and. 17450.21 Presidential Decree No. – The customs and traditions of indigenous cultural communities shall be applied in settling disputes between members of the cultural communities. Conciliation.
for judicial determination. but the same would not prevent a court of competent jurisdiction from exercising its power of adjudication over the case before it.23 As enunciated in the landmark case of Royales v. by virtue of any contract. the court shall dismiss the claim. there is no room for construction or interpretation. or stealth.22 Nevertheless. since she is already precluded from doing so. which raises the exclusive affirmative defense of simulation. where the defendants. By this acquiescence. Intermediate Appellate Court24: Ordinarily. – Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. 26 It is clear and categorical in Section 1. strategy. and when.28 Thus. As held in a case of similar circumstances. and basic is the rule in statutory construction that when the law is clear and free from any doubt or ambiguity. an Answer) or a motion to dismiss. a similar or identical rule is provided for all other motions in Section 8 of Rule 15 of the same Rule which states: Sec. 1508 is meritorious. the Court takes note that the defendant [Aquino] herself did not raise in defense the aforesaid lack of conciliation proceedings in her answer. This principle holds. The complaint becomes vulnerable to a motion to dismiss. judgment. order. a person deprived of the possession of any land or building by force. As long as these allegations demonstrate a cause of action either for forcible entry or for unlawful detainer. the conciliation process is not a jurisdictional requirement. Consequently. 17450 motu proprio. procedurally. that there is another action pending
between the same parties for the same cause.) While the aforequoted provision applies to a pleading (specifically. However. 17450 and there is utter lack of any objection on her part to any deficiency in the complaint which could oust the MeTC of its jurisdcition. vendee. non-compliance with the condition precedent prescribed by P. for the issue of non-recourse to barangay mediation proceedings should be impleaded in her Answer. Neither could the MeTC dismiss Civil Case No. or proceeding shall include all objections then available. since the Deed of Sale vesting Aure with the legal right over the subject property is simulated. Thus. we similarly find that Aquino cannot be allowed to attack the jurisdiction of the MeTC over Civil Case No. the court acquires jurisdiction over the subject matter. 8. What is more. Rule 70 of the Rules of Court. Who may institute proceedings. express or implied. as in this case. 17450 after having submitted herself voluntarily thereto.27 As has been our consistent ruling. and all objections not so included shall be deemed waived. or (3) where the action is barred by a prior judgment or by a statute of limitations. Rule 9 of the Revised Rules of Court that failure to raise defenses and objections in a motion to dismiss or in an answer is deemed a waiver thereof. so that non-compliance therewith cannot affect the jurisdiction which the court has otherwise acquired over the subject matter or over the person of the defendant. failed to object to such exercise of jurisdiction in their answer and even during the entire proceedings a quo. Rule 9 of the 1997 Rules of Civil Procedure: Sec. they participated in the trial of the case by cross-examining respondent Planas. Again. While petitioners could have prevented the trial court from exercising jurisdiction over the case by seasonably taking exception thereto. Aquino further argues that the issue of possession in the instant case cannot be resolved by the MeTC without first adjudicating the question of ownership. which reads: SECTION 1. even if the facts proved during the trial do not support the cause of action thus alleged. there is no occasion for interpretation.may resolve to dismiss the action for insufficiency of evidence. The fact that Aquino raised such objection during the pre-trial and in her Position Paper is of no moment. (2) there is another cause of action pending between the same parties for the same cause. a motion attacking a pleading. the failure of a defendant [Aquino] in an ejectment suit to specifically allege the fact that there was no compliance with the barangay conciliation procedure constitutes a waiver of that defense. The necessary allegations in a Complaint for ejectment are set forth in Section 1. 1. The 1997 Rules of Civil Procedure provide only three instances when the court may motu proprio dismiss the claim. We thus quote with approval the disquisition of the Court of Appeals: Moreover. vendor. petitioners cannot now be allowed belatedly to adopt an inconsistent posture by attacking the jurisdiction of the court to which they had submitted themselves voluntarily. x x x. Jurisdiction in ejectment cases is determined by the allegations pleaded in the complaint. intimidation. or a lessor. (Emphasis supplied. or other person against whom the possession of any land or building is unlawfully withheld after the expiration or termination of the right to hold possession. they instead invoked the very same jurisdiction by filing an answer and seeking affirmative relief from it. Aquino cannot thereafter move for the dismissal of the ejectment suit for Aure and Aure Lending’s failure to resort to the barangay conciliation process. or the legal representatives or assigns
. threat.D. it is clear that a court may not motu proprio dismiss a case on the ground of failure to comply with the requirement for barangay conciliation.Subject to the provisions of Section 1 of Rule 9. 1508 could affect the sufficiency of the plaintiff's cause of action and make his complaint vulnerable to dismissal on ground of lack of cause of action or prematurity. . Defenses and objections not pleaded . defendant [Aquino] is deemed to have waived such objection. such defense is no longer available for failure to plead the same in the Answer as required by the omnibus motion rule. although Aquino’s defense of non-compliance with Presidential Decree No. The spirit that surrounds the foregoing statutory norm is to require the party filing a pleading or motion to raise all available exceptions for relief during the single opportunity so that single or multiple objections may be avoided. this ground not being among those mentioned for the dismissal by the trial court of a case on its own initiative. in which instance the court -. – Subject to the provisions of the next succeeding section. or that the action is barred by a prior judgment or by statute of limitations. there is only room for application.25 By Aquino’s failure to seasonably object to the deficiency in the Complaint. she is deemed to have already acquiesced or waived any defect attendant thereto. when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter.) In the case at bar. we do not agree. Upon this premise. and that is when the pleadings or evidence on the record show that (1) the court has no jurisdiction over the subject matter. We have scrupulously examined Aquino’s Answer before the MeTC in Civil Case No. Omnibus Motion. where the law speaks in clear and categorical language. As provided under Section 1. x x x (Emphasis supplied.after acquiring jurisdiction -.
bring an action in the proper Municipal Trial Court against the person or persons unlawfully withholding or depriving of possession. or other person may at any time within one (1) year after such unlawful deprivation or withholding of possession. However. even where the defendant raises the question of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership. the instant Petition is DENIED. This does not mean.30 As extensively discussed by the eminent jurist Florenz D. possession de facto and not possession de jure. SO ORDERED.33 WHEREFORE. together with Aure Lending. the issue of ownership shall be resolved only to determine the issue of possession. together with damages and costs. B. despite the sale thus transferring ownership of the subject premises to [Aure and Aure Lending] as above-stated and consequently terminating [Aquino’s] right of possession over the subject property. Apropos thereto. 63733 are hereby AFFIRMED. In the case at bar.R. as revised. for the restitution of such possession. Homes. this Court ruled in Hilario v. At the outset. Aure’s assertion of possession over the subject property is based on his ownership thereof as evidenced by TCT No. Aure. Court of Appeals32: Thus. that blanket authority to adjudicate the issue of ownership in ejectment suits has been thus conferred on the inferior courts. inferior courts are now "conditionally vested with adjudicatory power over the issue of title or ownership raised by the parties in an ejectment suit. an adjudication made therein regarding the issue of ownership should be regarded as merely provisional and. which gives rise to a cause of action for an ejectment suit cognizable by the MeTC. sought the possession of the subject property which was never surrendered by Aquino after the perfection of the Deed of Sale. or any person or persons claiming under them.F. vendor. That Aquino impugned the validity of Aure’s title over the subject property and claimed that the Deed of Sale was simulated should not divest the MeTC of jurisdiction over the ejectment case. vendee. or where the principal and main issue raised in the allegations of the complaint as well as the relief prayed for make out not a case for ejectment but one for recovery of ownership. Municipal Trial Courts. 3. Court of Appeals31: As the law on forcible entry and unlawful detainer cases now stands. The law.
. however. x x x. 156802 bearing his name. Quezon City by virtue of a deed of absolute sale executed by [the spouses Aquino] in favor of [Aure and Aure Lending] although registered in the name of x x x Ernesto S. alleged as follows: 2. SP No. therefore. the Complaint filed by Aure and Aure Lending on 2 April 1997. is continuously occupying the subject premises notwithstanding several demands made by [Aure and Aure Lending] against [Aquino] and all persons claiming right under her to vacate the subject premises and surrender possession thereof to [Aure and Aure Lending] causing damage and prejudice to [Aure and Aure Lending] and making [Aquino’s] occupancy together with those actually occupying the subject premises claiming right under her. the Metropolitan Trial Courts. it must here be stressed that the resolution of this particular issue
concerns and applies only to forcible entry and unlawful detainer cases where the issue of possession is intimately intertwined with the issue of ownership. now provides instead that when the question of possession cannot be resolved without deciding the issue of ownership. and Municipal Circuit Trial Courts nevertheless have the undoubted competence to resolve the issue of ownership albeit only to determine the issue of possession. Costs against the petitioner. The foregoing doctrine is a necessary consequence of the nature of forcible entry and unlawful detainer cases where the only issue to be settled is the physical or material possession over the real property. that is. [Aquino] together with her family. [Aure and Aure Lending] became the owners of a house and lot located at No. title to the said property had already been issued in the name of [Aure] as shown by a transfer Certificate of Title . The Court of Appeals Decision dated 17 October 2001 and its Resolution dated 8 May 2002 in CAG. On its face. 29 It can be inferred from the foregoing that Aure. that is. 37 Salazar Street corner Encarnacion Street.of any such lessor." These courts shall resolve the question of ownership raised as an incident in an ejectment case where a determination thereof is necessary for a proper and complete adjudication of the issue of possession. the new Rule on Summary Procedure was extended to include within the jurisdiction of the inferior courts ejectment cases which likewise involve the issue of ownership. illegal. would not bar or prejudice an action between the same parties involving title to the land. a copy of which is hereto attached and made an integral part hereof as Annex A." In other words. It finds no proper application where it is otherwise. where ownership is not in issue. Regalado in Refugia v. premises considered.
1997. 1998 to KOGIES’ President who was then staying at a Makati City hotel. 1998 letter threatening that the machineries. However. KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their contract nor dismantle and transfer the machineries and equipment on mere imagined violations by KOGIES. on July 1. Branch 256 of Regional Trial Court of Muntinlupa City. 22 in case of nonpayment. KOGIES filed a Complaint for Specific Performance. 1998. and that PGSMC would dismantle and transfer the machineries.000. docketed as Civil Case No. the policy is to favor alternative methods of resolving disputes.500. these were dishonored for the reason “PAYMENT STOPPED. PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5. PGSMC paid KOGIES USD 1.: In our jurisdiction. 0316413 dated March 30. PGSMC filed before the Office of the Public Prosecutor an Affidavit-Complaint for Estafa docketed as I. 98-117 against PGSMC before the Muntinlupa City Regional Trial Court (RTC). which was subsequently extended until July 22. Inc. The monthly rental was PhP 322. and facilities for the manufacture of LPG cylinders were shipped. speedy and less hostile methods have long been favored by this Court. On March 5.530.SECOND DIVISION KOREA TECHNOLOGIES CO. JR. Petitioner. 98-03813 against Mr. President of KOGIES. PGSMC and KOGIES executed a Contract whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in Carmona. 1998. 1998. 143581 Present:
January 22. KOGIES averred that PGSMC violated Art. On June 1. thus forcing the parties to agree that KOGIES would be deemed to have completely complied with the terms and conditions of the March 5. When KOGIES deposited the checks. the parties executed. by unilaterally rescinding the contract without resorting to arbitration.500. Arbitration along with mediation. 1998 with a 10% annual increment clause. particularly in civil and commercial disputes. 1998. Korea pursuant to Art. 2008 x-----------------------------------------------------------------------------------------x DECISION VELASCO. PGSMC issued two postdated checks: (1) BPI Check No. CARPIO MORALES. 1998.S. KOGIES would install and initiate the operation of the plant for which PGSMC bound itself to pay USD 306. Regrettably. J. On June 15. She complained that not only did KOGIES deliver a different brand of hydraulic press from that agreed upon but it had not delivered several equipment parts already paid for. 1998. 1998. The contract and its amendment stipulated that KOGIES will ship the machinery and facilities necessary for manufacturing LPG cylinders for which PGSMC would pay USD 1. the parties wittingly or unwittingly prolonged the controversy. KOGIES also asked that PGSMC be restrained from dismantling and transferring the machinery and equipment installed in the plant which the latter threatened to do on July 4. . as amended. Subsequently.000. The contract was executed in the Philippines. while private respondent Pacific General Steel Manufacturing Corp.000 for the installation and initial operation of the plant.032-square meter warehouse building to house the LPG manufacturing plant.000. 15 of the Contract as amended. ALBERTO A. Respondents. Five days later. and facilities installed in the plant would be dismantled and transferred on July 4. KLP-970301 dated March 5. On the same date. No. KOGIES alleged that PGSMC had initially admitted that the checks that were stopped were not funded but later on claimed that it stopped payment of the checks for the reason that “their value was not received” as the former allegedly breached their contract by “altering the quantity and lowering the quality of the machinery and equipment” installed in the plant and failed to make the plant operational although it earlier certified to the contrary as shown in a January 22. an Amendment for Contract No. 1997 amending the terms of payment.000.000. on May 8.224. JJ. 1998. after the installation of the plant. PGSMC entered into a Contract of Lease with Worth Properties... LERMA. The petition before us puts at issue an arbitration clause in a contract mutually agreed upon by the parties stipulating that they would submit themselves to arbitration in a foreign country. KOGIES instituted an Application for Arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul. J.. 1997 on the ground that KOGIES had altered the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC. LTD.. 1998 for PhP 4. in Korea.224. instead of hastening the resolution of their dispute. 1998. HON. Dae Hyun Kang. On April 7. in TINGA. 1998 Certificate. and PACIFIC GENERAL STEEL Promulgated: MANUFACTURING CORPORATION. On July 3. It also insisted that their disputes should be settled by arbitration as agreed upon in Article 15. In its complaint. On May 14. and (2) BPI Check No. and facilities installed in the Carmona plant. being inexpensive. January 7. the arbitration clause of their contract. Petitioner Korea Technologies Co. CARPIO. Chairperson.. the wife of PGSMC’s President faxed a letter dated May 7.versus G. equipment. 1997 contract. (Worth) for use of Worth’s 5. 15 of their Contract. Likewise. PGSMC replied that the two checks it issued KOGIES were fully funded but the payments were stopped for reasons previously made known to KOGIES. PGSMC filed an opposition to the TRO arguing that
QUISUMBING. the initial operation could not be conducted as PGSMC encountered financial difficulties affecting the supply of materials. JR. Ltd. 1998 for PhP 4. 1998. On June 23. No. 1997. The RTC granted a temporary restraining order (TRO) on July 4. Thus. the total contract price amounted to USD 1. the machineries. LPG cylinder samples. conciliation. For the remaining balance of USD306.079-square meter property with a 4. 1998. equipment. Cavite. equipment. Thus.. PGSMC again wrote KOGIES reiterating the contents of its June 1. 1998. delivered. On July 9. (PGSMC) is a domestic corporation. and negotiation.000 upon the plant’s production of the 11-kg. 1997. 1998.560 commencing on January 1.R. and his capacity as Presiding Judge of VELASCO. 0316412 dated January 30. (KOGIES) is a Korean corporation which is engaged in the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants. gleaned from the Certificate executed by the parties on
.” Thus. and installed in the Carmona plant. KOGIES sent a demand letter to PGSMC threatening criminal action for violation of Batas Pambansa Blg. On October 14.
224. 1998 RTC Order granting inspection of the plant and denying dismissal of PGSMC’s compulsory counterclaims.R. KOGIES. The Court of Appeals affirmed the trial court and declared the arbitration clause against public policy On May 30.). 1998. Moreover. It claimed that it had performed all the undertakings under the contract and had already produced certified samples of LPG cylinders.000. And finally. 15. 15 of the Contract as amended was invalid as it tended to oust the trial court or any other court jurisdiction over any dispute that may arise between the parties. in view of the foregoing consideration. filed its Motion for Reconsideration of the July 23. reasoning that PGSMC had paid KOGIES USD 1. Incorporated at Carmona. 2044 of the Civil Code and as held by this Court in Chung Fu Industries (Phils.000 for altering the quantity and lowering the quality of the machineries and equipment. KOGIES asserted that the Branch Sheriff did not have the technical expertise to ascertain whether or not the machineries and equipment conformed to the specifications in the contract and were properly installed. without waiting for the resolution of its October 2.000. the trial court issued an Order (1) granting PGSMC’s motion for inspection. KOGIES filed its Reply to Answer and Answer to Counterclaim. the RTC issued an Order denying the application for a writ of preliminary injunction. the value of the machineries and equipment as shown in the contract such that KOGIES no longer had proprietary rights over them. SP No. insisted that the arbitration clause was without question valid. that KOGIES was not entitled to the PhP 9. 49249. Thereafter. 1998 urgent motion for reconsideration. on July 23.920 in rent (covering January to July 1998) to Worth and it was not willing to further shoulder the cost of renting the premises of the plant considering that the LPG cylinder manufacturing plant never became operational. dismantling. PGSMC 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. this Court believes and so holds that no cogent reason exists for this Court to grant the writ of preliminary injunction to restrain and refrain defendant from dismantling the machineries and facilities at the lot and building of Worth Properties. equipment. 15 of the Contract as amended was a valid arbitration stipulation under Art. 1998. SP No. KOGIES points out that the arbitration clause under Art. and that KOGIES was liable for damages amounting to PhP 4. On the issue of nonpayment of docket fees and non-attachment of a certificate of non-forum shopping by PGSMC. 1998. and preliminary injunction to enjoin the RTC and PGSMC from inspecting. 1998 Order denying its application for an injunctive writ claiming that the contract was not merely for machinery and facilities worth USD 1. 1998. and (3) denying KOGIES’ motion to dismiss PGSMC’s compulsory counterclaims as these counterclaims fell within the requisites of compulsory counterclaims. and facilities it delivered to the plant. the RTC held that Art. The CA found that the RTC did not gravely abuse its discretion in issuing the assailed July 23. KOGIES’ prayer for an injunctive writ was denied. KOGIES filed an Urgent Motion for Reconsideration of the September 21.224. mandamus. Court of Appeals . on August 4. and transferring the machineries and equipment in the Carmona plant. seeking annulment of the July 23. 1998. 1998. and to direct the RTC to enforce the specific agreement on arbitration to resolve the dispute. 1998 RTC Orders and praying for the issuance of writs of prohibition.530. Inc. It also reiterated its prayer for the issuance of the writs of prohibition. 1998. the RTC denied KOGIES’ urgent motion for reconsideration and directed the Branch Sheriff to proceed with the inspection of the machineries and equipment in the plant on October 28. PGSMC averred that it has already paid PhP 2. 1998 and seeking dismissal of PGSMC’s counterclaims. 2000. On the issue of the validity of the arbitration clause.000 covered by the checks for failing to completely install and make the plant operational.000 but was for the sale of an “LPG manufacturing plant” consisting of “supply of all the machinery and facilities” and “transfer of technology” for a total contract price of USD 1. KOGIES denied it had altered the quantity and lowered the quality of the machinery. 1998 and September 21. KOGIES opposed the motion positing that the queries and issues raised in the motion for inspection fell under the coverage of the arbitration clause in their contract.500. the CA held that the counterclaims of
On July 29. 1998 RTC Order.
determine whether there was indeed alteration of the quantity and lowering of quality of the machineries and equipment. 1998 RTC Order.000 was for the whole plant and had not been fully paid was contrary to the finding of the RTC that PGSMC fully paid the price of USD 1.257.R. On July 17.530. Moreover. According to the CA. the CA rendered the assailed Decision affirming the RTC Orders and dismissing the petition for certiorari filed by KOGIES. this determination by the RTC was a factual finding beyond the ambit of a petition for certiorari. 1998. The dispositive portion of the Order stated: WHEREFORE. Moreover. KOGIES filed a Supplement to the Petition in CA-G.KOGIES was not entitled to the TRO since Art. It averred that whatever was unfinished was PGSMC’s fault since it failed to procure raw materials due to lack of funds. On September 21. the arbitration clause. PGSMC filed a Motion for Inspection of Things to
. 1998 and September 21.). In the meantime.224. On November 11. In the meantime. After KOGIES filed a Supplemental Memorandum with Motion to Dismiss answering PGSMC’s memorandum of July 22. KOGIES. on October 19. the CA reasoned that KOGIES’ contention that the total contract price for USD 1. and whether these were properly installed. was null and void for being against public policy as it ousts the local courts of jurisdiction over the instant controversy. 1998 Orders. mandamus and preliminary injunction which was not acted upon by the CA.000. KOGIES filed before the Court of Appeals (CA) a petition for certiorari docketed as CA-G. v. the CA agreed with the lower court that an arbitration clause which provided for a final determination of the legal rights of the parties to the contract by arbitration was against public policy. relying on Chung Fu Industries (Phils.000 such that the dismantling and transfer of the machinery and facilities would result in the dismantling and transfer of the very plant itself to the great prejudice of KOGIES as the still unpaid owner/seller of the plant. 49249 informing the CA about the October 19. Ten days after. 1998. Cavite and transfer the same to another site: and therefore denies plaintiff’s application for a writ of preliminary injunction. (2) denying KOGIES’ motion for reconsideration of the July 23. 1998. On October 2. After the parties submitted their Memoranda. on October 12. which was for all the machineries and equipment. the Branch Sheriff filed his Sheriff’s Report finding that the enumerated machineries and equipment were not fully and properly installed. Inc.
8 on existing counterclaim or cross-claim states. d. in Yamaoka v. 7. RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT WAITING FOR THE RESOLUTION OF THE MOTION FOR RECONSIDERATION OF THE ORDER DATED SEPTEMBER 21. PRONOUNCING THE QUESTION OF OWNERSHIP OVER THE MACHINERY AND FACILITIES AS “A QUESTION OF FACT” “BEYOND THE AMBIT OF A PETITION FOR CERTIORARI” INTENDED ONLY FOR CORRECTION OF ERRORS OF JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF (SIC) EXCESS OF JURISDICTION. As aptly ruled by the CA. 1998 NOT TO BE PROPER SUBJECTS OF CERTIORARI AND PROHIBITION FOR BEING “INTERLOCUTORY IN NATURE. The rules on the payment of docket fees for counterclaims
and cross claims were amended effective August 16. hence. INSTEAD. DECREEING PRIVATE RESPONDENT’S COUNTERCLAIMS TO BE ALL COMPULSORY NOT NECESSITATING PAYMENT OF DOCKET FEES AND CERTIFICATION OF NON-FORUM SHOPPING. Pescarich Manufacturing Corporation. No. where the assailed interlocutory order was issued with grave abuse of discretion or patently erroneous and the remedy of appeal would not afford adequate and expeditious relief.” The CA erred on its reliance on Gamboa. the RTC must be given the opportunity to correct any alleged error it has committed. Also. 1998 RTC Order which was the plain. NOT GRANTING THE RELIEFS AND REMEDIES PRAYED FOR IN HE (SIC) PETITION AND. the CA also pronounced that “certiorari and Prohibition are neither the remedies to question the propriety of an interlocutory order of the trial court. where the interlocutory order was issued without or in excess of jurisdiction or with grave abuse of discretion. appeals from interlocutory orders would open the floodgates to endless occasions for dilatory motions.” On July 17. 04-2-04-SC. DISMISSING THE SAME FOR ALLEGEDLY “WITHOUT MERIT. the CA said a certificate of non-forum shopping was also not required. We stress. and whatever objections the accused had in his motion to quash can then be used as part of his defense and subsequently can be raised as errors on his appeal if the judgment of the trial court is adverse to him. 1997 Revised Rules of Civil Procedure. the remedy is certiorari. however.” f. e. docket fees are now required to be paid in compulsory counterclaim or cross-claims. Cruz. Hence. and that since the assailed orders were interlocutory. we have this Petition for Review on Certiorari under Rule 45. as amended by A. 1997 Revised Rules of Civil Procedure. “A compulsory counterclaim or a cross-claim that a defending party has at the time he files his answer shall be contained therein. incorporating in said appeal the grounds for assailing the interlocutory orders. According to the CA. we shall first tackle the procedural issues. the CA held that the petition for certiorari had been filed prematurely since KOGIES did not wait for the resolution of its urgent motion for reconsideration of the September 21. Thus. We disagree with KOGIES. the Court allows certiorari as a mode of redress. 1998. Thus. As to the failure to submit a certificate of forum shopping. it was not liable to pay filing fees for said counterclaims being compulsory in nature. PROCLAIMING THE TWO ORDERS DATED JULY 23 AND SEPTEMBER 21. these cannot be the subject of a petition for certiorari. that effective August 16.M. However. Rule 141. Furthermore. 5 of Rule 7. speedy. the courts a quo did not commit reversible error in denying KOGIES’ motion to dismiss PGSMC’s compulsory counterclaims. the rule that was effective at the time the Answer with Counterclaim was filed. The Issues Petitioner posits that the appellate court committed the following errors: a. Allowing appeals from interlocutory orders would result in the ‘sorry spectacle’ of a case being subject of a counterproductive ping-pong to and from the appellate court as often as a trial court is perceived to have made an error in any of its interlocutory rulings. It is a responsive pleading. it should have paid docket fees and filed a certificate of non-forum shopping. For the same reason. 1998 in accordance with Section 8 of Rule 11. Interlocutory orders proper subject of certiorari Citing Gamboa v. 2004 KOGIES strongly argues that when PGSMC filed the counterclaims. 1998 OR WITHOUT GIVING THE TRIAL COURT AN OPPORTUNITY TO CORRECT ITSELF. AND CONCLUDING THAT THE TRIAL COURT’S FINDING ON THE SAME QUESTION WAS IMPROPERLY RAISED IN THE PETITION BELOW. Before we delve into the substantive issues. PGSMC’s Answer is not an initiatory pleading which requires a certification against forum shopping under Sec. Sec. the counterclaims of PGSMC were incorporated in its Answer with Compulsory Counterclaim dated July 17.” The Court’s Ruling The petition is partly meritorious. DECLARING AS NULL AND VOID THE ARBITRATION CLAUSE IN ARTICLE 15 OF THE CONTRACT BETWEEN THE PARTIES FOR BEING “CONTRARY TO PUBLIC POLICY” AND FOR OUSTING THE COURTS OF JURISDICTION. we held: The proper remedy in such cases is an ordinary appeal from an adverse judgment on the merits. Gamboa involved the denial of a motion to acquit in a criminal case which was not assailable in an action for certiorari since the denial of a motion to quash required the accused to plead and to continue with the trial. at the time PGSMC filed its Answer incorporating its counterclaims against KOGIES. The general rule is that interlocutory orders cannot be challenged by an appeal.
. c. and adequate remedy available.PGSMC were compulsory ones and payment of docket fees was not required since the Answer with counterclaim was not an initiatory pleading. and that its failure to do so was a fatal defect. b. 2004 under Sec.
Thus. Petitioner is correct. shall finally be settled by arbitration in Seoul. speedy.” And in LM Power Engineering Corporation v. 876. Korea in accordance with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board.” Arbitration clause not contrary to public policy The arbitration clause which stipulates that the arbitration must be done in Seoul. public order. Indeed. Arbitration. Aside from unclogging judicial dockets. In Gonzales v. there is real and imminent threat of irreparable destruction or substantial damage to KOGIES’ equipment and machineries. Moreover. and adequate remedy in the ordinary course of law amply provides the basis for allowing the resort to a petition for certiorari under Rule 65. to pass upon and correct its mistakes without the intervention of the higher court. Prematurity of the petition before the CA Neither do we think that KOGIES was guilty of forum shopping in filing the petition for certiorari. Even before the approval on June 19. Court of Appeals . is not contrary to public policy. Established in this jurisdiction is the rule that the law of the place where the contract is made governs. equipment. There has been no showing that the parties have not dealt with each other on equal footing. The award rendered by the arbitration(s) shall be final and binding upon both parties concerned . or differences which may arise between the parties. arbitration also hastens the resolution of disputes. 876 was adopted to supplement the New Civil Code’s provisions on arbitration. may be voided. We find no reason why the arbitration clause should not be respected and complied with by both parties. there is an urgent necessity to resolve the issue on the dismantling of the facilities and any further delay would prejudice the interests of KOGIES. our laws ought to govern. KOGIES’ only remedy was to assail the RTC’s interlocutory order via a petition for certiorari under Rule 65. 2043. this Court had occasion to rule that an arbitration clause to resolve differences and breaches of mutually agreed contractual terms is valid. and facilities when he is not competent and knowledgeable on said matters is evidently flawed and devoid of any legal support. 1998 motion for reconsideration to be proper. While the October 2.” (Emphasis supplied. Note that KOGIES’ motion for reconsideration of the July 23.The alleged grave abuse of discretion of the respondent court equivalent to lack of jurisdiction in the issuance of the two assailed orders coupled with the fact that there is no plain.) Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null and void.” The September 21. Capitol Industrial Construction Groups. The arbitration clause was mutually and voluntarily agreed upon by the parties. We find the resort to certiorari based on the gravely abusive orders of the trial court sans the ruling on the October 2. the circumstances in this case would allow an exception to the rule that before certiorari may be availed of. 1998 RTC Order relating to the inspection of things. arbitration has been held valid and constitutional. we likewise ruled that “[t]he provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that contract and is itself a contract. The reason behind the rule is “to enable the lower court. The contract in this case was perfected here in the Philippines. (Emphasis supplied. courts should liberally construe arbitration clauses.. It has not been shown to be contrary to any law. Court of Appeals . we held that “[i]n this jurisdiction. 2044 of the Civil Code sanctions the validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral award. The Core Issue: Article 15 of the Contract We now go to the core issue of the validity of Art. v. as applied to Art. Climax Mining Ltd. or public policy. Provided such clause is susceptible of an interpretation that covers the asserted dispute.. 2039. Lex loci contractus. or annulled. controversies. we held that submission to arbitration is a contract and that a clause in a contract providing that all matters in dispute between the parties shall be referred to arbitration is a contract. and the allowance of the compulsory counterclaims has not yet been resolved. and that the arbitral award is final and binding. 2039 and 2040.—All disputes. Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods. Art. 1998 motion for reconsideration of KOGIES of the September 21. an order to arbitrate should be granted. in the first instance. is valid . we declared that: Being an inexpensive. Again in Del Monte Corporation-USA v. 2044 provides. Inc. RA 9285 incorporated the UNCITRAL Model law
. conciliation and negotiation––is encouraged by the Supreme Court.
without prejudice to Articles 2038. rescinded. and 2040 abovecited refer to instances where a compromise or an arbitral award.. Juan Ysmael and Co. 1998 RTC Order which denied the issuance of the injunctive writ had already been denied. Republic Act No. In the 1957 case of Eastboard Navigation Ltd. 2044 pursuant to Art. 1953 of Republic Act No. we come to the question on what governs an arbitration clause specifying that in case of any dispute arising from the contract. out of or in relation to or in connection with this Contract or for the breach thereof.) Arts. good customs. Korea in accordance with the Commercial Arbitration Rules of the KCAB. especially of the commercial kind. an arbitral panel will be constituted in a foreign country and the arbitration rules of the foreign country would govern and its award shall be final and binding. “Any stipulation that the arbitrators’ award or decision shall be final. Art. It provides: Article 15. this Court has countenanced the settlement of disputes through arbitration. Any doubt should be resolved in favor of arbitration. 1998 RTC Order directing the branch sheriff to inspect the plant. the arbitration clause. Having said that the instant arbitration clause is not against public policy. Brushing aside a contractual agreement calling for arbitration between the parties would be a step backward. Inc . Nonetheless. arbitration––along with mediation. Therefore. or against morals. This Court has sanctioned the validity of arbitration clauses in a catena of cases. the petitioner must have filed a motion for reconsideration and said motion should have been first resolved by the court a quo. It is thus regarded as the “wave of the future” in international civil and commercial disputes. 15 of the Contract. 2038. speedy and amicable method of settling disputes. . In BF Corporation v. but these would not denigrate the finality of the arbitral award.
inoperative or incapable of being performed. if at least one party so requests not later than the pre-trial conference. SEC.––A foreign arbitral award when confirmed by a court of a foreign country. 44. shall be enforced in the same manner as final and executory decisions of courts of law of the
While RA 9285 was passed only in 2004. regard shall be had to its international origin and to the need for uniformity in its interpretation and resort may be made to the travaux preparatories and the report of the Secretary General of the United Nations Commission on International Trade Law dated March 25. 43. the arbitration rules of our domestic arbitration bodies would not be applied. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York Convention. 40/72 approved on December 11.INTERNATIONAL COMMERCIAL ARBITRATION SEC.––The New York Convention shall govern the recognition and enforcement of arbitral awards covered by said Convention. and 44 relative to Secs. Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are the following: (1) The RTC must refer to arbitration in proper cases
Foreign arbitral awards must be confirmed by the RTC
Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final and binding are not immediately enforceable or cannot be implemented immediately. on grounds of comity and reciprocity. Application of the New York Convention. 9/264. xxxx SEC. otherwise known as the Alternative Dispute Resolution Act of 2004 entitled An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to Establish the Office for Alternative Dispute Resolution.––In interpreting the Model Law. promulgated on April 2. 42. Thus. 24. and mandates the referral to arbitration in such cases. –– The recognition and enforcement of foreign arbitral awards not covered by the New York Convention shall be done in accordance with procedural rules to be promulgated by the Supreme Court. SEC. 1985. 19. (RA) 9285. As a general rule. 42. In case a foreign arbitral body is chosen by the parties. “International Commercial Arbitration: Analytical Commentary on Draft Trade identified by reference number A/CN. As signatory to the Arbitration Rules of the UNCITRAL Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (UNCITRAL) in the New York Convention on June 21. We have even incorporated the Model Law in Republic Act No. Adoption of the Model Law on International Commercial Arbitration . 2004.to which we are a signatory For domestic arbitration proceedings. the RTC does not have jurisdiction over disputes that are properly the subject of arbitration pursuant to an arbitration clause. Referral to Arbitration. A foreign arbitral award. 47 and 48. or upon the request of both parties thereafter. recognize and enforce a non-convention award as a convention award. Well-settled is the rule that procedural laws are construed to be applicable to actions pending and undetermined at the time of their passage. the retroactive application of procedural laws does not violate any personal rights because no vested right has yet attached nor arisen from them. 24. and for Other Purposes. 20. Interpretation of Model Law. thus:
. 1985 entitled. Secs. 1985 (United Nations Document A/40/17) and recommended for enactment by the General Assembly in Resolution No. 1985. thus: SEC. it nonetheless applies in the instant case since it is a procedural law which has a retroactive effect.––International commercial arbitration shall be governed by the Model Law on International Commercial Arbitration (the “Model Law”) adopted by the United Nations Commission on International Trade Law on June 21. RA 9285 is applicable to the instant case. when confirmed by the Regional Trial Court. Sec. and are deemed retroactive in that sense and to that extent. copy of which is hereto attached as Appendix “A”.”
SEC. Foreign Arbitral Award Not Foreign Judgment. we have particular agencies to arbitrate disputes arising from contractual relations. ––A court before which an action is brought in a matter which is the subject matter of an arbitration agreement shall. Said procedural rules shall provide that the party relying on the award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the arbitration agreement. 35 of the UNCITRAL Model Law stipulates the requirement for the arbitral award to be recognized by a competent court for enforcement. 19 and 20 of Chapter 4 of the Model Law are the pertinent provisions: CHAPTER 4 . The Court may. The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the rules of procedure to be promulgated by the Supreme Court. 36 of the UNCITRAL Model Law may refuse recognition or enforcement on the grounds provided for. If the award or agreement is not made in any of the official languages. the Philippines committed itself to be bound by the Model Law. KOGIES filed its application for arbitration before the KCAB on July 1. Likewise. The applicant shall establish that the country in which foreign arbitration award was made in party to the New York Convention. the party shall supply a duly certified translation thereof into any of such languages. RA 9285 incorporated these provisos to Secs. refer the parties to arbitration unless it finds that the arbitration agreement is null and void. which court under Sec. 1998 and it is still pending because no arbitral award has yet been rendered. shall be recognized and enforced as a foreign arbitral award and not as a judgment of a foreign court. 43.
vacates. SEC. are enforced as final and executory decisions of our courts of law. Application of the New York Convention. relied upon by KOGIES is applicable insofar as the foreign arbitral awards. rejects. 42 and 45 provide: SEC. while final and binding. xxxx SEC. Any other ground raised shall be disregarded by the Regional Trial Court. 23 of RA 876 and shall be recognized as final and executory decisions of the RTC. reject. (4) Grounds for judicial review different in domestic and foreign arbitral awards The differences between a final arbitral award from an international or foreign arbitral tribunal and an award given by a local arbitral tribunal are the specific grounds or conditions that vest jurisdiction over our courts to review the awards. setting aside. if it considers it proper. reject. thus: SEC. and when confirmed. rejecting or vacating the award by the RTC are provided under Art. For final domestic arbitral awards. Therefore. the Court shall send notice to the parties at their address of record in the arbitration.––The New York Convention shall govern the recognition and enforcement of arbitral awards covered by said Convention. do not oust courts of jurisdiction since these arbitral awards are not absolute and without exceptions as they are still judicially reviewable. setting aside.Philippines xxxx SEC. Chapter 7 of RA 9285 has made it clear that all arbitral awards. modifies. what this Court held in Chung Fu Industries (Phils. 45 of RA 9285 designated and vested the RTC with specific authority and jurisdiction to set aside. Said procedural rules shall provide that the party relying on the award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the arbitration agreement. Secs. Venue and Jurisdiction. while the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by the parties. In this sense. whose final judgments are stipulated to be final and binding. the final foreign arbitral awards are similarly situated in that they need first to be confirmed by the RTC. on the application of the party claiming recognition or enforcement of the award. or if any part cannot be served notice at such address. or the act to be enjoined is located. and any application with a court for arbitration assistance and supervision shall be deemed as special proceedings and shall be filed with the Regional Trial Court (i) where arbitration proceedings are conducted. order the party to provide appropriate security.—A decision of the Regional Trial Court confirming. Inc. Thus. The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the rules of procedure to be promulgated by the Supreme Court. the grounds for setting aside. 46. (iii) where any of the parties to the dispute resides or has his place of business. For foreign or international arbitral awards which must first be confirmed by the RTC. it can be gleaned that the concept of a final and binding arbitral award is similar to judgments or awards given by some of our quasi-judicial bodies. It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a judgment of a foreign court but as a foreign arbitral award. (5) RTC decision of assailed foreign arbitral award appealable
Thus. or vacate it. the Regional Trial Court may. If the application for rejection or suspension of enforcement of an award has been made. (3) The RTC has jurisdiction to review foreign arbitral awards
The applicant shall establish that the country in which foreign arbitration award was made is party to the New York Convention. or vacate a foreign arbitral award on grounds provided under Art. at the option of the applicant. 42. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in cases where the RTC sets aside. still the foreign arbitral award is subject to judicial review by the RTC which can set aside. 45. If the award or agreement is not made in any of the official languages. 42 in relation to Sec. vacating. 48. 34(2) of the UNCITRAL Model Law. vacate its decision and may also. ––A party to a foreign arbitration proceeding may oppose an application for recognition and enforcement of the arbitral award in accordance with the procedures and rules to be promulgated by the Supreme Court only on those grounds enumerated under Article V of the New York Convention.––In a special proceeding for recognition and enforcement of an arbitral award. they may only be assailed before the RTC and vacated on the grounds provided under Sec. but not immediately executory in the sense that they may still be judicially reviewed.
Sec. correction or modification of an arbitral award. the party shall supply a duly certified translation thereof into any of such languages. which also need confirmation by the RTC pursuant to Sec. modifying or correcting an arbitral award may be appealed to the Court of Appeals in
. like the National Labor Relations Commission and Mines Adjudication Board.). 25 of RA 876. upon the instance of any party. are subject to judicial review on specific grounds provided for. Notice of Proceeding to Parties. (ii) where the asset to be attached or levied upon. The notice shall be sent al least fifteen (15) days before the date set for the initial hearing of the application. or (iv) in the National Judicial Capital Region. or corrects an arbitral award. 47. whether domestic or foreign. Appeal from Court Decision or Arbitral Awards.––Proceedings for recognition and enforcement of an arbitration agreement or for vacations. Rejection of a Foreign Arbitral Award. 34(2) of the UNCITRAL Model Law. at such party’s last known address.
the CA decision may further be appealed or reviewed before this Court through a petition for review under Rule 45 of the Rules of Court.
RTC has interim jurisdiction to protect the rights of the parties Anent the July 23. Korea pursuant to Art. Corollarily. 1998. based on the foregoing features of RA 9285. With our disquisition above. it has available remedies under RA 9285. neither of the parties can unilaterally treat the contract as rescinded since whatever infractions or breaches by a party or differences arising from the contract must be brought first and resolved by arbitration. given the alleged fact that PGSMC could not supply the raw materials required to produce the sample LPG cylinders. 1998 RTC Orders pertaining to the grant of the inspection of the equipment and machineries have to be recalled and nullified. Where an arbitration clause in a contract is availing. Finally. the award of which is not absolute and without exceptions. and whether there was substantial compliance by KOGIES in the production of the samples. a request for an interim measure of protection. Issue on ownership of plant proper for arbitration Petitioner assails the CA ruling that the issue petitioner raised on whether the total contract price of USD 1.530. KOGIES instituted an Application for Arbitration before the KCAB in Seoul. before constitution of the tribunal. may be made with the arbitral or to the extent that the arbitral tribunal has no power to act or is unable to act effectivity. 1998 and October 19. stipulating that the arbitral award is final and binding. While it may have misgivings on the foreign arbitration done in Korea by the KCAB. The losing party who appeals from the judgment of the court confirming an arbitral award shall be required by the appellate court to post a counterbond executed in favor of the prevailing party equal to the amount of the award in accordance with the rules to be promulgated by the Supreme Court. Unilateral rescission improper and illegal Having ruled that the arbitration clause of the subject contract is valid and binding on the parties. PGSMC must submit to the foreign arbitration as it bound itself through the subject contract. (b) The following rules on interim or provisional
. What this Court held in University of the Philippines v. while the issue of the proper installation of the equipment and machineries might well be under the primary jurisdiction of the arbitral body to decide. Firstly. In addition. is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied and incorporated in RA 9285. the September 21. De Los Angeles and reiterated in succeeding cases. as the subject
matter of the motion is under the primary jurisdiction of the mutually agreed arbitral body. Whether or not there was full payment for the machineries and equipment and installation is indeed a factual issue prohibited by Rule 65. who has been nominated. is of no worth as said Sheriff is not technically competent to ascertain the actual status of the equipment and machineries as installed in the plant. 1998 Order denying the issuance of the injunctive writ paving the way for PGSMC to dismantle and transfer the equipment and machineries. It is settled that questions of fact cannot be raised in an original action for certiorari. Indeed. from a Court to grant such measure . the request may be made with the Court.— (a) It is not incompatible with an arbitration agreement for a party to request. yet the RTC under Sec. and not contrary to public policy. 1998. Its interests are duly protected by the law which requires that the arbitral award that may be rendered by KCAB must be confirmed here by the RTC before it can be enforced. it is incumbent upon PGSMC to abide by its commitment to arbitrate. Thereafter. Cavite. the ownership of equipment and payment of the contract price. 28 pertinently provides: SEC. For these reasons. Petitioner’s position is untenable. 28. The RTC’s determination of such factual issue constitutes grave abuse of discretion and must be reversed and set aside. whatever findings and conclusions made by the RTC Branch Sheriff from the inspection made on October 28. as ordered by the trial court on October 19. and not through an extrajudicial rescission or judicial action. PGSMC has remedies to protect its interests Thus. the KCAB in Korea. that the act of treating a contract as rescinded on account of infractions by the other contracting party is valid albeit provisional as it can be judicially assailed. it must be noted that there is nothing in the subject Contract which provides that the parties may dispense with the arbitration clause.accordance with the rules and procedure to be promulgated by the Supreme Court. or modification thereof. we note that on July 1. are matters proper for arbitration. 28 of RA 9285 has jurisdiction to hear and grant interim measures to protect vested rights of the parties. does not oust our courts of jurisdiction as the international arbitral award. Thus. consequently. The issues arising from the contract between PGSMC and KOGIES on whether the equipment and machineries delivered and installed were properly installed and operational in the plant in Carmona. 1998. has accepted the nomination and written communication of said nomination and acceptance has been received by the party making the request. the trial court gravely abused its discretion in granting PGSMC’s Motion for Inspection of Things on September 21. a party may not unilaterally rescind or terminate the contract for whatever cause without first resorting to arbitration. is not applicable to the instant case on account of a valid stipulation on arbitration. what appears to constitute a grave abuse of discretion is the order of the RTC in resolving the issue on the ownership of the plant when it is the arbitral body (KCAB) and not the RTC which has jurisdiction and authority over the said issue. Sec. 15 of the Contract as amended. petitioner is correct in its contention that an arbitration clause. 1998. Grant of interim Measure of Protection . The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator. After constitution of the arbitral tribunal and during arbitral proceedings. However. being bound to the contract of arbitration. we find it to be in order considering the factual milieu of the instant case.000 was for the whole plant and its installation is beyond the ambit of a Petition for Certiorari.
allows the application of a party to a judicial authority for interim or conservatory measures. we were explicit that even “the pendency of an arbitral proceeding does not foreclose resort to the courts for provisional reliefs. to provide security for the performance of to produce or preserve any evidence.87M for 1998 alone without considering the 10% annual rent increment in maintaining the plant. (d) Interim or provisional relief is requested by written application transmitted by reasonable means to the Court or arbitral tribunal as the case may be and the party against whom the relief is sought. The court shall exercise such power in accordance with its own procedures in consideration of the specific features of international arbitration. the July 23. yet on hindsight. Likewise. Section 14 of Republic Act (R.A. which governs the parties’ arbitral dispute. or to compel any other appropriate act or
(c) Provide a means of preserving assets out of which a subsequent award may be satisfied. the grounds for the relief. as it has in relation to proceedings in courts. v. at any time prior to the issuance of the award by which the dispute is finally decided.A. PGSMC has the right to dismantle and transfer the equipment and machineries either for their protection and preservation or for the better way to make good use of them which is ineluctably within the management discretion of PGSMC. In the recent 2006 case of Transfield Philippines. The Rules of the ICC.560 as monthly rentals or PhP3. by which.
. Thirdly. considering that the equipment and machineries are in the possession of PGSMC.” We explicated this way: As a fundamental point.) Art. Inc. PGSMC was losing PhP322. 9285. (b) Take action that would prevent. (e) The order shall be binding upon the
(f) Either party may apply with the Court for assistance in implementing or enforcing an interim measure ordered by an arbitral tribunal. and the evidence supporting the request. and reasonable attorney's fees. the party against whom the relief is requested. to prevent irreparable loss or injury . the pendency of arbitral proceedings does not foreclose resort to the courts for provisional reliefs. or refrain from taking action that is likely to cause. the arbitral tribunal orders a party to: (a) Maintain or restore the status quo pending determination of the dispute. it has the right to protect and preserve the equipment and machineries in the best way it can. Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim measures: Article 17 J. and of greater import is the reason that maintaining the equipment and machineries in Worth’s property is not to the best interest of PGSMC due to the prohibitive rent while the LPG plant as set-up is not operational. (Emphasis ours. (iii) (iv) omission. otherwise known as the “Alternative Dispute Resolution Act of 2004.” allows the filing of provisional or interim measures with the regular courts whenever the arbitral tribunal has no power to act or to act effectively. including all expenses. parties. paid in obtaining the order’s judicial enforcement. 17(2) of the UNCITRAL Model Law on ICA defines an “interim measure” of protection as: Article 17. or (d) Preserve evidence that may be relevant and material to the resolution of the dispute. Such relief may be granted: (i) (ii) any obligation. Court-ordered interim measures A court shall have the same power of issuing an interim measure in relation to arbitration proceedings. In addition. Secondly.relief shall be observed: Any party may request that provisional relief be granted against the adverse party. Luzon Hydro Corporation.) No. while the KCAB can rule on motions or petitions relating to the preservation or transfer of the equipment and machineries as an interim measure. and corollarily. describing in appropriate detail the precise relief. R. Considering that the LPG plant was nonoperational. (g) A party who does not comply with the order shall be liable for all damages resulting from noncompliance. 876 (The Arbitration Law) recognizes the rights of any party to petition the court to take measures to safeguard and/or conserve any matter which is the subject of the dispute in arbitration. current or imminent harm or prejudice to the arbitral process itself. irrespective of whether their place is in the territory of this State. Fourthly. Power of arbitral tribunal to order interim measures xxx xxx xxx
(2) An interim measure is any temporary measure. 1998 Order of the RTC allowing the transfer of the equipment and machineries given the non-recognition by the lower
(c) The order granting provisional relief may be conditioned upon the provision of security or any act or omission specified in the order. whether in the form of an award or in another form. It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of protection.
(3) The parties are hereby ORDERED to submit themselves to the arbitration of their dispute and differences arising from the subject Contract before the KCAB. 49249 is REVERSED and SET ASIDE. (2) The September 21. this petition is PARTLY GRANTED. in that: (1) The May 30. SP No. 1998 and October 19. has accorded an interim measure of protection to PGSMC which would otherwise been irreparably damaged. the award of which can be enforced in our jurisdiction through the RTC. by our decision. Besides. and (4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment and machineries. Fifth. and ORDERED to preserve and maintain them until the finality of whatever arbitral award is given in the arbitration proceedings.R. if any. PGSMC therefore must preserve and maintain the subject equipment and machineries with the diligence of a good father of a family until final resolution of the arbitral proceedings and enforcement of the award. while PGSMC may have been granted the right to dismantle and transfer the subject equipment and machineries. No pronouncement as to costs. KOGIES is amply protected by the arbitral action it has instituted before the KCAB. PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its contract with KOGIES. 1998 RTC Orders in Civil Case No. 98-117 are REVERSED and SET ASIDE. Moreover.
. PGSMC to preserve the subject equipment and machineries Finally. it does not have the right to convey or dispose of the same considering the pending arbitral proceedings to settle the differences of the parties.courts of the arbitral clause. if it had not done so. 2000 CA Decision in CA-G.
WHEREFORE. SO ORDERED. KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on the contract.
thus: The petitioners' causes of action did not emanate from the Owner-Contractor Agreement. and KARINA TERESA D. ABRAJANO and GREGORIO ABRAJANO. as heirs of Salas.
DE LEON. EDUARDO A.354 square meters.: Before us is a petition for review on certiorari of the Order 1 of Branch 85 of the Regional Trial Court of Lipa City 2 dismissing petitioners' complaint 3 for rescission of several sale transactions involving land owned by Augusto L. Hence this petition. binding. and respondent Laperal Realty are
. Arbitration is the "wave of the future" in dispute resolution. who had then been missing for more than seven (7) years. 1996 (all of whom are hereinafter referred to as respondent lot buyers). It was granted on December 12. No. Jr. as well as their assigns and heirs. One representative acceptable to both OWNER and CONTRACTOR. 1989. containing the stipulation on arbitration. INC. 14 To brush aside a contractual agreement calling for arbitration in case of disagreement between parties would be a step backward. On August 6. reconveyance. FLORANTE DE LA CRUZ. On May 15. Failure to arbitrate is not a ground for dismissal. Florante de la Cruz and Jesus Vicente Capalan on June 4. On April 24. Inc. and sold subdivided portions thereof to respondents Rockway Real Estate Corporation and South Ridge Village. namely: TERESITA D. he entered into an Owner-Contractor Agreement 4 (hereinafter referred to as the Agreement) with respondent Laperal Realty Corporation (hereinafter referred to as Laperal Realty) to render and provide complete (horizontal) construction services on his land. The petitioners' causes of action for cancellation of contract and accounting are covered by the exception under the Arbitration Law. On September 23.
In a catena of cases 11 inspired by Justice Malcolm's provocative dissent in Vega v. One representative of the OWNER. 98-0047. Salas. 5 Meantime. Salas. LAVA and RODEL LAVA.. b. All cases of dispute between CONTRACTOR and OWNER'S representative shall be referred to the committee represented by: a. CRISTINA S. 1996. Spouses VIRGINIA D. accounting and damages against herein respondents which was docketed as Civil Case No. 1987. Spouses THELMA D. SOUTH RIDGE VILLAGE. on the ground that they failed to first resort to arbitration. San Carlos Milling Co. cancellation of contract. CAPELLAN. binds the parties thereto. Petitioners. 1988. executed a Special Power of Attorney in favor of respondent Laperal Realty to exercise general control. Jr. JR. Jr. filed in the Regional Trial Court
c. ARBITRATION. JESUS VICENTE B. ROCKWAY REAL ESTATE CORPORATION. 135362 December 13. 16 As such. respondent Laperal Realty subdivided the land of Salas. VI. the Agreement. 1998.LAPERAL REALTY CORPORATION. OSCAR DACILLO. respondent Laperal Realty filed a Motion toDismiss 7 on the ground that petitioners failed to submit their grievance to arbitration as required under Article VI of the Agreement which provides: Art. petitioners as heirs of Salas. Jr. 1990. Salas. Salas. enforceable and not contrary to public policy so much so that when there obtains a written provision for arbitration which is not complied with. respondent spouses Abrajano and Lava and respondent Dacillo filed a Joint Answer with Counterclaim and Crossclaim 9 praying for dismissal of petitioners' Complaint for the same reason. On February 3. Batangas spanning 1.. LESACA.484. on February 22. petitioners. vs. the trial court should suspend the proceedings and order the parties to proceed to arbitration in accordance with the terms of theiragreement 13. supervision and management of the sale of his land. Salas.. to respondent spouses Abrajano and Lava and Oscar Dacillo on June 27. SALAS. 1998. was the registered owner of a vast tract of land in Lipa City. respondents. and to respondents Eduardo Vacuna. 1998. for cash or on installment basis. He never returned. J. 1991. MAHARAMI DEVELOPMENT CORPORATION. SALAS for herself and as legal guardian of the minor FABRICE CYRILL D. On August 9. A submission to arbitration is a contract. Jr. and the REGISTER OF DEEDS FOR LIPA CITY. 17 But only they. 15 Nonetheless.
On May 5. their predecessor-in-interest. VACUNA. Jr.R.. Jr. SALAS.. this Court has recognized arbitration agreements as valid. SALAS. JR. MA. 1998. the trial court issued the herein assailed Order dismissing petitioners' Complaint for non-compliance with the foregoing arbitration clause. One representative of the CONTRACTOR. 1999 HEIRS OF AUGUSTO L. Teresita Diaz Salas filed with the Regional Trial Court of Makati City a verified petition for the declaration of presumptive death of her husband. 1996. Petitioners argue. we grant the petition. On June 10. 12.
G.. left his home in the morning for a business trip to Nueva Ecija.SECOND DIVISION
of Lipa City a Complaint 6 for declaration of nullity of sale. Jr.
Respondent Laperal Realty. duplicitous procedure and unnecessary delay. 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. the right to arbitrate as provided in Article VI of the Agreement was never vested in respondent lot buyers. their assigns and heirs". rather. Eduardo Vacuna. being their cause of action. 98-0047. is an arbitrable issue. Inc. They argue that rescission. against the heirs of the original party to the Agreement. Consequently. as a contracting party to the Agreement. As such. Jr. the assignee. they are not "assigns" contemplated in Art. to split the proceedings into arbitration for respondent Laperal Realty and trial for the respondent lot buyers.'s land when respondent Laperal Realty subdivided it and sold portions thereof to respondent lot buyers. The Order dated August 19. and the latter. the assignor. has the right to compel petitioners to first arbitrate before seeking judicial relief. The petitioners' contention is without merit. However.
. They are. Costs against private respondents. the instant petition is hereby GRANTED. would in effect result in multiplicity of suits. However.. On the other hand. 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 18 or in this case. Said court is hereby ordered to proceed with the hearing of Civil Case No. SO ORDERED. spouses Lava. 20 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. spouses Abrajano. If respondent Laperal Realty had assigned its rights under the Agreement to a third party. respondents Rockway Real Estate Corporation. buyers of the land that respondent Laperal Realty was given the authority to develop and sell under the Agreement. 876 which provides that "such submission [to] or contract [of arbitration] shall be valid. Oscar Dacillo. save upon such grounds as exist at law for the revocation of any contract". WHEREFORE. making the former. Jr. 1311 of the New Civil Code which provides that "contracts take effect only between the parties. South Ridge Village.'s land and sell the same. as a general rule. falls under the exception clause in Sec. Maharami Development Corporation. For while rescission. Petitioners claim that they suffered lesion of more than one-fourth (1/4) of the value of Salas. 1998 of Branch 85 of the Regional Trial Court of Lipa City is hereby NULLIFIED and SET ASIDE. enforceable and irrevocable. they instituted action 19 against both respondent Laperal Realty and respondent lot buyers for rescission of the sale transactions and reconveyance to them of the subdivided lots. Thus. 2 of Republic Act No. or to hold trial in abeyance pending arbitration between petitioners and respondent Laperal Realty. Florante de la Cruz and Jesus Vicente Capellan are not assignees of the rights of respondent Laperal Realty under the Agreement to develop Salas.certainly bound by the Agreement.
vs. another part of the parcelled Delta I (Lot 1) covering an area of 55.g. The entire DMC property is called GC III-Delta Motors Corporation. Thus. On October 30. 1988 for the amount of P95. Judge Tensuan denied Sun Valley's motion for reconsideration of its motion to dismiss. Both Toyota and Sun Valley filed their respective motions for reconsideration. and SUN VALLEY MANUFACTURING & DEVELOPMENT CORPORATION. TOYOTA CASE (Civil Case No. 1991. On September 16.00. Toyota sought the resurvey of the property to correct this error in the title.THE COURT OF APPEALS. HON. grounded on purely procedural issues. JR. Consequently. After this classification. 91-2504) On September 11. Judge Tensuan initially denied Toyota's application for preliminary injunction on the finding that there was no evidence of any threatened destruction. They were foreclosed by the Philippine National Bank (PNB) and later transferred to the national government through the APT for disposition. on December 17. 1992 TOYOTA MOTOR PHILIPPINES CORPORATION. Toyota alleges that the instrument failed to reflect the true intention of the parties. 26942 and raffled to the
GUTIERREZ. After its purchase. Parañaque.e.. as evidenced by the failure of the title to include the 723 square meters strip of land. 1991. No. Sun Valley elevated this denial to the Court of Appeals.236 square meters was purchased by Sun Valley from APT for the bid price of P124. Sun Valley was impleaded considering that it purchased the adjoining land whose title allegedly included the 723 square meters property. Judge Tensuan issued a temporary restraining order (TRO) enjoining Sun Valley and APT from any act of destruction and removal of Toyota's walls and structures.767. Judge Tensuan denied Sun Valley's motion to dismiss. Toyota moved to reconsider the denial of its injunctive application while Sun Valley moved to reconsider the denial of its motion to dismiss. walls and gates and the land on which the improvements stood.349. On October 10. these are the antecedents of the two cases which transpired below. Both Toyota and Sun Valley are the registered owners of two (2) adjoining parcels of land situated in La Huerta.R. On December 4. On December 11. On October 5. Metro Manila which they purchased from the Asset Privatization Trust (APT). Delta II. removal or dispossession of Toyota's property. Delta I into Lots 1. respondents. Relying upon the title description of its property and the surveys it had commissioned. APT parcelled out and catalogued the properties for bidding and sale. both Toyota and Sun Valley opted to file separate actions. buildings.: This case involves a boundary dispute between Toyota Motor Phil. upon Toyota's application. Part of the duly parcelled Delta I property (Lot 2) was sold to Toyota through public bidding on May 12. APT filed its answer with affirmative defenses alleging that the complaint must be dismissed on the ground that Toyota and APT should first have resorted to arbitration as provided in Toyota's deed of sale with APT. 1991.000. Sun Valley filed a motion to dismiss. 1991. and Delta III. Sun Valley and APT were respectively served summons on the following day. driveways. 1991. There are other cases arising from the same dispute but which are not before us. The complaint was for the reformation of the Deed of Sale executed between Toyota and APT. ( Rollo.00. Culled from the records. Judge Tensuan reconsidered his earlier denial of Toyota's application for injunction and granted a writ of preliminary injunction enjoining Sun Valley from proceeding with its threatened destruction and removal of Toyota's walls and directed Sun Valley to restore the premises to the status quo ante. Court battles ensued. Sun Valley claimed that Toyota's perimeter fence overlaps Sun Valley's property along corners 11 to 15 by 322 square meters and corners 19 to 1 by 401 square meters for a total of 723 square meters. 102881 December 7. i. Toyota filed a case against APT and Sun Valley docketed as Civil Case No. FERNANDO V..R. 1991. Branch 146 presided by Judge Salvador Tensuan. and (2) the complaint was in effect a collateral attack on its title. On September 27. parking areas.
. Further subdivisions for the separate catalogues were made for each division e. The properties in question formerly belonged to Delta Motors Corporation (DMC). Sp. APT then proceeded to classify the DMC properties according to the existing improvements. 91-2504 with the Regional Trial Court of Makati. 841) Negotiations between the two (2) corporations for a possible settlement of the dispute bogged down. perimeter fence. No. JR. Toyota constructed a concrete hollow block (CHB) perimeter fence around its alleged property. GOROSPE. 1991. p.THIRD DIVISION G. Corporation (Toyota) and Sun Valley Manufacturing and Development Corporation (Sun Valley).385. J. divided into Delta I. On September 11. Toyota was made to understand that included in its perimeter fence is the disputed strip of land. 2 and 3. Toyota alleges that the discrepancy came about because of the serious flaw in the classification/cataloguing of properties bidded out for sale by APT. 1990. Toyota filed a motion alleging that Sun Valley's long threatened destruction and removal of Toyota's walls and structures were actually being implemented to which Judge Tensuan issued another TRO enjoining acts of destruction and removal of the perimeter walls and structures on the contested area. In pursuing the resolution of the dispute. on the ground that the Toyota complaint failed to state a cause of action against it (1) since it was not a party to the contract of the deed of sale between Toyota and APT. Much of the complications that arose and are now before us can be traced to the two separate cases pursued by both parties. 1991. The case was docketed as CA-G. 1991. petitioner.
we issued a TRO enjoining the implementation of Judge Gorospe's injunction and break-open orders dated October 1. These are: (1) First supplemental petition dated October 4. 1991 and the writ of preliminary mandatory injunction dated December 19. 1991 which sought the nullification of the orders granting Sun Valley's application for preliminary prohibitory and mandatory injunction and denying Toyota's motion to cross-examine Sun Valley's witnesses on the latter's injunction application. Sun Valley. Protesting the admission of the amended complaint. 91-2550) On September 16. On September 27. Judge Gorospe issued a TRO enjoining Toyota from committing further acts of dispossession against Sun Valley. This petition was docketed as CA-G. the Court of Appeals' Second Division issued a TRO ordering respondent Judge Tensuan and all other persons acting in his behalf to cease and desist from further proceeding with Civil Case No. This Second Supplemental Petition was admitted on February 10. A subsequent motion for reconsideration was denied in a resolution dated August 10. and eventually to secure possession of the disputed area. on certiorari on October 1. 1991. Toyota informed the Court that on April 15. Sun Valley's application for prohibitory and mandatory injunction contained in its complaint was set for hearing on October 1. 1992. The respondent court denied due course to the Toyota petition on the finding that the amendment of Sun Valley's complaint was a valid one as Sun Valley's action was not for unlawful detainer but an accion publiciana. 1991. 1991 which sought to nullify the Order denying Toyota's motion to dismiss the amended complaint. The motion to dismiss was set for hearing on September 27.
SUN VALLEY CASE (Civil Case No. Toyota filed the present petition for certiorari on December 9. we admitted the supplemental petition. On September 23. 1992. 91-2550. Toyota went to the Court of Appeals. No. 26152 raffled to the Tenth (10th) Division. Subsequently. On January 10.
On November 27. Furthermore. before the Court of Appeals as a result of Judge Gorospe's alleged hasty issuance of four (4) Orders. Toyota filed its Second Supplemental Petition with this Court challenging the validity of the injunction writ issued by the Court of Appeals' Second Division. 1991. 1991. the supplemental petitions filed by Toyota assailing the prohibitory and mandatory injunctive writ were not ruled upon as they were expunged from the records because of Toyota's failure to attach a motion to admit these supplemental petitions. 1991. 1992. we gave due course to Toyota's petition.
. Branch 61 presided by Judge Fernando Gorospe. the Court of Appeals' 11th Division (Sun Valley case) rendered a decision dismissing the case before it for lack of merit. the same was submitted for resolution. through a manifestation dated April 29. Toyota was constrained to come to this Court for relief. No. This prompted Toyota to file a motion to quash the TRO and file a supplemental petition with this Court impleading the Court of Appeals' Second Division. 1991 which followed Sun Valley to break open and demolish a portion of the Toyota perimeter walls. 1992. 1992. 1991 and the order granting injunctive reliefs were challenged in a petition for certiorari filed with the Court of Appeals and docketed as CA-G. upon an ex-parte motion to clarify filed by Sun Valley on October 25. 1991. On February 10. Toyota moved to lift the TRO and opposed Sun Valley's application for injunction. 91-2504 and from enforcing the Order dated December 17. Ruling that the amendment was a matter of right.R. Thus. On the same day. all dated October 1. Judge Gorospe issued another order dated December 2. 1991. The Court of Appeals ruled that the Toyota complaint was not a collateral attack on Sun Valley's title and that misjoinder of parties is not a ground for dismissal. 1992. assigned to the Second (2nd) Division. 1988 when Toyota purchased the property. on the other hand. Toyota adopted its motion to dismiss the original complaint as its motion to dismiss the amended complaint. Judge Gorospe admitted the amended complaint. Toyota filed a motion to dismiss on the ground that the RTC has no jurisdiction over the case since the complaint was a simple ejectment case cognizable by the Metropolitan Trial Court (MTC). 1991. 1991. After the arguments to Toyota's motion to dismiss. 1991 respectively as well as further proceedings in Civil Case No. On December 11. 1991 and December 2. Earlier. 26813. 1992. 1991. On January 13. (2) Second supplemental petition dated October 23. On September 19. Sun Valley filed an amended complaint to incorporate an allegation that Toyota's possession of the alleged disputed area began in September. respondent Court of Appeals' Tenth Division promulgated its questioned decision which is primarily the subject matter of the present petition before us.Eleventh (11th) Division.R. 1991. 1991. Jr. Meanwhile. Consequently. Judge Tensuan's jurisdiction to act considering the defense of prematurity of action for failure to arbitrate the validity of the TRO issued on December 4. 91-2504). Toyota was later prompted to file two supplemental petitions. the Court of Appeals' Second Division issued the Resolution granting Sun Valley's application for preliminary injunction which enjoined Judge Tensuan in the Toyota case from implementing his injunction Order and from proceeding with the case before him (Civil Case No. filed a case for recovery of possession of the disputed 723 square meters boundary with the Regional Trial Court (RTC) Makati.
the parties hereby undertake to submit the matter for determination by a committee of experts.1992. 2. However. Anent the issue on jurisdiction. Whether or not the complaint filed in the court below is an accion publiciana which is within the jurisdiction of the RTC. In an action to reform a deed. it is best that these be resolved in one integrated proceeding where an overall picture of the entirety of the case can be presented and examined. 5 SE 2d 668. on the other hand raises the following: 1. we examine the two actions filed by the parties. As a general rule. 224 NC 353. Court of Appeal. American jurisprudence from where provisions on reformation of instruments were taken discloses that suits to reform written instruments are subject to the general rule in equity that all persons interested in the subject matter of the litigation. 1991. Under the facts of the present case. 224 NC 353. v. Whether or not respondent Judge Gorospe. v. From the foregoing jurisprudence. 2. 5. Toyota's action for reformation is dismissible as against Sun Valley. Sun Valley. the composition of which shall be as follows: a) One member to be appointed by the VENDOR. is the
matter of jurisdiction. The Court of Appeals' 11th Division. Attention must first be brought to the fact that the contract of sale executed between APT and Toyota provides an arbitration clause which states that: xxx xxx xxx 5.
. and second. we find only two (2) issues vital to the disposition of the petition: first. however. Thus.s 193 SCRA 158 . Whether or not the Court of Appeals committed grave abuse of discretion in refusing to act upon petitioner's supplemental petitions for certiorari. all persons to be affected by the proposed reformation must be made parties (American Fidelity & Casualty Co. Whether or not the petitioner availed of the proper mode of elevating the case to this Court. Sun Valley contends that it should not have been impleaded as a defendant. 3. Grace [Fla App] 115 So 2d 84. all parties claiming an interest in the land or any part thereof purportedly conveyed by the instrument sought to be reformed. 1359 Civil Code). whether it is a legal or an equitable interest should be made parties. before Judge Tensuan alleging that the true intentions of the parties were not expressed in the instrument (Art. 34 A 1099). 4. therefore. to wit: 1. Toyota alleges that there was a mistake in the designation of the real properties subject matter of the contract. Whether or not Judge Tensuan committed grave abuse of discretion in issuing the writ of mandatory injunction dated December 19. who as between the parties has the rightful possession of the land. the parties have succeeded in muddling up the vital issues of the case and getting the lower courts embroiled in numerous appeals over technicalities. Piecemeal determinations by several trial courts on segments of the basic issue and disconnected appeals to different Divisions of the Court of Appeals resulting in separate decisions each dealing with only part of the problem are discouraged. Jr. these principles are not applicable under the particular circumstances of this case. The instrument sought to be reformed is the deed of sale executed by APT in favor of Toyota. committed grave abuse of discretion in granting private respondent's application for a writ of preliminary prohibitory/mandatory injunction. As it is now. 54 N. 189 Ga 229. 2504 for reformation of instrument. correctly ruled that misjoinder of parties is not a ground for dismissal. xxx xxx xxx Amid the clutter of extraneous materials which have certainly bloated the records of this case.J. v. it would appear that Toyota was correct in impleading Sun Valley as party defendant. acting as arbitrators. Kemp v. Funderburk. Toyota filed an action for reformation on September 11. Tensuan had jurisdiction to take cognizance of Civil Case No. 1992 where the denial of Sun Valley's motion to dismiss was sustained. In case of disagreement or conflict arising out of this Contract. Whether or not Judge Salvador S. 30 SE 2d 155). In the instant petition Toyota raises the following issues. in its decision promulgated on April 15. there are three appellate decisions/resolutions before us for review and conflicting orders issued by lower courts as a result of the separate cases filed by the parties.E. 1991. Sun Valley. so that the court may settle all their rights at once and thus prevent the necessity of a multiplicity of suits (Bevis Construction Co. The Court of Appeals' 10th Division gravely abused its discretion when it ignored or pretended to ignore Toyota's protests against Judge Gorospe's injunction orders. argues that the complaint for reformation states no cause of action against it since an action for reformation is basically one strictly between the parties to the contract itself. As in the case of Consolidated Bank and Trust Corp . Stone. This case is far from settlement on the merits. who as between Judge Tensuan or Judge Gorospe has jurisdiction over the dispute. Sun Valley is guilty of forum-shopping and Judge Gorospe of case-grabbing. Through legal maneuverings. 387. and whose interests will be affected by the reformation of the instrument are necessary parties to the action (Kemp v. 6. Third persons who are not parties to the contract cannot and should not be involved. 30 SE 2d 155). Funderburk. Needless multiplicity of suits is something which is frowned upon. Elder. Green v. the Court is explicit in stating that: xxx xxx xxx Where there are conflicting but inextricably interconnected issues in one and the same complicated case. Sun Valley was impleaded in order to obtain complete relief since it was the owner of the adjacent lot.
The Arbitration Committee shall convene not later than three (3) weeks after all its members have been appointed and proceed with the arbitration of the dispute within three (3) calendar months counted therefrom. No. Such questions can only be answered by the parties to the contract themselves. 361 ). 7. 232 La 1026. 149 ALR 746) Assuming that Toyota is afforded the relief prayed for in the Tensuan court. Vallee (La App) 180 So 2d 570). Judge Tensuan should have not taken cognizance of the case. or
cancelled except in a direct proceeding in accordance with law (Section 48. While reformation may often be had to correct mistakes in defining the boundary of lands conveyed so as to identify the lands. Inasmuch as this concerns more importantly the parties APT and Toyota themselves. But the more apparent reason which warrants the dismissal of the action as against Sun Valley is the fact that the complaint for reformation amounts to a collateral attack on Sun Valley's title. New York Life Ins. (71 SCRA 557 ) is quite instructive:
. Lim y Sia (55 Phil. Co. The fact should not be overlooked that we are here confronted with what is really a collateral attack upon a Torrens title. (McCay v. Courts are bound by rules of law and have no arbitrary discretion to disregard them.. By written mutual agreement by the parties hereto. Sun Valley's complaint was one for accion publiciana cognizable by the RTC. Toyota moved to dismiss on the assumption that the complaint was one for unlawful detainer cognizable by the MTC. (Rollo. 173 Tenn 102. 169 SCRA 66 ). This is the reason why reformation was sought to correct the mistake. the Court held that: . What Sun Valley seeks in its complaint is the recovery of possession de jure and not merely possession de facto. Inc. notwithstanding a mistake in pointing out the lines. 143 SCRA 40 . Jenkins. P. Sun Valley filed an action for reconveyance against Toyota to recover possession of the strip of land encroached upon and occupied by the latter. 2). vis-a-vis wellsettled principles or rules in land registration. 169 SCRA 279 ). it may not be used to pass other lands from those intended to be bought and sold. 95 So 2d 644. Having been apprised of the presence of the arbitration clause in the motion to dismiss filed by APT. IAC. The Land Registration Law defines the methods under which a wrongful adjudication of title to land under the Torrens system may be corrected . such time limit for the arbitration may be extended for another calendar month. Sec. Edwards v. CA. Judge Tensuan should have at least suspended the proceedings and directed the parties to settle their dispute by arbitration (Bengson v. 142 SCRA 587 ). It is a long standing principle that equity follows the law. It is disputed that Sun Valley has a Torrens title registered in its name by virtue of its purchase of the land from APT. The members of the Arbitration Committee shall be appointed not later than three (3) working days from receipt of a written notice from either or both parties. An amendment to a complaint before a responsive pleading is filed. This is a controversy which clearly arose from the contract entered into by APT and Toyota. who shall be a lawyer. 114 SW 2d 808) even when real estate is involved (Agurs v. An action for reformation is in personam. Inc. Hellman Commercial Trust & Savings Bank. 816-817) xxx xxx xxx The contention that the arbitration clause has become disfunctional because of the presence of third parties is untenable. 244 Ala 650. The decision of the Arbitration Committee by majority vote of at least two (2) members shall be final and binding upon both the VENDOR and the VENDEE. Intermediate Appellate Court. Its right over the land is premised on the certificate of title registered in its name after it had purchased said land from APT. Toyota contends that the 723 square meters strip of land which it understood to be included in its purchase from APT was erroneously included in Sun Valley's title. Contracts are respected as the law between the contracting parties (Mercantile Ins. . Felipe Ysmael. . c) One member. RA 876). because as we have found. Chan. the land in controversy lies within the boundaries determined by that title. Jr. Inc. contrary to the finding of the Court of Appeals' 11th Division. the equitable relief of reformation may not come into play in order to transfer or appropriate a piece of land that one claims to own but which is titled in the name of a third party. . pp. 78 SCRA 113 . & Co. Whether or not the complaint was amended. Court of Appeals. the instrument failed to express the real agreement or intention of the parties. Santos Ongsiako. In the case of Domingo v. While it is a recognized remedy afforded by courts of equity it may not be applied if it is contrary to well-settled principles or rules. 15 So 2d 409. modified. As the registered owner it had the right of possession of said land illegally occupied by another (Ybañez v. Co. Sec. the arbitration committee is therefore the proper and convenient forum to settle the matter as clearly provided in the deed of sale. It is applied in the abscence of and never against statutory law (Zabat v. Toyota filed an action for reformation of its contract with APT. . On the other hand. Holt.. 1529). The circumstance that the action was directly brought to recover a parcel of land does not alter the truth that the proceeding involves a collateral attack upon a Torrens title. v. the parties are thereby expected to abide with good faith in their contractual commitments (Quillan v. The case of Banayos v. 24 P2d 960.D.b) One member to be appointed by the VENDEE. 133 Cal App 758. 194 SCRA 743 ). is a matter of right (Rule 10.) Courts of equity must proceed with utmost caution especially when rights of third parties may intervene. We do not find any reversible error in the decision of the Court of Appeals' 10th Division where it upheld Judge Gorospe's order denying Toyota's motion to dismiss. Vallee v. Susana Realty. It is merely an equitable relief granted to the parties where through mistake or fraud. since reformation under these circumstances would be inequitable and unjust. not in rem (Cohen v. Thus in the instant case. (See Arsenal v. Toyota is therefore bound to respect the provisions of the contract it entered into with APT. Well-settled is the rule that a certificate of title can not be altered. to be appointed by both of the aforesaid parties. the latter can not validly order the contested portion to be taken out from the Sun Valley's TCT and award it in favor of Toyota. As such. the purpose of which is to look into the real intentions/agreement of the parties to the contract and to determine if there was really a mistake in the designation of the boundaries of the property as alleged by Toyota.
cover all of the cases of dispossession of lands. 823-825. Preliminary injunction will not issue to protect a right not in esse (Buayan Cattle Co. Tarlac and Victoria. v. With the finding that Toyota's action for reformation is dismissable as it is in effect a collateral attack on Sun Valley's title. 523. These two actions must be filed within one (1) year after such unlawful deprivation or withholding of possession with the municipal or city court. Aguila.. 286. Two requisites are necessary if a preliminary injunction is to issue. 450. Catholic Church v. (Sec. Medina. et al. and it is not necessary for him to wait until the expiration of twelve months before commencing an action to be repossessed or declared to be owner of land. Valdellon. 26 SCRA 306. If he decides to raise the question of illegal dispossession only. 1988 TOYOTA MOTOR PHILIPPINES CORPORATION10th Floor. on the other hand has TCT No. 826-827). 9 Phil. Limited Partnership v. 63 SCRA 278) Courts of First Instance have jurisdiction over actions to recover possession of real property illegally detained. Furthermore.xxx xxx xxx We deem it advisable. Rule 70. namely: (1) the summary action for forcible entry and unlawful detainer. while the latter refers to an accion publiciana. Marcos. Rep. 174. 20 Phil. the law restoring to him such possession in a summary manner. We now come to the issue as to which of the parties has a legal right over the property to warrant the issuance of the preliminary mandatory/prohibitory injunction. Lack of fencing permit which can only be applied to and issued by the Parañaque
. v. Rules of Court. preliminary injunction will lie only after the plaintiff has fully established his title or right thereto by a proper action for the purpose. There are other circumstances in the case which militate against Toyota's claim for legal possession over the disputed area. 1988 prior to the construction of the perimeter fence. 618. Cf. supra). which is the recovery of the right to possess and is a plenary action in an ordinary proceeding in the Court of First Instance. even though one (1) year has not expired from the beginning of such illegal detention. Ruiz. 179. Ruiz. (Bishop of Cebu v. Pasaqui. The fact that Toyota has filed a suit for reformation seeking the inclusion of the 723 square meters strip of land is sufficient to deduce that it is not entitled to take over the piece of property it now attempts to appropriate for itself. 88. In other words. 55 Phil. The aforesaid Rule 70 does not. "whenever the owner is dispossessed by any other means than those mentioned he may maintain his action in the Court of First Instance.Makati. Gil J. Mangoron. 128 SCRA 286-287
. In particular. and in the case of unlawful detainer. 9 Phil. and (3) the accion de reivindicacion. at this point. supra) The former is an accion de reivindicacion which seeks the recovery of ownership as well as possession. Manila Railroad Co. together with rents due and damages. Metro Manila ATTENTION: MR. et al. Central Azucarera de Tarlac v. The letter of its surveyor company. v. Del. Thus. In the instant case the existence of a "clear positive right" especially calling for judicial protection has been shown by Sun Valley. he may commence such action in the Court of First Instance immediately or at any time after such illegal dispossession. Act No. 604. Luna v. are violative of said right. the property including the disputed area was sold to it. Medina. Gumiran. Carandang. Valdellon. Villablanca. Summa Kumagai thus reveals: 09 September. until the right of ownership can be tried in due course of law. 1990 (Rollo. Toyota's claim over the disputed property is anchored on the fact of its purchase of the property from APT. namely. The action for forcible entry may be brought where dispossession of real property had taken place by any of the means provided for in Section 1 of Rule 70 of the Revised Rules of Court. 169. 49019 of the Registry of Deeds of Parañaque embracing the aforesaid property in its name. 296. and the action is filed more than one (1) year after such deprivation or withholding of possession. To authorize a temporary injunction. (2) the accion publiciana. then the Court of First Instance will have original jurisdiction over the case. Inc. As early as September. De Leon. FLORENCIO JURADOFinance Officer SUBJECT: PHASE I RENOVATION WORKPERIMETER FENCE GENTLEMEN: This is in connection with the construction of the Perimeter Fence for the Toyota Motor Plant Facilities which to this date we have not started yet due to the following reasons: 1. supra. where the possession is withheld after the expiration or termination of the right to hold possession. 692. and the facts against which the injunction is to be directed. pp. therefore. v. Lim Cay v. intended to provide an expeditious means of protecting actual possession or right to possession of property. having been validly acquired also from APT by virtue of a Deed of Sale executed in its favor on December 5. however. 66 Phil. Ledesma v. Attorney General. 6 Phil. the existence of the right to be protected. Navarro v. v. In actions involving realty. et al. 148 SCRA 326 ). if the party illegal dispossessed desires to raise the question of illegal dispossession as well as that of the ownership over the property. Sun Valley. Toyota was already aware of the discrepancies in the property's description in the title and the actual survey. Quintillan. that from the circumstances of the purchase and the intention of the parties. dispossessed of that land. Valdellon. Medina. to reiterate the essential differences between three kinds of actions for the recovery of possession of real property. the complaint for injunctive relief must be construed strictly against the pleader (Ortigas & Company. by force. These actions in their essence are mere quieting processes by virtue of which a party in possession of land may not be. et al. Puyat Ave. the complainant must make out at least a prima facie showing of a right to the final relief. supra). 21 Phil. Sun Valley's action for recovery of possession filed before Judge Gorospe now stands to be the proper forum where the following dispute may be tried or heard. et al. v. the existence of the right and the violation must appear in the allegations of the complaint and an injunction is proper also when the plaintiff appears to be entitled to the relief demanded in his complaint. by virtue of any contract express or implied. for a writ of preliminary injunction to issue. provided the question of ownership of such property is also involved. Limited Partnership v. They are." (Gumiran v. 56 Phil. Metrobank PlazaSen. Ortigas & Company.
Among these are the following: May 28. Toyota & Sun Valley show that the parties are certainly aware that the ownership of the disputed property more properly pertains to Sun Valley. We offer to give way to an access road 5 m. Alonzo and Jurado. 1. wide more or less from point 15 to 16 of Lot 2 (14. Question of ownership of certain permanent improvements (underground water reservoir and perimeter walls/fences) located at Lot 6 which we won by bidding from APT on October 5. 1990. This occurs even on fence already existing and should have been maintained in the TCT. we propose the following in relation to the excess area occupied by TMP . We propose to pay for the balance of excess land inside TMP fence (contested areas) at a price mutually agreed upon. II. Metro Manila Dear Mr. Boundary Issue between TMP Main Office & Factory and the recently acquired property of SVMDC. Aurora Blvd. 15. 2. Rollo. Alvarez:
boundaries were on top of the monuments set by Geo-Resources. As per our understanding. Mitake. However. APT — Mr. We hope that through this proposal we would settle our differences and look forward to a more cooperative relationship between good neighbors. and Andrews Ave.
. It is highly doubtful whether Toyota may be considered a builder in good faith to be entitled to protection under Article 448 of the Civil Code. we would like to propose as a package the settlement of differences between your property and ours as follows: 1. Very truly yours. We have made our position to APT that these permanent improvements are part of Lot 6 on "as is where is" bid basis (See explanatory map — Exhibit 3). ELEProject Manager (Emphasis supplied. 1991 TOYOTA MOTOR PHILIPPINES CORPORATIONRm. Pedrosa. The construction of the fence utilized existing fence marked yellow on Exhibit 1 and made sure that the new fence to set July 4. Kindly expedite the immediate confirmation with the Geodetic Engineer on the final descriptions of the property lines. We will appreciate your favorable consideration and immediate attention on the matter. MASAO MITAKEPresident
Thank you for honoring our invitation to a luncheon meeting held at noon time today at Sugi Restaurant. 833383). 1991 MR. since you have relayed to us that the underground water reservoir is of no use to you. Toyota continued to build the perimeter fence. Even communication exchanges between and among APT.65 m. confirmed in its reports dated April 1 and April 5. South SuperhighwayParañaque. p. Since we have manifested our intention when we set boundaries to our property. as part of the total package we are proposing to pay for the underground water reservoir. pp. 2. ALVAREZPresidentSun Valley Manufacturing &Development Corp. The boundary lines to our property lines bidded early 1988 were determined after making full payment in August 1988 jointly by representatives of TMP/Metrobank — Messrs.Pasay City. we could not execute the fencing work due to discrepancies on the consolidation plan and the existing property monuments . 1991 that Toyota's perimeter fence overlaps the boundaries of Sun Valley's lot ( Rollo. in length) at the back of our Paint Storage Building (Exhibit 2). MASAO MITAKEPresident Gentlemen: This refers to our several meetings regarding the property problems at "Lot 6" and your encroachment of SVMD LOT I. (SVMDC)Cor. Very truly yours. JOSE CH. CESAR D. The replacement of existing wire fence were affected by setting concrete walls on exactly the same position. Although the Building Official has verbally instructed us to proceed with the renovation work and construction of fence.Building Official upon receipt of the transfer certificate to title and tax declaration. Inc. This is the reason why we are surprised top be informed that our fence goes beyond the boundary lines set forth in the Technical Description on the Transfer Certificate of Title (TCT) to our property. The records also reveal that Toyota's own surveyor. Bince together with representatives of Geo-Resources who installed the monuments and prepared the technical description of the property. the Certeza Surveying & Acrophoto Systems. We would appreciate your usual prompt attention regarding this matter. Metro Manila ATTENTION: MR. the applicable perimeter walls/fences and the water pump/pipings at a price mutually agreed upon. 811) Despite such notification. These discrepancies was (sic) confirmed with the representatives of the Geodetic Engineer.
water reservoir. therefore. 79 Phil. Rodulfa v. On the other hand. As between the two (2) parties. JOSE CH. m. (See Mara. a copy of which is attached. Inc. a writ of preliminary mandatory injunction may be issued pendente lite.
. Bince. we propose that the property problem at "LOT 6" which consists of the perimeter fence. Santos. p. 1991. BA-Lepanto Building9847 Paseo de Roxas BuildingMetro Manila Attention: Mr. Toyota has not established its right over the said property except for the assertion that there was a mistake in an instrument which purportedly should have included the questioned strip of land. proceed as earlier demanded to immediately demolish the CHB fence that prevents us from using our property. 101 Phil.500. 53 ) In view of all the foregoing. and considering that the clear legal right of Toyota to possession of the disputed area has not been established sufficient to grant the prayed for relief. the petition is hereby DISMISSED for failure to show reversible error. Vice Pres. NORBERTO S. we will consider the whole matter as unacceptable to you and we. we are hoping that this first problem be settled not later than July 15. in the amount of P3. De Gracia v. Jr. 832. regarding the check survey of Delta I.We wish to thank you for finally acknowledging the legitimacy of our demands on both properties. otherwise. Felipe B. Sun Valley has a better right. 225  and Torre v. of land adjacent to your Assembly Plant which you continue to use even after said property has been legally transferred to us from last quarter of 1990. therefore. VILAExec. 1991. After asking some of the field men who participated in the various surveys of Delta I from the consolidation to subdivision surveys. Very truly yours. Under the circumstances. & Gen. 65 SCRA 471 . 839)
There is therefore sufficient and convincing proof that Sun Valley has a clear legal right to possession in its favor to warrant the issuance of a writ of preliminary/mandatory injunction. water pump and systems be settled first. In order to start a good business relationship. In view of your present good behavior. much less grave abuse of discretion.00 payable to CMANC. We shall show this during a meeting with the representatives of the owners of Lots 1 and 2. on the part of the respondent court. ALVAREZPresident (Rollo. We also would like to request you to allow us to continue usage of the MERALCO posts and lines connecting to SVMD power station which passes thru your property and allow entry of MERALCO linemen from time to time. v. when Lot 2 was initially surveyed in August 1988: The Asset Privitalization Trust10th Floor. I will confer which our Japanese partners to consider the selling of the 723 sq. Estrella. Emphasis supplied) Moreover. 76 Phil. Sun Valley puts forth evidence that Toyota has altered the boundaries of its own property by moving the monuments erected thereon by APT's surveyor GeoResources and Consultancy. Alfonso. Manager (Emphasis supplied. Very truly yours. p. Upon acceptance of these requests. Rollo. We hope for your immediate action to start the resolution of these unwanted problems. Sun Valley's TCT gives it that right to possession. Querubin. Inc.Associate Executive Trustee Dear Sirs: This has reference to our letter to your office dated April 8. we found out that some more of the present corner points are not the same points shown to them during the surveys . 365 . We hope this will clarify the discrepancies.000.
COLAYCO. 1991 until its eventual completion. Petitioner and respondent Shangri-la Properties. 1998 BF CORPORATION." Said agreement would cover the construction work on said project as of May 1. 1993. 4 Barely two days later or on July 14. plaintiff BF and defendant Shangri-La Properties. SPI proposed the re-negotiation of the agreement between them. Defendants have submitted a copy of the alleged trade contract. RAMOS. LXX. per its Index. It emphasized that the agreement did not provide for arbitration and therefore the court could not be deprived of jurisdiction conferred by law by the mere allegation of the existence of an arbitration clause in the agreement between the parties. petitioner incurred delay in the construction work that SPI considered as "serious and substantial. Series of 1991 of his notarial register. Rufo B. Alfredo C. Complaint). SHANGRI-LA PROPERTIES. Briones as document No. Section C of the said Contract Documents is entitled "Articles of Agreement and Conditions of Contract" which. Calayco. The motion was anchored on defendants' allegation that the formal trade contract for the construction of the project provided for a clause requiring prior resort to arbitration before judicial intervention could be invoked in any dispute arising from the contract. Contract Document." Thus.. However." 3 This resulted in disagreements between the parties as regards their respective liabilities under the contract. petitioner reiterated that there was no arbitration clause in the contract between the parties.. Inc. This Court notes. No. which is entitled "Contract Documents For Builder's Work Trade Contractor" dated 01 May 1991. INC. consists of Part A (Articles of Agreement) and B (Conditions of Contract). however. contains the following provisions: 3. the lower court denied the motion to suspend proceedings. 1991 (Annex C. on page D/6 thereof. and one of the said documents is the "Conditions of Contract" which contains the Arbitration Clause relied upon by the defendants in their Motion to Suspend Proceedings. the parties' respective representatives met in conference but they failed to come to an agreement.: The basic issue in this petition for review on certiorari is whether or not the contract for the construction of the EDSA Plaza between petitioner BF Corporation and respondent Shangri-la Properties. petitioner and SPI entered into a written agreement denominated as "Agreement for the Execution of Builder's Work for the EDSA Plaza Project. SPI president. 1991." 1 On the other hand. on May 30. and Section A thereof consists of the abovementioned Letter-Agreement dated May 30. Colayco of Shangri-La Properties. It alleged that suspension of proceedings would not necessarily deprive the court of its jurisdiction over the case and that arbitration would expedite rather than delay the settlement of the parties' respective claims against each other. In its sur-rejoinder. agreed upon the terms and conditions of the Builders Work for the EDSA Plaza Project (Phases I. On August 3. 1993. upon a finding that an arbitration clause indeed exists. The said Articles of Agreement appears to have been duly signed by President Rufo B. 1990 damaging Phase I" of the Project.THIRD DIVISION
conditions of the contract containing the arbitration clause that it failed to append to its motion to suspend proceedings. Inc. RUFO B. Ramos. II and Carpark). the construction works "progressed in faithful compliance with the First Agreement until a fire broke out on November 30. Petitioner opposed said motion claiming that there was no formal contract between the parties although they entered into an agreement defining their rights and obligations in undertaking the project. 1993. Thus. page 70.R.
ROMERO. vs. SPI pointed out the significance of petitioner's admission of the due execution of the "Articles of Agreement. according to petitioner. Antonio B. In reply to said opposition. Olbes. Lanuza. On July 12. Maximo G. MAXIMO G. (SPI) entered into an agreement whereby the latter engaged the former to construct the main structure of the "EDSA Plaza Project. subject to the execution by the parties of a formal trade contract. 1991. petitioner. 2 Hence. book No. SPI insisted that there was such an arbitration clause in the existing contract between petitioner and SPI. Metro Manila on November 15. page 2 of which is entitled "Contents of Contract Documents" with a list of the documents therein contained. Licauco III and Benjamin C. It added that defendants should be declared in default for failure to file their answer within the reglementary period. Gerardo O. petitioner filed with the Regional Trial Court of Pasig a complaint for collection of the balance due under the construction agreement. 1991 by Notary Public Nilberto R. 1991. ALFREDO C. that the 'Conditions of Contract' referred to. and was thereafter acknowledged before Notary Public Nilberto R. According to SPI. It averred that granting that such a clause indeed formed part of the contract.COURT OF APPEALS. 345. Jr. The construction work was in progress when SPI decided to expand the project by engaging the services of petitioner again. suspension of the proceedings was no longer proper. respondents. Named defendants therein were SPI and members of its board of directors namely. Colayco. thus:
G. the signatures of Rufo B. Inc. Inc. while page D/7 shows that the agreement is a public document duly notarized on November 15. Fernando of BF and their witnesses. petitioner "failed to complete the construction works and abandoned the project.
. upon SPI's initiative. LICAUCO III and BENJAMIN C. embodies an arbitration clause in case of disagreement between the parties in the implementation of contractual provisions. and Bayani Fernando. 5 Thereafter. 120105 March 27. the parties entered into an agreement for the main contract works after which construction work began. The following day. In a rejoinder to SPI's reply. and President Bayani F. president of petitioner appear. SPI submitted a copy of the
It appears from the said document that in the letter-agreement dated May 30. Consequently. Ramos. The said Articles of Agreement also provides that the "Contract Documents" therein listed "shall be deemed an integral part of this Agreement"." a shopping mall complex in the City of Mandaluyong. Briones of Makati. RAMOS. J. SPI and its co-defendants filed a motion to suspend proceedings instead of filing an answer.
petition)." (Emphasis supplied. 1991. Considering the insistence of the plaintiff that the said Conditions of Contract was not duly executed or signed by the parties. . Against the above backdrop. petition).Three copies of the Contract Documents referred to in the Articles of Agreement shall be signed by the parties to the contract and distributed to the Owner and the Contractor for their safe keeping. this Court entertains serious doubt whether or not the arbitration clause found in the said Conditions of Contract is binding upon the parties to the Articles of Agreement. but also for the reason that defendants have failed to file any written notice of any demand for arbitration during the said long period of one year and eight months. . it was "too late in the day for defendants to invoke arbitration. 1. 2. Bayani Fernando and Reynaldo de la Cruz. has been submitted by them to the respondent Court (Annex G. "which apparently. . Inc. president of respondent Corporation (Annex G-1. . petitioner billed SPI in the total amount of P110. Failing these efforts then such dispute or difference shall be referred to Arbitration in accordance with the rules and procedures of the Philippine Arbitration Law. without that of the representative of petitioner Shangri-La Properties. And it is significant to note further that the said "Conditions of Contract" is not duly signed by the parties on any page thereof — although it bears the initials of BF's representatives (Bayani F. Inc. later than the time of final payment . The conference took place but it proved futile. does not militate against its effectivity. 876. The lower court denied SPI's motion for reconsideration for lack of merit and directed
it and the other defendants to file their responsive pleading or answer within fifteen (15) days from notice. 1991 with "liquified (sic) damages up to a maximum of 5% of the total contract price.52. Said petitioner having categorically admitted that the document. Inc. 26. The respondent Court held that petitioners "are in default in proceeding with such arbitration. 227-229). later than the time of final payment. The fact that said conditions of contract containing the arbitration clause bear only the initials of respondent Corporation's representatives. it is required that "Notice of the demand for arbitration of a dispute shall be filed in writing with the other party . not only because defendants had taken possession of the finished works and the plaintiff's billings for the payment thereof had remained pending since November. the project was to be completed by October 31. assuming that the arbitration clause was valid and binding. . 1993. rollo).000. petition. the Court of Appeals held: The reasons given by the respondent Court in denying petitioners' motion to suspend proceedings are untenable.) The lower court then ruled that.883. and of Bayani Fernando. SPI set up its own claim of P220. . ." It took note of "the fact that under the supposed Arbitration Clause invoked by defendants.. And it is at pages D/42 to D/44 of the conditions of contract that the provisions for arbitration are found (Annexes G-3 to G5." SPI. . should be allowed to submit their dispute to arbitration in accordance with their agreement. in no case . Instead of filing an answer to the complaint. In so ruling." which apparently.000. the Owner and the Contractor hereby agree to exert all efforts to settle their differences or dispute amicably. It bears the signature of petitioner Rufo B. ." It quoted the following provision of the arbitration clause: Notice of the demand for arbitration of a dispute shall be filed in writing with the other party to the contract and a copy filed with the Project Manager. . it is required that "Notice of the demand for arbitration of a dispute shall be filed in writing with the other party . not only because defendants had taken possession of the finished works and the plaintiff's billings for the payment thereof had remained pending since November. shall the demand he made be later than the time of final payment except as otherwise expressly stipulated in the contract. 1993. 1991 agreement. Said appellate court granted the petition. this Court finds that it cannot stay the proceedings in this case as required by Sec."
. .000 for each day of delay counted from November 1. annulled and set aside the orders and stayed the proceedings in the lower court. pp. either during the progress or after the completion or abandonment of the Works as to the construction of this Contract or as to any matter or thing of whatsoever nature arising thereunder or in connection therewith (including any matter or being left by this Contract to the discretion of the Project Manager or the withholding by the Project Manager of any certificate to which the Contractor may claim to be entitled or the measurement and valuation mentioned in clause 30 (5) (a) of these Conditions' or the rights and liabilities of the parties under clauses 25." The lower court also found that after the project was completed in accordance with the agreement that contained a provision on "progress payment billing. Instead of paying the amount demanded. . Upon the above facts. but also for the reason that defendants have failed to file any written notice of any demand for arbitration during the said long period of one year and eight months. At page D/4 of said articles of agreement it is expressly provided that the conditions of contract are "deemed an integral part" thereof (page 188. 1993 (Annex G. the contractor would pay P80. the initial or signature of said petitioner's representative to signify conformity to arbitration is no longer necessary. 1991 up to the filing of this case on July 14. because defendants are in default in proceeding with such arbitration. still. ." (emphasis supplied). in no case . having failed to pay for the works. . 1993. 1993. The demand for arbitration shall be made within a reasonable time after the dispute has arisen and attempts to settle amicably have failed.00 and scheduled a conference on that claim for July 12. 32 or 33 of these Conditions). 1991 up to the filing of this case on July 14. Fernando and Reynaldo M. the lower court concluded: Considering the fact that under the supposed Arbitration Clause invoked by defendants. president of petitioner Shangri-La Properties. 7 of Republic Act No. The notarized copy of the articles of agreement attached as Annex A to petitioners' reply dated August 26. Annex A to its reply dated August 26. 1993. 1991. Colayco. is the agreement between the parties. and the failure of the defendants to submit any signed copy of the said document. Thereafter. . Clause No. The parties. SPI filed a petition for certiorari under Rule 65 of the Rules of Court before the Court of Appeals. had elapsed." SPI "took possession and started operations thereof by opening the same to the public in November. 35 on arbitration specifically provides: Provided always that in case any dispute or difference shall arise between the Owner or the Project Manager on his behalf and the Contractor. petition). . de la Cruz) without the initials thereon of any representative of Shangri-La Properties. had elapsed. however. the lower court found that per the May 30. in no case.101. therefore. contained in a demand letter sent by it to SPI on February 17.
certiorari will not lie. Errors of judgment are correctible by appeal.101. 1993. the Court of Appeals should have dismissed the petition for certiorari because the remedy of appeal would still be available to private respondents at the proper time. said arbitration clause does not exist. . If the lower court indeed prematurely assumed jurisdiction over the case. the private respondents rightfully invoked the special civil action of certiorari. upon the continuation of the proceedings. The rule that the special civil action of certiorari may not be invoked as a substitute for the remedy of appeal is succinctly reiterated in Ongsitco v." Rule 65 is very clear. However. the Court of Appeals interpreted the construction of the subject contract documents containing the Arbitration Clause in accordance with Republic Act No. any alleged errors committed in the exercise of its jurisdiction will amount to nothing more than errors of judgment which are reviewable by timely appeal and not by a special civil action of certiorari. after the final demand to pay the amount of P110. the the question is one of fact which is not proper in a petition for certiorari. . . respondent Corporation filed its complaint against petitioners. 876 (Arbitration Law) and existing jurisprudence which will be extensively discussed hereunder. The issue." The writs of certiorari and prohibition are remedies to correct lack or excess of jurisdiction or grave abuse of discretion equivalent to lack of jurisdiction committed by a lower court. Under the circumstances. 1993. Hence. petitioners wrote to respondent Corporation requesting arbitration. ." That is why they are referred to as "extraordinary. Hence. In resolving said question of fact. It is that mode of appeal taken by private respondents before the Court of Appeals that is being questioned by the petitioners before this Court. which is a question of law depends on the determination of the existence of the arbitration clause. For this Court to be able to resolve the question of whether private respondents took the proper mode of appeal.Respondent Court has overlooked the fact that under the arbitrationclause — Notice of the demand for arbitration dispute shall be filed in writing with the other party to the contract and a copy filed with the Project Manager. . Certiorari is not a remedy for errors of judgment. it ruled that in contemplation of law. The Court has likewise ruled that " certiorari will not be issued to cure errors in proceedings or correct erroneous conclusions of law or fact. B THE COURT OF APPEALS ERRED IN FINDING GRAVE ABUSE OF DISCRETION IN THE FACTUAL FINDINGS OF THE TRIAL COURT THAT: (i) THE PARTIES DID NOT ENTER INTO AN AGREEMENT TO ARBITRATE. While this Court does not deny the eventual jurisdiction of the lower court over the controversy. errors of jurisdiction are reviewable by certiorari. to petitioner. in no case. the issue posed basically is whether the lower court prematurely assumed jurisdiction over it." 9 This is not exactly so in the instant case. But at the heart of said issue is the question of whether there exists an Arbitration Clause because if an Arbitration Clause does not exist. then it has to answer the core issue of whether there exists an Arbitration Clause which.00 and set a conference thereon on July 12. However. July 14. petition). Countless times in the past. Court of Appeals 8 as follows:
. 1993. Neither can they be considered in default of their obligation to respondent Corporation. . is a question of fact. A decision containing a finding that the contract has no arbitration clause can then be elevated to a higher court "in an ordinary appeal" where an adequate remedy could be obtained. posed before the Court of Appeals in a petition for certiorari is whether the Arbitration Clause does not in fact exist. speedy and adequate remedy in the ordinary course of law .000. this petition before this Court. As long as a court acts within its jurisdiction. Being a question of law. . therefore. The extraordinary remedies of certiorari. then private respondents took the wrong mode of appeal before the Court of Appeals. ." As such." .
. it cannot be said that petitioners' resort to arbitration was made beyond reasonable time. instead of paying. The demand for arbitration shall be made within a reasonable time after the dispute has arisen and attempts to settle amicably had failed . admittedly.000. On August 13. . (ii) ASSUMING THAT THE PARTIES DID ENTER INTO THE AGREEMENT TO ARBITRATE. 7 The above contention is without merit. which is a question of fact. The Court of Appeals found that an Arbitration Clause does in fact exist. RESPONDENTS ARE ALREADY IN DEFAULT IN INVOKING THE AGREEMENT TO ARBITRATE.883. is a question of law. the action for certiorari will not be entertained. As the respondent Court there said. the question of jurisdiction. In the instant case. . petitioners set up its own claim against respondent Corporation in the amount of P220. "Where the proper remedy is appeal. however. this Court has held that "where appeal is the proper remedy. prohibition and mandamus are available only when "there is no appeal or any plain. petitioner contends that the Order of the lower court denying the motion to suspend proceedings "is a resolution of an incident on the merits. In effect. Petitioner assigns the following errors: A THE COURT OF APPEALS ERRED IN ISSUING THE EXTRAORDINARY WRIT OF CERTIORARI ALTHOUGH THE REMEDY OF APPEAL WAS AVAILABLE TO RESPONDENTS. The next day. the lower court found that there exists an arbitration clause. which. then it becomes an error of jurisdiction which is a proper subject of a petition for certiorari before the Court of Appeals. Said conference proved futile. the lower court would appreciate the evidence adduced in their totality and thereafter render a decision on the merits that may or may not sustain the existence of an arbitration clause. . And if the lower court does not have jurisdiction over the controversy. On its face.52. the issue posed before the Court of Appeals was likewise a question of law. incidentally. then any decision or order it may render may be annulled and set aside by the appellate court. shall the demand be made later than the time of final payment except as otherwise expressly stipulated in the contract (emphasis supplied) quoted in its order (Annex A. . On the first assigned error.
terms and consideration. when connected. as in contracts entered into by correspondence. . Similarly.). 11 That word may sometimes be construed to mean to give consent to or to attest. Thus. these requisites were complied with in the contract in question. this Court holds that the question of the existence of the arbitration clause in the contract between petitioner and private respondents is a legal issue that must be determined in this petition for review on certiorari. The failure of the private respondent's representative to initial the "Conditions of Contract" would therefor not affect compliance with the formal requirements for arbitration agreements because that particular portion of the covenants between the parties was included by reference in the Articles of Agreement. is available in the files of (said) office as Notarial Registry Entry only. 876 provides for the formal requisites of an arbitration agreement as follows: Sec. However. one signed by each of the parties. Notably. private respondent SPI should have paid its liabilities tinder the contract in accordance with its terms. Its other contentions. is binding on both to the same extent as though there had been only one copy of the agreement and both had signed it. it is not a formal trade contract. where a rigid application of the rule that certiorari cannot be a substitute for appeal will result in a manifest failure or miscarriage of justice. show the parties. and therefore. subject matter. which incorporates all the other contracts and agreements between the parties." In other words. too. A contract need not be contained in a single writing. The making of a contract or submission for arbitration described in section two hereof. to enforce such contract of submission. and (f) the compilation submitted by respondents are a "mere hodge-podge of documents and do not constitute a single intelligible agreement. Petitioner's contention that there was no arbitration clause because the contract incorporating said provision is part of a "hodge-podge" document. the provisions of the Rules of Court which are technical rules may be relaxed. 13 A contract may be encompassed in several instruments even though every instrument is not signed by the parties. The Articles of Agreement. the trial court found that the "conditions of contract" embodying the arbitration clause is not duly signed by the parties. Briones. upon a scrutiny of the records of this case. 12 The Court finds that. a written agreement of which there are two copies. The contract(s) introduced in court by private respondents were therefore "of dubious authenticity" because: (a) the Agreement for the Execution of Builder's Work for the EDSA Plaza Project does not contain an arbitration clause. it was because
. since it is sufficient if the unsigned instruments are clearly identified or referred to and made part of the signed instrument or instruments. 4. or by his lawful agent. Second. 14 The flaw in petitioner's contentions therefore lies in its having segmented the various components of the whole contract between the parties into several parts. as well as a submission to arbitrate an existing controversy.Moreover. while not denying that there exists an arbitration clause in the contract in question. Republic Act No. shall be deemed a consent of the parties of the province or city where any of the parties resides.'" It is this Articles of Agreement that was duly signed by Rufo B. president of private respondent SPI." then it should have been duly notarized. (b) private respondents "surreptitiously attached as Annexes "G-3" to "G-5" to their petition before the Court of Appeals but these documents are not parts of the Agreement of the parties as "there was no formal trade contract executed. the lower court found that the said Articles of Agreement "also provides that the 'Contract Documents' therein listed 'shall be deemed an integral part of this Agreement. Consequently. 1993 merely states that "the notarial record of Nilberto Briones . Besides. had the Court of Appeals dismissed the petition for certiorari. This notwithstanding. However. was signed by representatives of both parties and duly notarized. There is no denying that the parties entered into a written contract that was submitted in evidence before the lower court. providing for arbitration of any controversy. is therefore untenable. This Court likewise does not find that the Court of Appeals erred in ruling that private respondents were not in default in invoking the provisions of the arbitration clause which states that "(t)he demand for arbitration shall be made within a reasonable time after the dispute has arisen and attempts to settle amicably had failed. This Court may as well proceed to determine whether the arbitration clause does exist in the parties' contract. (Emphasis supplied. president of petitioner corporation.' and one of the said documents is the 'Conditions of Contract' which contains the Arbitration Clause. In other words. In the same vein. The same agreement was duly subscribed before notary public Nilberto R. the issue of whether or not an arbitration clause exists in the contract would not have been resolved in accordance with evidence extant in the record of the case. 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. The almost two-year delay in paying its liabilities may not therefore be wholly ascribed to private respondent SPI. Colayco. private respondent SPI's initiative in calling for a conference between the parties was a step towards the agreed resort to arbitration. and Bayani F. specifically that insinuating fraud as regards the alleged insertion of the arbitration clause. To "subscribe" means to write underneath. petitioner posthaste filed the complaint before the lower court. are questions of fact that should have been threshed out below. to sign at the end of a document. while private respondent SPI's request for arbitration on August 13." (c) if the entire compilation of documents "is indeed a formal trade contract. misunderstandings appeared to have cropped up between the parties ostensibly brought about by either delay in the completion of the construction work or by force majeure or the fire that partially gutted the project. this would have resulted in a judicial rejection of a contractual provision agreed by the parties to the contract. asserts that in contemplation of law there could not have been one considering the following points. Petitioner. private respondents misrepresented before the Court of Appeals that they produced in the trial court a notarized duplicate original copy of the construction agreement because what were submitted were mere photocopies thereof. 1993 might appear an afterthought as it was made after it had filed the motion to suspend proceedings. . (d) the certification from the Records Management and Archives Office dated August 26. It may be collected from several different writings which do not conflict with each other and which. Fernando." (e) the same certification attests that the document entered in the notarial registry pertains to the Articles of Agreement only without any other accompanying documents." Under the factual milieu. Form of arbitration agreement . 10 As we shall show hereunder. petitioner ironically admits the execution of the Articles of Agreement. — A contract to arbitrate a controversy thereafter arising between the parties. as one's name. petitioner denies the existence of the arbitration clause primarily on the ground that the representatives of the contracting corporations did not sign the "Conditions of Contract" that contained the said clause. First. shall be in writing and subscribed by the party sought to be charged. the subscription of the principal agreement effectively covered the other documents incorporated by reference therein.
petitioner also appeared to act hastily in order to resolve the controversy through the courts. The arbitration clause provides for a "reasonable time" within which the parties may avail of the relief under that clause. "Reasonableness" is a relative term and the question of whether the time within which an act has to be done is reasonable depends on attendant circumstances. 15 This Court finds that under the circumstances obtaining in this case, a one-month period from the time the parties held a conference on July 12, 1993 until private respondent SPI notified petitioner that it was invoking the arbitration clause, is a reasonable time. Indeed, petitioner may not be faulted for resorting to the court to claim what was due it under the contract. However, we find its denial of the existence of the arbitration clause as an attempt to cover up its misstep in hurriedly filing the complaint before the lower court. In this connection, it bears stressing that the lower court has not lost its jurisdiction over the case. Section 7 of Republic Act No. 876 provides that proceedings therein have only been stayed. After the special proceeding of arbitration 16 has been pursued and completed, then the lower court may confirm the award 17 made by the arbitrator. It should be noted that in this jurisdiction, arbitration has been held valid and constitutional. Even before the approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement of disputes through arbitration. 18 Republic Act No. 876 was adopted to supplement the New Civil Code's provisions on arbitration. 19 Its potentials as one of the alternative dispute resolution methods that are now rightfully vaunted as "the wave of the future" in international relations, is recognized worldwide. To brush aside a contractual agreement calling for arbitration in case of disagreement between the parties would therefore be a step backward. WHEREFORE, the questioned Decision of the Court of Appeals is hereby AFFIRMED and the petition for certiorari DENIED. This Decision is immediately executory. Costs against petitioner. SO ORDERED.
SECOND DIVISION G.R. NO. 152471 August 18, 2006 FIESTA WORLD MALL CORPORATION, Petitioner,vs.LINBERG PHILIPPINES, INC., Respondent. DECISION SANDOVAL-GUTIERREZ, J.: For our resolution is the instant Petition for Review on Certiorari 1 assailing the Decision2 dated December 12, 2001 and Resolution 3 dated February 28, 2002 rendered by the Court of Appeals in CA-G.R. SP No. 63671, entitled "Fiesta World Mall Corporation, petitioner, versus Hon. Florito S. Macalino, Presiding Judge of the Regional Trial Court (RTC), Branch 267, Pasig City, and Linberg Philippines, Inc., respondents." The facts of this case are: 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, docketed as Civil Case No. 67755. 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" 4 (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 pertinent portions of which provide: 2.1 x x x E1 – 988,888 kw-hr x BER E2 – (ED-988,888) x BER Where: E1 & E2 – Energy fees in pesos for the billing period. Where E1 is based on the minimum energy off-take of 988,888 kw-hrs. per month and E2 is based on the actual meter reading less the minimum off-take. BER – Base energy rate at Ps 2.30/Kw-Hr billing rate based on the exchange rate of Ps 26.20 to the US dollar, and with fuel oil to be supplied by LINBERG at its own cost. The base energy rate is subject to exchange rate adjustment accordingly to the formula as follows:
BER – 0.6426 + 0.3224 Pn + 1.345 Fn 26.40 4.00 WHERE: Pn – is defined as the average of the Bangko Sentral ng Pilipinas’ published dealing rates for thirty (30) trading days immediately prior to the new billing rate. Fn – Weighted average of fuel price per liter based on the average of the last three (3) purchases made by LINBERG as evidenced by purchase invoices. ED – Energy delivered in kw-hrs per meter reading. 3. Minimum Energy Off-Take The energy fees payable to LINBERG shall be on the basis of actual KWH generated by the plant. However, if the actual KWH generated is less than the minimum energy off-take level, the calculation of the energy fees shall be made as if LINBERG has generated the minimum energy off-take level of 988,888 KW-HR per month. 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. 5 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 pursuant to 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. Article XXI, referred to in paragraph 17.2 above, reads: ARTICLE XXI JURISDICTION The parties hereto submit to the exclusive jurisdiction of the proper courts of Pasig City, Republic of the Philippines for the hearing and determination of any action or proceeding arising out of or in connection with this Agreement. 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, docketed as CA-G.R. SP No. 63671. 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 court in its Resolution6 dated February 28, 2002. Hence, the instant Petition for Review on Certiorari. The sole issue for our resolution is whether the filing with the trial court of respondent’s 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.7 And because it covers the dispute between them in the present case, either of them may compel the other to arbitrate. 8 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.9 To brush aside such agreement providing for arbitration in case of disputes between the parties would be a step backward. As we held in BF Corporation v. Court of Appeals,10 It should be noted that in this jurisdiction, arbitration has been held valid and constitutional. Even before the approval on June 19, 1953 of Republic Act No. 876 (The Arbitration Law), this Court has countenanced the settlement of disputes through arbitration (Puromines, Inc. v. Court of Appeals, G.R. No. 91228, March 22, 1993, 220 SCRA 281-290). Republic Act No. 876 was adopted to supplement the New Civil Code’s provisions on arbitration (Chung Fu Industries Phils., Inc. v. Court of Appeals, G.R. No. 92683, February 25, 1992, 206 SCRA 545, 551). Its potentials as one of the alternative dispute resolution methods that are now rightfully vaunted as ‘the wave of the future’ in international relations, is recognized worldwide. To brush aside a contractual agreement calling for arbitration in case of disagreement between the parties would therefore be a step backward.
Branch 267.4 of the Contract. since respondent has already filed a complaint with the trial court without prior recourse to arbitration. The assailed Decision and Resolution of the Court of Appeals in CA-G.
. SO ORDERED. we hold that the Court of Appeals erred in disregarding the arbitration clause in the parties’ Contract. the proper procedure to enable an arbitration panel to resolve the parties’ dispute pursuant to their Contract is for the trial court to stay the proceedings. The Regional Trial Court. WHEREFORE. we GRANT the instant petition. Pasig City is directed to suspend the proceedings in Civil Case No. then the trial court may confirm the award made by the arbitration panel. The parties are ordered to submit their controversy to the arbitration panel pursuant to paragraph 7. 63671 are REVERSED.11 After the arbitration proceeding has been pursued and completed. Costs against respondent.12 In sum. 67755 until after the Arbitration Panel shall have resolved the controversy and submitted its report to the trial court.In this connection.R. SP No.
. No. Atty. Inc. by appointing and confirming the appointment of the Third Arbitrator. Paras for petitioner. Republic Act 876. of Branch LXI. The law (R. and upon being satisfied that the making of the agreement or such failure to comply therewith is not in issue. On the basis of the aforesaid allegations." Petition). in particular.) In its Answer with Counterclaim (Annex "C. in Special Case No. Jr. 876). Ancheta. petitioner. etc. providing that: 7. under the Rules of Court. respondents.: In an effort to declog the courts of an increasing volume of work load and. indeed encourages.. — A party aggrieved by the failure. If the finding be that no agreement in writing providing for arbitration was made. 1993 with the former owner thereof. thru written notices to the former. petitioner here specifically denied the averments of the petition below. This case before us concerns the jurisdiction of courts. (Annex "A. La Proveedora. is governed by a special law." Petition. the applicability of the doctrine of estoppel. 1989. as third arbitrator. in relation to the provisions of Section 6 of Republic Act No. within ten days after such motions. Respondent Yao theorizes that this was petitioner's design to delay the arbitration proceedings. 1990. shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. 1989. 1990 and June 22. an order shall be made summarily directing the parties to proceed with the arbitration in accordance with the terms thereof. was held in abeyance because petitioner instructed Atty. 876. Sabile to defer the same until its Board of Directors could convene and approve Tupang's appointment. theorizing that such petition is premature since respondent Yao has not yet formally required arbitrators Alamarez and Sabile to
G. respondent Yao appointed Domingo Alamarez. 1994 LA NAVAL DRUG CORPORATION. . The confirmation of the appointment of Aurelio Tupang. . the latter. stating as follows: (1) Petitioner's claim for damages predicated on alleged tortuous acts of respondents La Naval Drug corporation such as their alleged interference and dilatory tactics. otherwise known as the Arbitration Law. Petitioner assails that portion of subject Order of April 26. 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. in accordance with Republic Act 876.R. and respondent La Naval Drug Corporation's counterclaim for damages may be entertained by this Court in a hearing — not summary — for the purpose. it appears that he is the present owner of a commercial building a portion of which is leased to petitioner under a contract of lease executed on December 23. Original action for Certiorari and Prohibition for Annulment of the Orders.A. respectively. J.
VITUG. most importantly. Arbitrations. provides: Sec. Compromises and arbitration are widely known and used as such acceptable methods of resolving adversarial claims. neglect or refusal of another to perform under an agreement in writing providing for arbitration may petition the court for an order directing that such arbitration proceed in the manner provided for in such agreement. Regional Trial Court. specifically Section 6 thereof. the same shall be submitted to a group of Arbitrators composed of three (3) members. (2) A preliminary hearing of the special and affirmative defense to show that Petitioner has not cause of action against respondent's claim for damages is denied. Casiano Sabile and Domingo Alamarez be directed to proceed with the arbitration in accordance with Section 7 of subject Contract of Lease and the applicable provisions of the Arbitration law. which contract expired on April 30. which we here reproduce in toto. in the implementation of the Arbitration Agreement in the Contract of Lease. If the making of the agreement or default be in issue the court shall proceed to summarily hear such issue. Jerome T. the events that have led to the case at bench are detailed in the appealed decision of respondent appellate court. and paragraph 7 of their lease contract. Angeles City. YAO. while on June 5. thereby compelling among others the petitioner to go to Court for redress. 6024 for Enforcement of ARBITRATION Agreement with Damages. 1990 denying its motion for reconsideration of the said earlier Order. in order to accord contending parties with expenditious alternatives for settling disputes. one to be appointed by LESSOR. respondent Yao prayed that after summary hearing pursuant to Section 6 of the Arbitration Law.THE HONORABLE COURT OF APPEALS and WILSON C. petitions. 1989. However. dated April
. in that respect. But petitioner and respondent Yao disagreed on the rental rate. petitions or application filed under the provisions of this Act. Asperilla. In chronology.EN BANC
26. and the governing stipulation of their contract of lease. the law authorities. Casiano Sabile as its arbitrator. The court shall hear the parties. Thus. If the finding be that a written provision for arbitration was made and there is a default in proceeding thereunder. in violation of the Arbitration Law. suppletory to which are laws and rules of general application. or applications have been heard by it. expressed his intention to submit their disagreement to arbitration. Peña & Nolasco for private respondent. and. And challenges the Order of June 22. petitioner chose Atty. on May 6. a resolution on this issue is deferred after the trial of the case on the merits. pursuant to Section 12 and the succeeding sections of the Arbitration Law. petitioner exercised its option to lease the same building for another five years. 103200 August 31. out of court settlements or adjudications. the proceeding shall be dismissed. as his arbitrator. 1990. vs. and that the Board of Three Arbitrators be ordered to immediately convene and resolve the controversy before it. or that there is no default in the proceeding thereunder. and to resolve the controversy. 6. The court shall decide all motions. Quasha. Hearing by court. Should the parties fail to agree on the rate of rentals. From the petition below of respondent Yao. Five days notice in writing of the hearing of such application shall be served either personally or by registered mail upon the party in default.
1989. on the one hand.agree on the third arbitrator. 308). et al. that the amended petition should be dismissed on the ground of non-payment of the requisite filing fees therefor. (Syllabus. In its Order of November 14.. Zurbito.000. (18 SCRA 207. however. 876. under Section 6 of Republic Act No. recalling the distinctions. But the respondent court was not persuaded by petitioner's submission. While the appellate court has agreed with petitioner that. 41 Phil. this Court has ruled that if the defendant. In Wang Laboratories. 1990. Judge Navarro. contending. On April 26. and incurred attorney's fees of P50. 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. such as in this instance. On October 31. If his motion is for any other purpose than to object to the jurisdiction of the court over his person. A citation of a few of our decisions might be apropos. may in this case solely determine the issue of whether the litigants should proceed or not to arbitration. 1989. which poses an issue litigable in an ordinary civil action. it has equated the matter to a situation where. is necessary. petitioner answered the amended petition. Mendoza (156 SCRA 44). respondent Yao filed an amended petition for "Enforcement of Arbitration Agreement with Damages. Judge Ferandos (64 SCRA 23. and. It likewise informed the parties that petitioner's Motion to Set Case for Preliminary Hearing" of Special and Affirmative Defenses would be resolved together with the question of damages. otherwise. 387). petitioner presented a "Motion to Set Case for Preliminary Hearing" of its special and affirmative defenses. On October 20. a court. It may be disregarded because it was nullified by the fact that in her motion to dismiss she relied not only on the ground of lack of jurisdiction over her person but also on the ground that there was no showing that earnest efforts were exerted to compromise the case and because she prayed "for such other relief as" may be deemed "appropriate and proper. it (petitioner) having itself filed similarly its own counterclaim with the court a quo. besides setting up in a motion to dismiss his objection to the jurisdiction of the court. among others. he must do so seasonably by motion for the purpose of objecting to the jurisdiction of the court. Flores vs. According to petitioner. which are grounds fro a motion to dismiss. it actually gave arbitrators Sabile and Alamarez a free hand in choosing the third arbitrator. it. pertinent to the case. of notifying and thereafter. It is hardly disputable that when a court is called upon to exercise limited and special jurisdiction. and its lack of jurisdiction over the subject matter or the nature of the action. The justification for the rule was expressed in Republic vs. 213-214). it must be for the sole and separate purpose of objecting to the jurisdiction of the court. In the process. he is deemed to have submitted himself to the jurisdiction of the court. (146 SCRA 5).000. the Court elaborated thusly: We are of the opinion that the lower court has acquired jurisdiction over the person of Mrs. Mina and Arejola. The lack of jurisdiction over the person of the defendant may be waived either expressly or impliedly. the respondent court admitted the same. ask for a dismissal of the action upon the further ground that the court had no jurisdiction over the subject matter. alleges at the same time any other ground for dismissing the action. vs. 1989. 1989. On October 24. a full blown and regular trial. he is deemed to have submitted himself to the jurisdiction of the court. And on November 21. Narciso as the third arbitrator. Inc. he thereby submits himself to the jurisdiction of the court.000. where the proceedings are summary in nature. In moving for reconsideration of the said Order. supra.
Elumbaring. between the court's lack of jurisdiction over the person of the defendant. petitioner argued that in Special Case No. petitioner alleged that it suffered actual damages of P100." praying that petitioner be ordered to pay interest on the unpaid rents.00 for every court appearance of its counsel.00. he shall be deemed to have submitted himself to that jurisdiction.00. acting within the limits of its special jurisdiction. Ker and Companry. Midgely by reason of her voluntary appearance. within ten (10) days from notice. 384. the aforequoted assailed Order issued. 12 Phil. Prefatorily. despite petitioner's opposition to the motion to admit the amended petition. respondent Yao has no cause of action against it (petitioner). (Rollo. A special appearance by motion made for the purpose of objecting to the jurisdiction of the court over the person will be held to be a general appearance. In De Midgely vs. 31). if the party in said motion should. 6024. the respondent court announced that the two arbitrators chose Mrs. The decisions promulgated heretofore by this Court would likewise seemingly apply estoppel to bar the defendant from pursuing that defense by alleging in his answer any other issue for dismissing the action. 1989. the defendant invokes an affirmative relief against his opponent. Rule 16 of the Rules of Court. should be useful. requiring both arbitrators to appoint the third member of the Board of Arbitrators. That rule was followed in Ocampo vs. Ltd.00. By way of Counterclaim. for example. such as in Immaculata vs. it denied the motion for reconsideration. and that the delay in the arbitration was due to respondent Yao's failure to perform what is incumbent upon him. in this wise:
. particularly. Eloisa R. that court cannot stray to matters outside the area of its declared authority or beyond what has been expressly invested by law (Elumbaring vs. at page 751. When a defendant voluntarily appears. If he so wishes not to waive this defense. it ordered the parties to submit their position papers on the issue as to whether or not respondent Yao's claim for damages may be litigated upon in the summary proceeding for enforcement of arbitration agreement. 89-93). plus P500. pp. Invoking Section 5." xxx xxx xxx When the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the person. upon the other hand. the respondent court sits as a special court exercising limited jurisdiction and is not competent to act on respondent Yao's claim for damages. therefore. and exemplary damages of at least P250. so that respondent Yao's proposition for a summary hearing of the arbitration issue and separate trial for his claim for damages is procedurally untenable and implausible. at the prevailing rate of interest in commercial banks. The reservation in her motion to dismiss that she was making a special appearance to contest the court's jurisdiction over her person may be disregarded. and it being in the nature of an ordinary civil action. On June 22. 1990.
broadly defined.We observed that the motion to dismiss filed on April 14. defenses upon which the defendant may rely (Section 4. Indeed. are deemed waived. In the same manner that the plaintiff may assert two or more causes of action in a court suit. (e) That there is another action pending between the same parties for the same cause. (c) The venue is improperly laid. Tested by the above criteria. as well as full ventilation. Any ground for dismissal in a motion to dismiss. Rules of Court). would necessarily foreclose. i. (b) That the court has no jurisdiction over the nature of the action or suit. a defendant is likewise expressly allowed. that by its participation during the trial on the merits.. Rule 16. abandoned. we refer to the grounds provided for in Rule 16 of the Rules of Court that must be asserted in a motion to dismiss or by way of affirmative defenses in an answer. prayed for dismissal of the complaint on the ground that plaintiff's cause of action had prescribed. Section 1. The doctrine of estoppel is predicated on. of course. prevent or bar recovery by the plaintiff. may. If it is true. Ltd. under Section 2. Estoppel is not understood to be a principle that. ( j ) That the suit is between members of the same family and no earnest efforts towards a compromise have been made. A negative defense denies the material facts averred in the complaint essential to establish the plaintiff's cause of action. there should be no real cause for what may understandably be its apprehension. 738). Rule 6. it necessarily had to acquire jurisdiction upon the latter's person. For the court to validly decide the said plea of defendant Ker & Co. (225 SCRA 737. in Signetics Corporation vs. provides that a motion to dismiss may be made on the following grounds: (a) That the court has no jurisdiction over the person of the defendant or over the subject of the action or suit. can still be made to answer for a cause of action which accrued while it was doing business. Ltd. that its only involvement in the Philippines was through a passive investment in Sigfil. except improper venue.e. except for the failure to state a cause of action. availed of an affirmative defense on the basis of which it prayed the court to resolve controversy in its favor. Court of Appeals and Freuhauf Electronics Phils. while an affirmative defense in an allegation of a new matter which. Inclusive of these defenses are those mentioned in Rule 16 of the Rules of Court which would permit the filing of a motion to dismiss. Not inevitably. then it cannot really be said to be doing business in the Philippines. being the proponent of the affirmative defense. absent an invocation of separate or independent reliefs of its own. as further set forth in Section 5 of the same rule. all other possible defenses. such as it concededly is. also. of the Rules of Court. the Court sees it propitious to re-examine specifically the question of whether or not the submission of other issues in a motion to dismiss. should be deemed to have abandoned its special appearance and voluntarily submitted itself to the jurisdiction of the court. it can easily become a most convenient and effective means of injustice. was further cured when defendant filed its answer to the complaint. while admitting the material allegations of the complaint. or of an affirmative defense (as distinguished from an affirmative relief) in an answer. By defenses. Rule 8. Since these points have seasonably been raised by the petitioner. It is a principle intended to avoid a clear case of injustice. as a mere exception from the standard legal norms of general application that can be invoked only in highly exceptional and justifiable cases. of the Rules of Court. and has its origin in. The term is hardly distinguishable from a waiver of right. Ker & Co. should prevalently apply but. that requires the contravention of the allegations of the complaint. to put up his own defenses alternatively or even hypothetically. which should not thus be within the province of a mere motion to dismiss. is justice according to natural law and right. defenses and objections not pleaded either in a motion to dismiss or in an answer.
. (g) That the complaint states no cause of action. We take this to mean that a defendant may. of the Rules of Court. however. and that TEAM Pacific is not its agent. as well as affirmative. feel enjoined to set up. nevertheless. Estoppel. is another matter that would yet have to await the reception and admission of evidence. Rule 9. Inc. It is a defense.. as a rule. (f) That the cause of action is barred by a prior judgment or by statute of limitations. that the petitioner's right to question the jurisdiction of the court over its person is now to be deemed a foreclosed matter. and have the effect of a waiver of. 1962. A defendant can not be permitted to speculate upon the judgment of the court by objecting to the court's jurisdiction over its person if the judgment is adverse to it. who. like its said counterpart. be considered to have voluntarily submitted itself to the court's jurisdiction. It thus appears that it is not the invocation of any of such defenses. must be unequivocal and intentional for. if any. which it even later disposed of. By interposing such second ground in its motion to dismiss. of the main merits of the case. along with his objection to the court's jurisdiction over his person.. Mindful of the foregoing. (d) That the plaintiff has no legal capacity to sue.
(h) That the claim or demand set forth in the plaintiff's pleading has been paid. An answer itself contains the negative. we lately ruled: This is not to say. under Section 2. aside from disputing the lower court's jurisdiction over defendant's person. be pleaded as an affirmative defense and a preliminary hearing may be had thereon as if a motion to dismiss had been filed. as Signetics claims. Lack of jurisdiction over the subject matter of the suit is yet another matter.. and acceding to jurisdiction over its person if and when the judgment sustains its defenses. the right of a defendant to set up the court's lack of jurisdiction over the person of the defendant. if any. ( i ) That the claim on which the action or suit is founded is unenforceable under the provisions of the statute of frauds. in effect. Such defect. but the failure to so raise them. however. in fact. that can result in waiver or estoppel. it may. when misapplied. So. but which has ceased to do business at the time of the filing of a complaint.. equity which. or otherwise extinguished. the issue posed by the petitioner as to whether a foreign corporation which has done business in the country. would. waived. Voluntary appearance cures defects of summons.
however. in the instant proceedings. for damages. on the issue of estoppel. which. The rule was reiterated in Calimlim vs. 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. National Labor Relations Commission (206 SCRA 283). The court a quo. is rendered without it either because a special law has limited the exercise of its normal jurisdiction on a particular matter or because the type of action has been reposed by law in certain other courts or quasi-judicial agencies for determination. let alone the parties. and does not depend upon the will of the parties. this Court. Rules of Court). but the case was tried and decided upon the theory that it had jurisdiction. for instance. that it is pleaded in a motion to dismiss or by way of an affirmative defense in an answer. The circumstances obtaining in this case are far. WHEREFORE. finds that no such agreement exists. neither estoppel nor waiver shall apply. this matter being legislative in character. Judge Concepcion. held: The operation of the principle of estoppel on the question of jurisdiction seemingly depends upon whether the lower court actually had jurisdiction or not. In the affirmative. In People vs. Rule 9. the decision of the Court of Appeals and the orders of the trial court in question are SET ASIDE. as well as petitioner's counterclaim. In summary." The proceedings are summary in nature. Jurisdiction over the nature of the action. Here. the party who induced it to adopt such theory will not be permitted. the action shall be dismissed (Section 2. which ordinarily would have the authority and competence to take a case. This defense may be interposed at any time. SO ORDERED. et al.that — (1) Jurisdiction over the person must be seasonably raised. The rule that jurisdiction is conferred by law. as we now so hereby express. 73 93-94).e.S. lack of jurisdiction over the nature of the action is the situation that arises when a court. 957) or even after final judgment (Cruzcosa vs. 146). we hold. in Southeast Asian Fisheries Development Center-Aquaculture Department vs. Voluntary appearance shall be deemed a waiver of this defense. Casiano (111 Phil. of affirmative defenses shall not be constructed as an estoppel or as a waiver of such defense. from assailing such jurisdiction. from justifying the application of estoppel against either party. Such is understandable. it is our considered view. All considered. has not bearing thereon. such as hereinbefore exemplified. the parties are not barred. is ordered to DESIST from further hearing private respondent's claim.. the principle of estoppel applies. on appeal. and may not be conferred by consent of the parties or by estoppel" (5 C. if the lower court had jurisdiction. (2) Where the court itself clearly has no jurisdiction over the subject matter or the nature of the action. "the proceeding shall be dismissed." If the court. 861-863). upon the other hand. in concept. to themselves determine or conveniently set aside. may be ventilated in separate regular proceedings at an opportune time and venue. If it had no jurisdiction. for the same "must exist as a matter of law. differs from jurisdiction over the subject matter. However. such.J. and quite recently. to assume an inconsistent position — that the lower court had jurisdiction.Whenever it appears that the court has no jurisdiction over the subject matter. upon the other hand.. and the case was heard and decided upon a given theory. let alone to confer that jurisdiction. i. It is neither for the courts nor the parties to violate or disregard that rule. the court a quo must then refrain from taking up the claims of the contending parties for damages. Barring highly meritorious and exceptional circumstances.. The assertion. as that the court had no jurisdiction. 101 Phil. as this kind of jurisdiction is conferred by law and not within the courts. 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. No costs. during appeal (Roxas vs. Illustrated. Ramirez (118 SCRA 399. the want of jurisdiction by the court is indisputable. Nevertheless. 37 Phil. it can hardly be questioned that the rules relating to the effects of want of jurisdiction over the subject matter should apply with equal vigor to cases where the court is similarly bereft of jurisdiction over the nature of the action. Rafferty. 406).
. on appeal. the invocation of this defense may be done at any time. In the case at bench.
Hence. February 28. the exclusive right to explore and survey the mining claims for a period of thirty-six (36) months within which the latter could decide to take an operating agreement on the mining claims and/or develop. On 30 July 2003. Inc. signed a document designated as the Addendum to the May 14. Arimco Mining Corporation. The Court of Appeals also observed that there were no averments relating to particular acts constituting fraud and oppression. respondents. CLIMAX-ARIMCO MINING CORP. not inexistent. Also. but with regard to the constitutionality of the Addendum Agreement and FTAA. the Addendum Contract). a ruling on the validity of the assailed contracts would result to the grant or denial of mining rights over the properties. It added that since the Addendum Contract was executed in 1991. and Aumex Philippines...) dated 3 December 1996. Petitioner raises the following issues: A. DECISION TINGA. 1987 Letter of Intent renegotiated the same into the February 28. petitioner Gonzales. the parties to the May 14. a Complaint seeking the declaration of nullity or termination of the Addendum Contract. and did not involve any mining dispute. said the Court of Appeals. petitioners. the Panel believing that the case involved a dispute involving rights to mining areas and a dispute involving surface owners. as the prescriptive period for an action for annulment is four years from the time of the discovery of the fraud. Region II. the Panel of Arbitrators dismissed the Complaint for lack of jurisdiction. the Assignment.” On 21 February 2001. The Court of Appeals was of the opinion that the petition should have been settled through arbitration under Republic Act No. On 9 March 1991. is limited only to the resolution of mining disputes. the Court of Appeals denied petitioner’s motion for reconsideration for lack of merit. defined as those which raise a question of fact or matter requiring the technical knowledge and experience of mining authorities. and Inmex Ltd. Accession Agreement. entered into a co-production. Petitioner filed on 22 March 2004 this Petition for Review on Certiorari Under Rule 45 assailing the decision and resolution of the Court of Appeals. Petitioner moved for reconsideration and this was granted on 18 October 2001. the Panel granted the Motion for Reconsideration with regard to the issues of nullity. Respondents filed their motion for reconsideration but this was denied on 25 June 2002. Inc. his action had already prescribed. joint venture and/or production-sharing letteragreement designated as the May 14.R. When petitioner filed his complaint before the Panel in 1999. as claimowner of mineral deposits located within the Addendum Area of Influence in Didipio. Under the 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
. hence the contract remains valid until annulled. oppression and violation of the Constitution. Mines and Geosciences Bureau of the Department of Environment and Natural Resources. petitioner. the Operating and Financial Accommodation Contract. although the issue raised in the Complaint appeared to be purely civil in nature and should be within the jurisdiction of the regular courts. collectively. as first parties. the question on the validity of the contract amounts to a mining conflict or dispute. as second party) dated 23 December 1996 and Assignment. 1987 Letter of Intent and February 28. On 20 June 1994. 2005]
respondents from further implementing the questioned agreements. the Court of Appeals noted that fraud and duress only make a contract voidable. vs. conspiring and confederating with one another and with each other…. 1987 Letter of Intent with Geophilippines. The Panel of Arbitrators maintained that there was a mining dispute between the parties since the subject matter of the Complaint arose from contracts between the parties which involve the exploration and exploitation of minerals over the disputed area. as claimowner. According to the Panel. 1989 Agreement with Express Adhesion Thereto (hereafter. in the provinces of Quirino and Nueva Vizcaya. It was found that the complaint alleged fraud. On 28 January 2004. the FTAA. (APMI) entered into a Memorandum of Agreement dated 1 June 1991 whereby the former transferred its FTAA to the latter. 1989 Agreement whereby the exploration of the mining claims was extended for another period of three years. Inmex Ltd. which called for the interpretation and application of laws. On 8 November 1999.SECOND DIVISION [G. Article XII of the CONSTITUTION perpetrated by these foreign RESPONDENTS.. 161957. He sought said releifs on the grounds of “FRAUD. occupants and claim owners/concessionaires. OPPRESSION and/or VIOLATION of Section 2. Climax. Accession Agreement (between Climax-Arimco Mining Corporation and Australasian Philippines Mining Inc.1 of the Addendum Contract.. and Australasian Philippines Mining Inc. 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). PROCEDURAL GROUND THE HONORABLE COURT OF APPEALS SHOULD HAVE SUMMARILY DISMISSED RESPONDENTS’ PETITION A QUO FOR FAILURE TO COMPLY WITH PROCEDURAL
JORGE GONZALES and PANEL OF ARBITRATORS.. against respondents Climax-Arimco Mining Corporation (ClimaxArimco).  Under the Addendum Contract. 876 (The Arbitration Law) as stated in Clause 19. Geophilippines Inc. the Court of Appeals granted the petition. CLIMAX MINING LTD. it held that it had no jurisdiction. and AUSTRALASIAN PHILIPPINES MINING INC. No. mine and otherwise exploit the mining claims and market any and all minerals that may be derived therefrom. and Inmex Ltd. withdrawal or damages.  The jurisdiction of the Panel of Arbitrators. the action to annul it should have been brought not later than 1995. termination. The Court of Appeals therefore declared as invalid the orders dated 18 October 2001 and 25 June 2002 issued by the Panel of Arbitrators. On 28 February 1989. J. and APMI. petitioner Gonzales filed before the Panel of Arbitrators. operate. granted to Geophilippines. declaring that the Panel of Arbitrators did not have jurisdiction over the complaint filed by petitioner. and the Memorandum of Agreement. therefore. Inc.. Respondents assailed the orders of the Panel of Arbitrators via a petition for certiorari before the Court of Appeals.: Petitioner Jorge Gonzales.. Arimco Mining Corporation obtained the FTAA and carried out work under the FTAA. Respondent Climax Mining Corporation (Climax) and respondent Australasian Philippines Mining Inc. Respondents executed the Operating and Financial Accommodation Contract (between Climax-Arimco Mining Corporation and Climax Mining Ltd.
i. it can be gleaned from the nature of the two actions that the issues in the case before the RTC of Makati City and in the petition for certiorari before the Court of Appeals are different. ii. A certification not signed by a duly authorized person renders the petition subject to dismissal. Manzanas that she is “also the authorized representative of [respondent Climax]” without presenting further proof of such authority. SUBSTANTIVE GROUND THE HONORABLE COURT OF APPEALS ERRED IN GRANTING THE PETITION A QUO FILED BY RESPONDENTS AND IN DENYING MOTION FOR RECONSIDERATION FILED BY PETITIONER FOR UTTER LACK OF BASIS IN FACT AND IN LAW. the petition filed before the Court of Appeals is an unauthorized act and the assailed orders of the Panel of Arbitrators have become final. i. The issues for resolution in this petition for review are: (a) Whether there was forum-shopping on the part of respondents for their failure to disclose to this Court their filing of a Petition to Compel for Arbitration before the Regional Trial Court of Makati City. Hence. involves related causes of action and the grant of the same or substantially the same reliefs as those involved in the instant case. the petitioner is a corporation. and failure to comply with this requirement is sufficient ground for dismissal of the petition. the Rules of Court making no distinction between natural and juridical persons. The requirement that petitioner should sign the certificate of non-forum shopping applies even to corporations. a board resolution authorizing a corporate officer to execute the certification against forum-shopping is necessary. A petition for certiorari raises the issue of whether or not there was grave abuse of discretion. OFAC AND AAAA ON THE GROUND OF
FRAUD HAS PRESCRIBED. or a judicial question which should properly be brought before the regular courts. it cannot be determined from petitioner’s mere allegations in the Petition that the Petition to Compel for Arbitration instituted by respondent Climax-Arimco. as in this case. WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED JURISPRUDENCE WHEN IT HELD THAT PETITIONER CEDED HIS CLAIMS OVER THE MINERAL DEPOSITS LOCATED WITHIN THE ADDENDUM AREA OF INFLUENCE. 876. The signatory in the case of the corporation should be “a duly authorized director or officer of the corporation” who has knowledge of the matter being certified. a petitioner is required to submit. WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED JURISPRUDENCE WHEN IT HELD THAT THE PANEL OF ARBITRATORS IS BEREFT OF JURISDICTION OVER THE SUBJECT MATTER OF CASE NO. Petitioner claims that respondents are guilty of forum-shopping for failing to disclose before this Court that they had filed a Petition to Compel for Arbitration before the RTC of Makati City. 058. together with the petition. Petitioner next alleges that there was no authority granted by respondent Climax to the law firm of Sycip Salazar Hernandez & Gatmaitan to file the petition before the Court of Appeals. iv. WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED JURISPRUDENCE WHEN IT HELD THAT THE ACTION TO DECLARE THE NULLITY OF THE ADDENDUM CONTRACT. Under Section 3. Rule 46 of the Rules of Court. Furthermore. while the Petition to Compel for Arbitration seeks the implementation of the arbitration clause in the agreement between the parties. The Verification and Certification only contains a statement made by one Marianne M. (c) Whether the complaint filed by petitioner raises a mining dispute over which the Panel of Arbitrators has jurisdiction. There is allegedly no Secretary’s Certificate from respondent Climax attached to the petition. However. Branch 148. which is currently pending. FTAA. WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED JURISPRUDENCE WHEN IT DID NOT DISMISS THE PETITION A QUO FILED BY RESPONDENT CLIMAX DESPITE THE LACK OF THE REQUISITE AUTHORITY TO FILE THE PETITION A QUO. If. Petitioner did not attach copies of the Petition to Compel for Arbitration or any order or resolution of the RTC of Makati City related to that case.A. WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED JURISPRUDENCE WHEN IT DID NOT DISMISS THE PETITION A QUO DESPITE RESPONDENTS’ FAILURE TO COMPLY WITH THE RULES ON DISCLOSURE IN THE “VERIFICATION AND CERTIFICATION” PORTION OF THEIR PETITION A QUO. Let us deal first with procedural matters.REQUIREMENTS. 876.
. it is argued that as to respondent Climax. WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED JURISPRUDENCE WHEN IT HELD THAT THE COMPLAINT FILED BY THE PETITIONER FAILED TO ALLEGE ULTIMATE FACTS OR PARTICULARS OF FRAUD. Act No. v. ii. (d) Whether the dispute between the parties should be brought for arbitration under Rep. B. iii. (b) Whether counsel for respondent Climax had authority to file the petition for certiorari before the Court of Appeals considering that the signor of the petition for certiorari’s Verification and Certification of Non-forum Shopping was not authorized to sign the same in behalf of respondent Climax. WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED JURISPRUDENCE WHEN IT HELD THAT PETITIONER AND RESPONDENTS SHOULD SUBMIT TO ARBITRATION UNDER R. a sworn certification of non-forum shopping.
 Under Republic Act No. as opposed to a moot question or one properly decided by the executive or legislative branch. are existent.On this point. that is. In Pearson v. The Complaint charged respondents with disregarding and ignoring the provisions of the Addendum Contract. (b) mineral agreements. is merely corollary to the main issue. induced petitioner to enter into the Addendum Contract and the FTAA in order to repeatedly extend the option period within which to conduct the feasibility study. 7942 (otherwise known as the Philippine Mining Act of 1995). occupants and claimholders/concessionaires. 1989 Agreement) respondent Climax-Arimco had committed to complete the Bankable Feasibility Study by 28 February 1992. and acting in a fraudulent and oppressive manner against petitioner and practicing fraud and deception against the Government. They can be ratified. the dispute is not a mining conflict. This constitutes fraud which vitiated petitioner’s consent. as well as the question of whether or not petitioner had ceded his mining claims in favor of respondents by way of execution of the questioned contracts. they do not produce any effect and cannot be ratified. and the rendering of a judgment based thereon. such that the contracts are rendered invalid and not binding upon the parties. do not qualify to enter into a co-production. The question as to the rights of petitioner or respondents to the mining area pursuant to these contracts. violating the purpose and spirit of the May 14. whether the case involves void or voidable contracts is still a judicial question. correctly stated that the Panel’s jurisdiction is limited only to those mining disputes which raise questions of fact or matters requiring the application of technological knowledge and experience.. FTAAs. morals. but the same was not accomplished. and under Article 1390 of the Civil Code. or deciding conflicting applications. or permits. joint venture or production sharing agreement with the Government. conspiring and confederating with one another. It is apparent that the Panel of Arbitrators is bereft of jurisdiction over the Complaint filed by petitioner. The complaint was not merely for the determination of rights under the mining contracts since the very validity of those contracts is put in issue. permits. Voidable or annullable contracts. and may not be resolved without first determining the main issue. in its questioned decision. A judicial question is a question that is proper for determination by the courts. respondent Climax-Arimco. this latter issue becomes irrelevant in the light of our decision to deny this petition for review for lack of jurisdiction by the Panel of Arbitrators over the complaint filed by petitioner. Clearly. as will be discussed below. this Court observed that the trend has been to make the adjudication of mining cases a purely administrative matter. the interpretation and application of those laws. Instead. Respondent also failed to refute this in its Comment. Manzanas to file the petition in behalf of respondent Climax. respondents have allegedly caused damage not only to petitioner but also to the Republic of the
Philippines. the Panel of Arbitrators has exclusive and original jurisdiction to hear and decide these mining disputes. or approving. However. the question involves the determination of what the law is and what the legal rights of the parties are with respect to the matter in controversy. 7942 when it
. On the other hand. 1989 Agreement . The Complaint is not about a dispute involving rights to mining areas. Intermediate Appellate Court. There appears to be no subsequent compliance with the requirement to attach a board resolution authorizing the signor Marianne M. and (c) surface owners. by their lack of financial and technical competence to carry out the mining project.. Article XII thereof. The basic issue in petitioner’s Complaint is the presence of fraud or misrepresentation allegedly attendant to the execution of the Addendum Contract and the other contracts emanating from it. involve questions of fact especially with regard to the determination of the circumstances of the execution of the contracts. Decisions of the Supreme Court on mining disputes have recognized a distinction between (1) the primary powers granted by pertinent provisions of law to the then Secretary of Agriculture and Natural Resources (and the bureau directors) of an executive or administrative nature.. in some instances. we have to agree with petitioner. such as granting of license. nor is it a dispute involving claimholders or concessionaires. Act No. A judicial question is raised when the determination of the question involves the exercise of a judicial function. oppression and violation of the Constitution? This issue may be distilled into the more basic question of whether the Complaint raises a mining dispute or a judicial question. misrepresented under the Addendum Contract and FTAA that respondent Climax-Arimco possessed financial and technical capacity to put the project into commercial production. He argues that respondents. before they are set aside. . 1987 Letter of Intent and February 28. lease and contracts. It is essentially judicial. 1409. good customs. rejecting. in circumvention of and in patent violation of the spirit and purpose of the Constitution.. a mining dispute is a dispute involving (a) rights to mining areas. Petitioner asserts that for circumventing and being in patent violation of the Constitution. By so doing. object or purpose is contrary to law. In essence. the FTAA and the subsequent contracts. valid. It requires the ascertainment of what laws are applicable to the dispute. through false and insidious representations and machinations by alleging technical and financial capacity. particularly Section 2. It avers that petitioner was misled by respondents into agreeing to the Addendum Contract. This distinction is carried on even in Rep. The Court of Appeals. and binding. It may. But the resolution of the validity or voidness of the contracts remains a legal or judicial question as it requires the exercise of judicial function. . the FTAA and the other contracts are void contracts. Petitioner insists that the Complaint is actually one for the declaration of nullity of void contracts. The following contracts are inexistent and void from the beginning: (1) Those whose cause. Act No. 1987 Letter of Intent and February 28. Petitioner relies on the Civil Code for support: Art. and are effective and obligatory between the parties. As such. and (2) controversies or disagreements of civil or contractual nature between litigants which are questions of a judicial nature that may be adjudicated only by the courts of justice. is one of the grounds for the annulment of a voidable contract. (7) Those expressly prohibited or declared void by law.. However. We now come to the meat of the case which revolves mainly around the question of jurisdiction by the Panel of Arbitrators: Does the Panel of Arbitrators have jurisdiction over the complaint for declaration of nullity and/or termination of the subject contracts on the ground of fraud. public order or public policy. The Complaint is also not what is contemplated by Rep. when in truth it had no such qualification whatsoever to do so. reinstating or canceling applications. The main question raised was the validity of the Addendum Contract.. 7942. Petitioner alleged in his Complaint that under the original agreements (the May 14. petitioner alleges that respondents. the Addendum Contract.
Act 876. the subject FTAA and future FTAAs. the Court took the case on an original petition. A party cannot rely on the contract and claim rights or obligations under it and at the same time impugn its existence or validity. The Panel of Arbitrators does not have jurisdiction over such an issue since it does not involve the application of technical knowledge and expertise relating to mining. These questions are legal in nature and require the application and interpretation of laws and jurisprudence which is necessarily a judicial function. but for a different reason. it is worthy of note that in a case. Inc. In fact. which was resolved only on 1 December 2004. 876. recognizing “the exceptional character of the situation and the paramount public interest involved.A. and the need to avert a multiplicity of suits. pursuant to the arbitration clause in the Addendum Contract which states that “[a]ll disputes arising out of or in connection with the Contract. The Complaint is not exclusively within the jurisdiction of the Panel of Arbitrators just because. the dispute involves an FTAA. As previously discussed. the complaint should have been filed before the regular courts as it involved issues which are judicial in nature. the Petition for Review on Certiorari Under Rule 45 is DENIED. At this juncture. WHEREFORE. and constitutionality of Rep. 7942 and DENR Administrative Order 96-40. which needs the interpretation and the application of that particular knowledge and expertise possessed by members of that Panel. shall finally be settled under R. We agree that the case should not be brought under the ambit of the Arbitration Law. Act No. or for as long as. Petitioner also disagrees with the Court of Appeals’ ruling that the case should be brought for arbitration under Rep. this Court upheld the validity of the FTAA entered into by the Republic of the Philippines and WMC (Philippines). as well as the necessity for a ruling to put an end to the uncertainties plaguing the mining industry and the affected communities as a result of doubts case upon the constitutionality and validity of the Mining Act. 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.” 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. The question of validity of the contract containing the agreement to submit to arbitration will affect the applicability of the arbitration clause itself. The validity of the contract cannot be subject of arbitration proceedings.” He points out that respondents Climax and APMI are not parties to the Addendum Contract and are thus not bound by the arbitration clause in said contract. Indeed.says the dispute should involve FTAAs. in view of the foregoing. which cannot be settled amicably among the Parties. The Complaint raised the issue of the constitutionality of the FTAA. This the Panel of Arbitrators has even conceded in its Orders dated 18 October 2001 and 25 June 2002. which is definitely a judicial question. The question of constitutionality is exclusively within the jurisdiction of the courts to resolve as this would clearly involve the exercise of judicial power. SO ORDERED. litigants are enjoined from taking inconsistent positions.
. Costs against petitioner Jorge Gonzales. Allegations of fraud and duress in the execution of a contract are matters within the jurisdiction of the ordinary courts of law. The Orders dated 18 October 2001 and 25 June 2002 of the Panel of Arbitrators are SET ASIDE.
Inc. On that date. 18 Petitioner Hi-Precision now asks this Court to set aside the Award. as it did subsequent Urgent Motions for a temporary restraining order.
. and CONSTRUCTION INDUSTRY ARBITRATION COMMISSION. INC. INC. 1192 and 2215 of the Civil Code. and eventually completed on February
Upon motions for reconsideration filed. 10 Petitioner Hi-Precision entered into a contract with private respondent Steel Builders under which the latter as Contractor was to complete a P21 Million construction project owned by the former within a period of 153 days. J. The Court also required private respondent Steel Builders to file a Comment on the Petition for Review and Steel Builders complied. the subsequent Reply 6 of petitioner filed on 20 July 1993 and the Petition for Review 7 dated 21 July 1993. however.R. Vinluan and Siguion Reyna. On the Chairman was a lawyer. alleged unearned profits and other receivables. premises considered.83 and all other claims of the parties against each other are deemed compensated and offset. 12 In its Award. On the same day.717. The Parties are enjoined to abide by the award. by Hi-Precision. The Opposition. the Owner [petitioner Hi-Precision] is ordered to pay the Contractor [private respondent Steel Builders] the amount of P6. two (2) being appointed upon nomination of Hi-Precision and Steel Builders. the arbitrators concluded that (a) both parties were at fault. and claims that the Arbitral Tribunal committed grave abuse of discretion when it allowed certain claims by Steel Builders and offset them against claims of Hi-Precision.115. and (b) private respondent's claim for profit it had failed to earn because of petitioner's take over of the project. the third member (the Chairman) was appointed by the CIAC as a common nominee of the two (2) parties. 13-90. which application the Court merely noted.83. The Petition prays for issuance of a temporary restraining order 9 to stay the execution of the assailed Order and Award in favor of Steel Builders.
G. petitioner. from 8 May 1990 to 8 October 1990.THIRD DIVISION
1991. 15 (d) took account of the admissions of liability in respect of particular claims. only 75. in its Answer and Amended Answer. petitioner Hi-Precision Steel Center. i. With such guidance. ("Steel Builders") on 5 July 1993. 1993 HI-PRECISION STEEL CENTER. and (b) the breaches by one party affected the discharge of the reciprocal obligations of the other party. claimed actual and liquidated damages. detailed claims the Arbitral Tribunal. Steel Builders filed a "Request for Adjudication" with public respondent CIAC. the Arbitral Tribunal denied (a) petitioner's claims for the additional costs allegedly incurred to complete the project. Petitioner HiPrecision insists it is still entitled to damages. The project was taken over on 7 November 1990. Inc. were noted by the Court in its Resolution 8 of 28 July 1993. ("Hi-Precision") stating that it intended to file a Petition for Review on Certiorari in respect of the 13 November 1992 Award 2 and 13 May 1993 Order 3 of public respondent Construction Industry Arbitration Commission ("CIAC") in Arbitration Case No.8674% of the project was actually completed.400. 110434 December 13. the Arbitral Tribunal rendered a unanimous Award dated 13 November 1992. After the arbitration proceeding. No.285. the Arbitral Tribunal stated that it was guided by Articles 1169. Hi-Precision. 13 (b) found neither basis nor justification for a particular claim. by Hi-Precision and Steel Builders. respectively.e. 16 (e) relied on its own expertise in resolving particular claims. De Castro & Cagampang Law Offices for Lim Kim teel Builders. The project completion date was first moved to 4 November 1990. Steel Builders sought payment of its unpaid progress buildings. The Petition (really a Motion) prayed for an extension of thirty (30) days or until 21 July 1993 within which to file a Petition for Review. Inc.: On 18 June 1993. respondents. In disposing of these multiple. In its Complaint filed with the CIAC. reimbursement of alleged additional costs it had incurred in order to complete the project and attorney's fees. however.. 17 and (f) applied a "principle of equity" in requiring each party to bear its own loss resulting or arising from mutual fault or delay ( compensation morae). Felix Q. Petitioner attributed this non-completion to Steel Builders which allegedly had frequently incurred delays during theoriginal contract period and the extension period. RESOLUTION
FELICIANO. The Tribunal then proceeded to resolve the remaining specific claims of the parties. Steel Builders insisted that the delays in the project were either excusable or due to Hi-Precision's own fault and issuance of change orders.. contending basically that it was the contractor Steel Builders who had defaulted on its contractual undertakings and so could not be the injured party and should not be allowed to recover any losses it may have incurred in the project. No pronouncement as to costs. the dispositive portion of which reads as follows: WHEREFORE. With mutual fault as a principal premise.LIM KIM STEEL BUILDERS. The CIAC formed an Arbitral Tribunal with three (3) members. upon the other hand. the Court issued a Resolution 5 granting the Motion with a warning that no further extension would be given. respectively. a "Petition for Extension to File Petition for Review" 1 was filed before the Court. Montecillo & Ongsiako for petitioner. Upon the other hand. 14 (c) found the evidence submitted in support of particular claims either weak or non-existent. though the Tribunal could not point out which of the parties was the first infractor. An opposition 4 to the Motion was filed by private respondent Lim Kim Steel Builders. the Arbitral Tribunal issued an Order dated 13 May 1993 which reduced the net amount due to contractor Steel Builders to P6. vs. in respect of one or more of the respective claims of the parties: (a) averaged out the conflicting amounts and percentages claimed by the parties.
prefaced each with a creative formula: (1) The public respondent [should be the "Arbitral Tribunal'] committed serious error in law. if not grave abuse of discretion. (3) The public respondent committed serious error in law. (5) The public respondent committed serious error in law. Moreover. and when it nonetheless persisted in its awards of damages in favor of therespondent. estoppel against the contractor. 253). expense and aggravation which commonly accompany ordinary litigation. the Arbitral Award was not rendered by the CIAC. (2) when there is grave abuse of discretion in the appreciation of facts (Buyco vs. 1008. New Civil Code. this issue was. 1205).. 94 Phil. under Section 20 of Executive Order No. . Voluntary arbitration involves the reference of a dispute to an impartial body. In its Petition. The basic objective is to provide a speedy and inexpensive method of settling disputes by allowing the parties to avoid the formalities. . (a) when the inference made is manifestly absurd. or the single Arbitrator. the findings of facts of the public respondent in the instant case may be reviewed by the Honorable Supreme Court. . especially litigation which goes through the entire hierarchy of courts. such factual errors should nonetheless be reviewed because there was "grave abuse of discretion" in the misapprehension of facts on the part of the Arbitral Tribunal. particularly to par. 2b. as amended. CA. . in any case. It shall be final and inappealable except on questions of law which shall be appealable to the Supreme Court. mistaken or impossible (Luna vs. if not grave abuse of discretion. 15). in its Section 19. 1008 created an arbitration facility to which the construction industry in the Philippines can have recourse. 20 (Emphasis partly applied and partly in the original) From the foregoing. as follows: Sec. — The arbitral award shall be binding upon the parties. Alto Surety. the private respondent herein. when it failed to strictly apply Article 1191. the members of which are chosen by the parties themselves. in the May 13. if not grave abuse of discretion . Executive Order No. . Linatoc. are present in the instant case. (3) when the judgment is premised on a misapprehension of facts (De la Cruz v. it is the Arbitral Tribunal. 1993 Order. 401).. requires us to apply rigorously the above principle embodied in Section 19 that the Arbitral Tribunal's findings of fact shall be final and inappealable. 74 Phil. however. (6) The exceptional circumstances in Remalante vs. 1990 to award termination of the contract and the owner's takeover of the project . 95 Phil. the "technical specification[s]" which is one of the contract documents. Sec. (5) when the findings are contrary to the admissions of the parties (Evangelista v. (a). dated 4 February 1985. 103 Phil. 158 SCRA 138. against thecontractor . provides. Finality of Awards. when it did not enforce the law between the parties. which at the same time constitute grave abuse of discretion amounting to lack of jurisdiction on the part of the Arbitral Tribunal. removal and stockpiling of top soil shall be done "prior to the start of regular excavation or backfiling work". People. . as amended. Sosing. not squarely raised by either party and has not been properly and adequately litigated. namely. part 3. when it failed to rule in favor of the owner. with the concurrence of the CIAC. 1008. and therefore. 21
. a public policy the implementation of which is necessary and important for the realization of national development goals. Petitioner Hi-Precision apparently seeks review of both under Rule 45 and Rule 65 of the Rules of Court. Tibe.. 124 SCRA 808). 19. when it found. Consideration of the animating purpose of voluntary arbitration in general. as amended. Section 19 makes it crystal clear that questions of fact cannot be raised in proceedings before the Supreme Court — which is not a trier of facts — in respect of an arbitral award rendered under the aegis of the CIAC. . (4) when the findings of fact are conflicting (Casica v. which expressly requires that major site work activities like stripping. . 1008. all the awards it claimed on arbitration. 26 and Castillo vs. which parties freely consent in advance to abide by the arbitral award issued after proceedings where both parties had the opportunity to be heard.01. for its abject failure to apply the doctrine of waiver. 19 We do not find it necessary to rule which of the two: a petition for review under Rule 45 or a petition for certiorari under Rule 65 — is necessary under Executive Order No. and (b) Should the supposed errors petitioner asks us to correct be characterized as errors of fact. if not grave abuse of discretion. should be impleaded even though the defense of its Award would presumably have to be carried by the prevailing party. where the Honorable Supreme Court may review findings of facts. which issues the writ of execution requiring any sheriff or other proper officer to execute the award. The Executive Order was enacted to encourage the early and expeditious settlement of disputes in the construction industry. but rather by the Arbitral Tribunal. the principal issue in arbitration being noncompliance with the contract documents. (2) The public respondent committee serious error in law. (4) The public respondent committed serious error in law. Hi-Precision purports to raise "legal issues. petitioner Hi-Precision may be seen to be making two (2) basic arguments: (a) Petitioner asks this Court to correct legal errors committed by the Arbitral Tribunal. The CIAC has indeed been impleaded. the petitioner "guilty of
estoppel" although it is claimed that the legal doctrine of estoppel does not apply with respect to the required written formalities in the issuance of change order .. ." and in presenting these issues. if not grave abuse of discretion. 101 Phil.A preliminary point needs to be made. subpart 3. We consider that the Arbitral Tribunal which rendered the Award sought to be reviewed and set aside. when it agreed on November 16. delay. Executive Order No. We note that the Arbitral Tribunal has not been impleaded as a respondent in the Petition at bar. and arbitration under the aegis of the CIAC in particular. now petitioner herein. Villaseca.
22 Prototypical examples would be factual conclusions of the Tribunal which resulted in deprivation of one or the other party of a fair opportunity to present its position before the Arbitral Tribunal. rule would result in setting at naught the basic objective of a voluntary arbitration and would reduce arbitration to a largely inutile institution. Hi-Precision claims that the Arbitral Tribunal had committed grave abuse of discretion amounting to lack of jurisdiction in reaching its factual and legal conclusions." Here again. and an award obtained through fraud or the corruption of arbitrators. in case one of the obligors should not comply with what is incumbent upon him. As summarized in the Arbitral Award. was unable to make that factual determination and instead concluded that both parties had committed breaches of their respective obligations." As noted earlier. and is entitled to damages in either case. 25 The Arbitral Tribunal. In the present Petition. the supposed misapplication of Article 1191. e. such that Steel Builders was the party in default and the entity guilty of negligence and delay. The court shall decree the rescission claimed. Whether or not that Agreement dated 16 November 1990 (a document not submitted to this Court) is properly characterized as constituting waiver on the part of Steel Builders. when the contractor Steel Builders defaulted on the 153rd day of the original contract period. petitioner had offered no proof that it had complied with such 15-day notice required under Article 28. to all appearances the same arguments it had raised before the Tribunal." 27 The "law between that parties" here involved is the "Technical Specifications" forming part of the Contract Documents. We will not review. if it is. the Arbitral Tribunal after the prolonged arbitration proceeding. permit the parties to relitigate before it the issues of facts previously presented and argued before the Arbitral Tribunal. in its above argument. In respect of each item of the owner's claims and each item of the contractor's claims. Hi-Precision opted for specific performance and gave Steel Builders a 30-day extension period with which to complete the project. for it requires ascertainment and identification of which the two (2) contending parties had first failed to comply with what is incumbent upon it." The parties here had recourse to arbitration and chose the arbitrators themselves. One of the faults attributed to petitioner Hi-Precision is that it had failed to give the contractor Steel Builders the required 15-day notice for termination of the contract. the Petition asks this Court to "review serious errors in the findings of fact of the [Arbitral Tribunal]." 28 In this section of its Petition. Examination of the Petition at bar reveals that it is essentially an attempt to re-assert and re-litigate before this Court the detailed or itemized factual claims made before the Arbitral Tribunal under a general averment that the Arbitral Tribunal had "misapprehended the facts" submitted to it. but. and each claim of the contractor Steel Builders which the Tribunal had granted. while ostensibly a "legal issue. He may also seek rescission. 26 This was clearly a finding of fact on the part of the Tribunal. i. That determination is eminently a question of fact. in reaching its factual conclusions. Petitioner Hi-Precision's argument is that a written Agreement dated 16 November 1990 with Steel Builders concerning the take over of the project by Hi-Precision. too. As the injured party." is ultimately a question of fact. A third "legal issue" posed by Hi-Precision relates to the supposed failure on the part of the Arbitral Tribunal "to uphold the supremacy of 'thelaw between the parties' and enforce it against private respondent [Steel Builders]. The Arbitral Tribunal resolved Hi-Precision's claim by finding that Steel Builders had complied substantially with the Technical Specifications. more relaxed. A second "legal issue" sought to be raised by petitioner Hi-Precision relates to the supposed failure of the Arbitral Tribunal to apply the doctrines of estoppel and waiver as against Steel Builders. may be conceded to be prima facie a question of law. Contractor's Claims were as follows:
. supported by the circumstance that per the record. The Court will not. Finally. disregards is that the determination of whether Hi-Precision or Steel Builders was the "injured party" is not
to be resolved by an application of Article 1191. constituted waiver on the part of the latter of its right to a 15-day notice of contract termination. even after he has chosen fulfillment. if the latter should become impossible. issues of fact. to ask this Court to correct a claimed misapplication or non-application of Article 1191 is to compel this Court to determine which of the two (2) contending parties was the "injured party" or the "first infractor. the Arbitral Tribunal committed an error so egregious and hurtful to one party as to constitute a grave abuse of discretion resulting in lack or loss of jurisdiction.g." since petitioner is in reality asking this Court to review the physical operations relating. to site preparation carried out by the contractor Steel Builders and to determine whether such operations were in accordance with the Technical Specifications of the project. 23 Any other. The Court will not review the factual findings of an arbitral tribunal upon the artful allegation that such body had "misapprehended the facts" and will not pass upon issues which are. Hi-Precision asserts that the Arbitral Tribunal did not uphold the "law between the parties. 24 Article 1191 reads: Art. in accordance with articles 1385 and 1388 and the Mortgage Law. the Court will not assist one or the other or even both parties in any effort to subvert or defeat that objective for their private purposes. The power to rescind obligations is implied in reciprocal ones. Hi-Precision contends energetically that it is the injured party and that Steel Builders was the obligor who did not comply with what was incumbent upon it. with the payment of damages in either case.e. and much less reverse.Aware of the objective of voluntary arbitration in the labor field. What petitioner Hi-Precision. save only where a very clear showing is made that. unless there be just cause authorizing the fixing of a period. HiPrecision sets out its arguments. after declaring that the parties were mutually at fault. Hi-Precision continues. The injured party may choose between the fulfillment and the rescission of the obligation... the determination of the existence or non-existence of a fact or set of facts in respect of which Article 1191 may be properly applied. Hi-Precision maintains that it may choose between the fulfillment or rescission of the obligation in accordance with Article 1191. Thus. In other words. therefore. in the construction industry. that error clearly did not constitute a grave abuse of discretion resulting in lack or loss of jurisdiction on the part of the Tribunal. that basic factual finding of the Arbitral Tribunal. no matter how cleverly disguised they might be as "legal questions. Thus. petitioner is merely disguising a factual question as a "legal issue.Hi-Precision asks us to examine each item of its own claims which the Arbitral Tribunal had rejected in its Award. and assuming arguendo that the Arbitral Tribunal had erred in resolving it. and in any other area for that matter. The first "legal issue" submitted by the Petition is the claimed misapplication by the Arbitral Tribunal of the first and second paragraphs of Article 1911 of the Civil Code." but instead substituted the same with "its [own] absurd inference and 'opinion' on mud. 1191. proceeded to enumerate the faults of each of the parties. they must have had confidence in such arbitrators.01 of the General Conditions of Contract forming part of the Contract Documents. at bottom. This is understood to be without prejudice to the rights of third persons who have acquired the thing. This Court will not pretend that it has the technical and engineering capability to review the resolution of that factual issue by the Arbitral Tribunal.
-do.0012.300.0012.0012.8.231. Change Order 1 0.90 ——————— P8.10. -do.987.29.63 Total Actual Damages 35.7 503.518.096.3812.048.6 353. -do. in disposing of the detailed claims of the respective parties.208.130.00 Progress Billings 5.27.45 Total Amount Paid for Construction 23.7012. Cost of money of (a) 818.104.22.1686.18b.706.1326%) 2. Upon the other hand.200.21.242.0012.800. -do. 273.650. -do.9. 1.00 3.000.4 112.13 49.18. -do.23. -do.138. Cost of money (a) 821.24.183. Increases in prices since Oct. 730. in either the methods employed or the results reached by the Arbitral Tribunal.11. -do.4012. 0.13.79Equipment Rental 1.72Labor 2.457.00Less: Contract Price (21.32 2. -do.000. Due to Huey Commercialused for HSCI Project 51. Amount not yet deductedfrom Downpayment dueto non-completion of Project (P24.155. 0.621.513. Liquidated Damages 2. -do.982.0012.406.3 320.927.0012.213.0012.250.6.45b) after the take-over Civil Works 1.000.318.195.398.14 167.3.0012. WHEREFORE.9 101. 0.585. Additional import levy of 5% 886.31.774. petitioner Hi-Precision is asking this Court to pass upon claims which are either clearly and directly factual in nature or require previous determination of factual issues.12. SO ORDERED.436. -do.272.33d.110. Foreign exchange loss 4.138.991.16 92.40 b.
============= Upon the other hand. Cost of money (a) 2.319. Cost of money on marginaldeposit on Letter of Credit 561. the Petition is hereby DISMISSED for lack of merit. 0.11 0. Attorney's Fees 500.2 10.499.14.513.15 445. 7.49 ID Installation of machinery a.318. -do.7012.284. Foreign exchange loss 11.3012.40 IC Additional construction expenses
.22.0012.0012. the petitioner's claims we are asked to review and grant are summarized as follows: 1.0012.0012.000. 0.5 398.7.25 IF Cost of money on holding to CRC INTY 3.4.816.0012. for all the foregoing.0012. 0.927.00 12.500.7512.582.37 b.050. Actual Damages Advance Downpayment[at] signing of Contractwhich is subject to 40%deduction every progressbilling (40% of Contract Price) P8. Unpaid Progress Billing 1. -do.2.163.952.0012.15.0012. This upon the one hand.81 b.26.722. -do.650.8 216.0012.295.55 Advances made to Lim Kim a) prior to take-over 392.609.95 12. -do.01 I[E] Raw Materials a.014.5. 22.214.171.1241. 0.158.535.812.16. 63.448.00) IA Excess of amount paidover contract price 2.20. Cost of money (c) 170.0012.17 1.32 30 ============= We consider that in asking this Court to go over each individual claim submitted by it and each individual countering claim submitted by Steel Builders to the Arbitral Tribunal. -do. 20.29 IB Other items due from LimKim Steel Builders a.12 7.00 ——————— P38. Costs against petitioner. the Court considers that petitioner Hi-Precision has failed to show any serious errors of law amounting to grave abuse of discretion resulting in lack of jurisdiction on the part of the Arbitral Tribunal.57126.96.36.199.565.000.00 ——————— 12.53 12.10 7.19.44e.72c.781.28
Tanza. VELEZ (Presiding Judge. it was stipulated therein that the issue(s) shall be submitted for resolution before a single arbitrator chosen by both parties. Respondent lower court denied Chung Fu's Motion to Remand thus compelling it to seek reconsideration therefrom but to no avail.00. Apart from the aforesaid construction agreement. Subsequent negotiations between the parties eventually led to the formulation of an arbitration agreement which.00 and unpaid progress billings of P2.: This is a special civil action for certiorari seeking to annul the Resolutions of the Court of Appeals* dated October 22. the sum of P16. 2 and the other dated August 12. The respondent appellate court concurred with the findings and conclusions of respondent trial court resolving that Chung Fu and its officers. commanding a price of P12. 1989. Respondent Court of Appeals affirmed the ruling of the trial court that herein petitioners. 1989. TRISTAN A. the latter had to take over the construction when it had become evident that Roblecor was not in a position to fulfill its obligation.R.1990 the assailed resolution was issued. 1989. entered judgment in conformity therewith. CATINDIG. 1990. e.00. for the installation of electrical.THIRD DIVISION
with prayer for Temporary Restraining Order before respondent Regional Trial Court.23. COURT OF APPEALS.R. DEL ROSARIO.. The parties mutually agree that the decision of the arbitrator shall be final and unappealable. pursuant to the arbitration clause in the construction agreement. Roblecor moved for the confirmation of said award. consequential damage and/or interest thereon.. FRANCISCO X. 1989. Moreover. J. Willardo Asuncion was appointed as the sole arbitrator. are precluded from seeking judicial review of subject arbitration award. Engr. petitioners.000. JAMES J. (Roblecor for short) forged a construction agreement 1 whereby respondent contractor committed to construct and finish on December 31. INC. vs. As an exception to sub-paragraph (e) above. xxx xxx xxx (Emphasis supplied) Respondent Regional Trial Court approved the arbitration agreement thru its Order of May 30. to wit: one dated June 23.801. In the event of disputes arising from the performance of subject contract. 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.000.500.370. pursuant to the Arbitration Agreement precluding judicial review of the award. ROCK A. Chung Fu moved to dismiss the petition and further prayed for the quashing of the restraining order. providing that the arbitration award shall be final and unappealable. Regional Trail Court of Makati [Branch 57]) and ROBLECOR PHILIPPINES. Therefore.C.1 million and requiring completion thereof one month after civil works have been finished. the parties mutually agree that either party is entitled to seek judicial assistance for purposes of enforcing the arbitrator's award. in Civil Case No. JEM S. HON.875. 3 However. The trial court granted Roblecor's Motion for Confirmation of Award and accordingly. 1990 upholding the Orders of July 31. 1990.179. it granted the motion for the issuance of a writ of execution filed by respondent. 1990 and August 23. It appears that on May 17. On October 22. He further declared the award as final and unappealable. 1990. petitioner Chung Fu Industries (Philippines) (Chung Fu for brevity) and private respondent Roblecor Philippines. filed a petition for Compulsory Arbitration
. 1990 and December 3. VICENTE B. Subsequently. Thereafter. 1990 of the Regional Trial Court of Makati. HUANG. 1992 CHUNG FU INDUSTRIES (PHILIPPINES) INC. water and hydrant systems at the plant site. HUANG. among others.C. 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. Cavite for and in consideration of P42. On June 30. CHEN. as signatories to the Arbitration Agreement
G.000. Consequently. On the other hand. respondent Roblecor failed to complete the work despite the extension of time allowed it by Chung Fu.00. Claiming an unsatisfied account of P10. The parties mutually agree that the arbitration shall proceed in accordance with the following terms and conditions: — xxx xxx xxx d.
ROMERO. Chung Fu elevated the case via a petition for certiorari to respondent Court of Appeals. Branch 57.285. Chung Fu and Roblecor entered into two (2) other ancillary contracts. 1989. Roblecor on May 18. provides: 2. its Directors and Officers namely: HUANG KUO-CHANG. to be completed on or before October 31. petitioner corporation's industrial/factory complex in Tanawan. there shall be no further judicial recourse if either party disagrees with the whole or any part of the arbitrator's award. MARIA TERESA SOLIVEN and VIRGILIO M. 90-1335. Inc. AMADOR.108. after submitting themselves for arbitration and agreeing to the terms and conditions thereof. HUANG AN-CHUNG. No. for the construction of a dormitory and support facilities with a contract price of P3. respondents. 96283 February 25. f. Arbitrator Asuncion ordered petitioners to immediately pay respondent contractor.
1990. probity and good sense the parties in conflict reposed full trust. . the early cases on arbitration carefully spelled out the prevailing doctrine at the time. . A motion for reconsideration of said resolution was filed by petitioner. 1008. as well as denied due process and substantial justice to petitioners. as the preferred mode of settling disputes in industry. terms and conditions as they may deem convenient. resort to the arbitration process may be spelled out by them in a contract in anticipation of disputes that may arise between them. it is the regular courts that remain the fora to resolve such matters. or selected by them from an apposite listing (the album judicium) or else by having the arbiter chosen by lot. — (a) by refusing to exercise their judicial authority and legal duty to review the arbitration award." 5 Such means of referring a dispute to a third party has also long been an accepted alternative to litigation at common law. 442. As early as the 1920's. 10 That there was a growing need for a law regulating arbitration in general was acknowledged when Republic Act No. Whether utilized in business transactions or in employer-employee relations. arbiter and judge (judex) were synonymous. absent an agreement of the parties to resolve their disputes via a particular mode. Although early on. which agreement would be void. the
provisions on compromises made applicable to arbitrations under Articles 1820 and 1821. much effort has been expended by men and institutions in devising ways of resolving the same. While not completely supplanting compulsory arbitration which until today is practiced by government officials. the Industrial Peace Act which was passed in 1953 as Republic Act No. court litigations tended to be time-consuming. in time such a modality gave way to voluntary arbitration. . exercising their basic freedom to "establish such stipulation. in particular. in general. and clarifying the issues. In practice nowadays. 9 Arbitration found a fertile field in the resolution of labor-management disputes in the Philippines. only appeared under the Empire. by not vacating and annulling the award dated 30 June 1990 of the Arbitrator. otherwise known as the Arbitration Law. the attitude of the courts toward arbitration agreements is slowly crystallizing into definite and workable form. physical combat has been ruled out and instead. 8 these and additional ones were reinstated in the present Civil Code. 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. specifically. it was preferred to orders imposed by government upon the disputants. It was accepted and enunciated more explicitly in the Labor Code." 12 In such a case. 6715 (1989). Whatever be the case. "Said Act was obviously adopted to supplement — not to supplant — the New Civil Code on arbitration. 17) Allow us to take a leaf from history and briefly trace the evolution of arbitration as a mode of dispute settlement. which was passed on November 1. 7 Although said provisions were repealed by implication with the repeal of the Spanish Law of Civil Procedure. Moreover. the courts will look with favor upon such amicable arrangements and will only with great reluctance interfere to anticipate or nullify the action of the arbitrator. p. and resort to grievance procedure. whether this be a court or a private individual or individuals. Legal history discloses that "the early judges called upon to solve private conflicts were primarily the arbiters. as specially trained state officials endowed with own power and jurisdiction. costly. 1974 as Presidential Decree No. 1985. Because conflict is inherent in human society. morals. provided they are not contrary to law. a Construction Industry Arbitration Commission (CIAC) was created by Executive Order No. by the so-called cognitio extra ordinem. and thereby exceeded the authority and power delegated to him. with the amendments later introduced by Republic Act No. In fact. it was nonetheless recognized in the Spanish Civil Code. arbitration was gaining wide acceptance. . on the ground that the Arbitrator grossly departed from the terms of the parties' contracts and misapplied the law. With the progress of civilization. such recourse to an extrajudicial means of settlement is not intended to completely deprive the courts of jurisdiction. the parties may opt for recourse to third parties. thus: ". after noting down the conflicting claims of litigants. However.are bound to observe the stipulations thereof providing for the finality of the award and precluding any appeal therefrom. Title XIV. A consensual process. The magistrate or praetor. enacted on February 4. Book IV of the Civil Code shall remain in force. was passed. Commonwealth Act 103 (1936) provided for compulsory arbitration as the state policy to be administered by the Court of Industrial Relations. favored the policy of free collective bargaining. . more specific means have been evolved. public order or public policy. 6 Sparse though the law and jurisprudence may be on the subject of arbitration in the Philippines. in Republican Rome. It expressly declares that "the provisions of chapters one and two. (Rollo. The rule now is that unless the agreement is such as absolutely to close the doors of the courts against the parties. 876 (1953). as well as denied due process and substantial justice to petitioner. Or this may be stipulated in a submission agreement when they are actually confronted by a dispute. Hence. good customs. 875. by common agreement. a clause in a contract providing that all matters in
. clauses. but it was similarly denied by respondent Court of Appeals thru its questioned resolution of December 3." Second Respondent Court of Appeals and trial Judge gravely abused their discretion and/or exceeded their jurisdiction. such as recourse to the good offices of a disinterested third party." 11 In recognition of the pressing need for an arbitral machinery for the early and expeditious settlement of disputes in the construction industry. and taking cognizance of litigations from beginning to end. Thus. referred them for decision to a private person designated by the parties. The judges proper. persons not specially trained but in whose morality. the instant petition anchored on the following grounds: First Respondents Court of Appeals and trial Judge gravely abused their discretion and/or exceeded their jurisdiction. and inflexible due to their scrupulous observance of the due process of law doctrine and their strict adherence to rules of evidence. this Court declared: In the Philippines fortunately.
Similarly. under Sections 24 and 25 of the Arbitration Law. we have taken cognizance of petitions questioning these decisions where want of jurisdiction. voluntary arbitration awards or decisions were final. . Dormitory Contract and Electrical Contract. The Honorable Arbitrator committed grave error in granting extra compensation to Roblecor for loss of productivity due to the cement crisis.dispute between the parties shall be referred to arbitrators and to them alone is contrary to public policy and cannot oust the courts of Jurisdiction." 21 Even decisions of administrative agencies which are declared "final" by law are not exempt from judicial review when so warranted. 14 A court action may likewise be proven where the arbitrator has not been selected by the parties. grave abuse of discretion. 3. the arbitrators' award may be annulled or rescinded. 4. violation of due process.00) or forty-percent (40%) of the paid-up capital of the respondent employer. v. et al.
." 16 Under the original Labor Code. 19 Additionally. thus: Any stipulation that the arbitrators' award or decision shall be final is valid. . The Honorable Arbitrator committed grave error in granting extra compensation to Roblecor for loss due to delayed payment of progress billings. unappealable and executory. the voluntary arbitrator is now mandated to render an award or decision within twenty (20) calendar days from the date of submission of the dispute and such decision shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties. however. by the nature of their functions. 2039 and 2040 applicable to both compromises and arbitrations are obtaining. 18 Where the parties agree that the decision of the arbitrator shall be final and unappealable as in the instant case. The Honorable Arbitrator committed grave error in granting extra compensation to Roblecor for losses allegedly sustained on account of the failed coup d'état. 7. . 2039 and 2040. et al. We rule in the negative. unappealable and executory? Article 2044 of the Civil Code recognizes the validity of such stipulation. in the event that they declare their intention to refer their differences to arbitration first before taking court action. if and when the factual circumstances referred to in the above-cited provisions are present. It should be stressed. The Honorable Arbitrator committed grave error in failing to apply the terms and conditions of the Construction Agreement. In the case at bar. the stipulation to refer all future disputes to an arbitrator or to submit an ongoing dispute to one is valid. without prejudice to Articles 2038. such that where a suit has been instituted prematurely. The Honorable Arbitrator committed grave error in granting to Roblecor the amount representing the alleged extended overhead expenses." 17 It is to be noted that the appeal in the instances cited were to be made to the National Labor Relations Commission and not to the courts. act in a quasi-judicial capacity. denial of substantial justice or erroneous interpretation of the law were brought to our attention . modifying or rescinding an arbitrator's award. that this action will lie only where a grave abuse of discretion or an act without or in excess of jurisdiction on the part of the voluntary arbitrator is clearly shown. it is binding and enforceable in court in case one of them neglects. and in using instead the "practices" in the construction industry. Flerida Ruth P. voluntary arbitration awards or decisions on money claims. too. With the subsequent deletion of the above-cited provision from the Labor Code. Where the conditions described in Articles 2038. and (b) gross incompetence. may the parties who agree to submit their disputes to arbitration further provide that the arbitrators' award shall be final. that their decisions should not be beyond the scope of the power of judicial review of this Court. 24 It stands to reason. 20 Thus. Thus." 13 But certainly. judicial review of the award is properly warranted. The Honorable Arbitrator committed grave error in granting extra compensation to Roblecor for loss of productivity due to adverse weather conditions. Inspite of statutory provisions making "final" the decisions of certain administrative agencies. 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. 22 this Court had occasion to rule that: . whichever is lower. this constitutes a condition precedent. It is to be borne in mind. In a special civil action of certiorari. Being part of a contract between the parties. The Honorable Arbitrator committed grave error in granting to Roblecor the amount representing the alleged unpaid billings of Chung Fu. For "the writ of certiorari is an extra-ordinary remedy and that certiorari jurisdiction is not to be equated with appellate jurisdiction. maybe appealed to the National Labor Relations Commission on any of the following grounds: (a) abuse of discretion. Romero.
What if courts refuse or neglect to inquire into the factual milieu of an arbitrator's award to determine whether it is in accordance with law or within the scope of his authority? How may the power of judicial review be invoked? This is where the proper remedy is certiorari under Rule 65 of the Revised Rules of Court. fails or refuses to arbitrate. 2044 of the Civil Code that the finality of the arbitrators' award is not absolute and without exceptions. most of which allege error on the part of the arbitrator in granting compensation for various items which apparently are disputed by said petitioners: 1. the Court will not engage in a review of the facts found nor even of the law as interpreted or applied by the arbitrator unless the supposed errors of fact or of law are so patent and gross and prejudicial as to amount to a grave abuse of discretion or an exces de pouvoir on the part of the arbitrator. the pivotal inquiry is whether subject arbitration award is indeed beyond the ambit of the court's power of judicial review. therefore. . 5. that voluntary arbitrators. "However. . petitioners assailed the arbitral award on the following grounds. 2. 6.000. Going a step further. 23 (Emphasis ours). the court shall suspend the same and the parties shall be directed forthwith to proceed to arbitration. It is stated explicitly under Art. involving an amount exceeding One Hundred Thousand Pesos (P100. 15 Under present law. in the case of Oceanic Bic Division (FFW). there are grounds for vacating.
are hereby SET ASIDE. the appellate court. despite prima facie showing of the existence of grounds warranting judicial review. 1990 and December 3. where under the applicable laws and jurisprudence. 2. more so where the objections raised against an arbitration award may properly constitute grounds for annulling. 1990. After closely studying the list of errors. in not giving due course to the petition. 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. SO ORDERED. The Honorable Arbitrator committed grave error in awarding to Roblecor attorney's fees. The Honorable Arbitrator committed grave error in granting to Roblecor the amount representing expenses for change order for site development outside the area of responsibility of Roblecor. he exceeded his powers — all of which would have constituted ground for vacating the award under Section 24 (d) of the Arbitration Law. 1990 and August 23. and 12. including the writ of execution issued pursuant thereto. WHEREFORE. this case is REMANDED to the court of origin for further hearing on this matter. 10. the trial court itself committed grave abuse of discretion. But the respondent trial court's refusal to look into the merits of the case.
. the petition is GRANTED. vacating or modifying said award under the laws on arbitration. In so doing. effectively deprived petitioners of their opportunity to prove or substantiate their allegations. Respondent courts should not shirk from exercising their power to review. The Resolutions of the Court of Appeals dated October 22. in granting unjustified extra compensation to respondent for several items. 9. 11. 1990 as well as the Orders of respondent Regional Trial Court dated July 31. No costs. The Honorable Arbitrator committed grave error in granting to Roblecor the cost of warehouse No. Likewise. committed grave abuse of discretion. The Honorable Arbitrator committed grave error in granting to Roblecor extra compensation for airduct change in dimension. such power may be rightfully exercised.8. The Honorable Arbitrator committed grave error in granting to Roblecor extra compensation for airduct plastering. thus committing a grave abuse of discretion. Accordingly. 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. All incidents arising therefrom are reverted to the status quo ante until such time as the trial court shall have passed upon the merits of this case. Furthermore.
George Ty and Alfonso Yuchengco met with then President Fidel V.R. (PIATCO): (1) the Concession Agreement signed on July 12. MENDOZA. the DOTC engaged the services of Aeroport de Paris (ADP) to conduct a comprehensive study of the Ninoy Aquino International Airport (NAIA) and determine whether the present airport can cope with the traffic development up to the year 2010. ANGELITO SANTOS.. 1994. the NEDA Investment Coordinating Council (NEDA ICC) – Technical Board favorably endorsed the project to the ICC – Cabinet Committee which approved the same. CLAVEL A. (2) the Amended and Restated Concession Agreement dated November 26. ADOLFO. LOPEZ. vs. EDUARDO C. HILARIO. 1999. respondents.. Inc. 1997. JOSEPH B. HIZON. MACARANBON. 1996. LOLITA R. MANILA INTERNATIONAL AIRPORT AUTHORITY. JR.JACINTO V. in his capacity as Head of the Department of Transportation and Communications.. INC. MAMERTO S.. LUISA M. capacity of existing facilities.R. SALES. on January 19. 1994. the PIATCO Contracts). VALENCIA. 1 was issued. GAERLAN. PALCON and SAMAHANG MANGGAGAWA SA PALIPARAN NG PILIPINAS (SMPP).PHILIPPINE INTERNATIONAL AIR TERMINALS CO. MANILA INTERNATIONAL AIRPORT AUTHORITY.PHILIPPINE INTERNATIONAL AIR TERMINALS CO. petitioners-in-intervention. petitioners. CATAHAN. 1993. 94-832 constituting the Prequalification Bids and Awards Committee (PBAC) for the implementation of the NAIA IPT III project. PICHAY. petitioners. MACROASIA-MENZIES AIRPORT SERVICES CORPORATION. six business leaders consisting of John Gokongwei. RAFAEL P.. DE LEON. A revised proposal. was forwarded by the DOTC to NEDA on December 13. PUNO. the second envelope the Technical Proposal. HARLIN CAST ABAYON. INC. REUNILLA. Lucio Tan.R. PBAC Bulletin No. x---------------------------------------------------------x G. petitioners. PROSPERO C. REMEDIOS P. CLARA. and MIASCOR LOGISTICS CORPORATION. 1995. 2003 CEFERINO C. 155661 May 5. 2000. vs. MANILA INTERNATIONAL AIRPORT AUTHORITY. postponing the availment of the Bid Documents and the submission of the comparative bid proposals. DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS. and BENASING O. and SECRETARY SIMEON A. MIASCOR AIRCRAFT MAINTENANCE CORPORATION. MA. in his capacity as Head of the Department of Transportation and Communications. respondents. ZIALCITA. LEONARDO DE LA ROSA. J. On June 7. 1996. PARAS. (3) the First Supplement to the Amended and Restated Concession Agreement dated August 27. then DOTC Secretary Jose Garcia endorsed the proposal of AEDC to the National Economic and Development Authority (NEDA). The alternative bidders were required to submit three (3) sealed envelopes on or before 5:00 p. Andrew Gotianun. ALFREDO B. DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS. INC. the NEDA passed Board Resolution No. No. subject to certain conditions. vs. 2001 (collectively. 1996.m. Ramos to explore the possibility of investing in the construction and operation of a new international airport terminal. 155001 May 5. MA. On June 20. MENDOZA. On January 5.. they formed the Asia's Emerging Dragon Corp. DNATA-WINGS AVIATION SYSTEMS CORPORATION. MARTINEZ and CONSTANTINO G. in his capacity as Head of the Department of Transportation and Communications. the DOTC issued Dept. however. Sr. and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA). and 21.. 155547 May 5. respondents. and (5) the Third Supplement to the Amended and Restated Concession Agreement dated June 22..PHILIPPINE INTERNATIONAL AIR TERMINALS CO. On October 5. 2003 SALACNIB F..NATIONAL LABOR UNION (MWU-NLU). NANTES.1 On December 2. Some time in 1993. AEDC submitted an unsolicited proposal to the Government through the DOTC/MIAA for the development of NAIA International Passenger Terminal III (NAIA IPT III) under a build-operate-and-transfer arrangement pursuant to RA 6957 as amended by RA 7718 (BOT Law). DOTC/MIAA caused the publication in two daily newspapers of an invitation for competitive or comparative proposals on AEDC's unsolicited proposal. NOGRALES. RAMON M.. BIENVENIDO C. CONRADO G. The study consisted of two parts: first. x---------------------------------------------------------x G. 1996. On March 27. TERESA V. (4) the Second Supplement to the Amended and Restated Concession Agreement dated September 4. NAIA future requirements. as amended. PROSPERO A. presentation of the preliminary design of the passenger terminal building. and second. The facts are as follows: In August 1989. WILLY BUYSON VILLARAMA.: Petitioners and petitioners-in-intervention filed the instant petitions for prohibition under Rule 65 of the Revised Rules of Court seeking to prohibit the Manila International Airport Authority (MIAA) and the Department of Transportation and
Communications (DOTC) and its Secretary from implementing the following agreements executed by the Philippine Government through the DOTC and the MIAA and the Philippine International Air Terminals Co. MIASCOR CATERING SERVICES CORPORATION. SECRETARY LEANDRO M. Henry Sy. proposed master plans and development plans. MANUEL ANTONIO B. No. DOMALAON. DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS. DIMAANO. BOÑE. DATUMANONG. BATERINA. 2003
DEMOSTHENES P. Interested firms were permitted to obtain the Request for Proposal Documents beginning June 28. DINA C. 14. SECRETARY LEANDRO M. in his capacity as Head of the Department of Public Works and Highways. INC.. 1996. JR. The first envelope should contain the Prequalification Documents. AGAN. in accordance with Sec. No.EN BANC G. VIRGIE CATAMIN RONALD SCHLOBOM.
. respondents-intervenors. 4-A of RA 6957. Order No.MIASCOR GROUNDHANDLING CORPORATION. DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS and SECRETARY LEANDRO M. To signify their commitment to pursue the project. MENDOZA. MACROASIA-EUREST SERVICES. 1999. JARAULA. JOSE MARI B. and the third envelope the Financial Proposal of the proponent. 1996. MIASCOR WORKERS UNION . traffic forecasts. (AEDC) which was registered with the Securities and Exchange Commission (SEC) on September 15. of September 20. The ADP submitted a Draft Final Report to the DOTC in December 1989. 1995. DIMALANTA. 2 which approved the NAIA IPT III project. On February 13. MORY V. REUEL E.
The PBAC also clarified that the list of revenue sources contained in Annex 4. and that the challengers' technical and financial proposals would remain confidential.5% 10. depending on the outcome of PBAC's query on the matter with the Department of Justice. only the proposed Annual Guaranteed Payment submitted by the challengers would be revealed to AEDC. On July 23.2a of the Bid Documents was merely indicative and that other revenue sources may be included by the proponent. the PBAC opened
b. c. and ii. Air and Grounds Services. Aside from the fixed Annual Guaranteed Payment. and maintenance phases of the project. In order to comply with this equity requirement. and its capacity to secure external financing for the project." Paircargo's queries and the PBAC's responses were as follows: 1. 1996. shall be acceptable. It is difficult for Paircargo and Associates to meet the required minimum equity requirement as prescribed in Section 8. the PBAC issued Bid Bulletin No. The proponent would be evaluated based on its ability to provide a minimum amount of equity to the project. On August 16. 1996. The amount of the fixed Annual Guaranteed Payment shall be subject of the price challenge. to be established by submitting the respective companies' audited financial statements. d. However. Paircargo is being required to submit a copy of the draft concession as one of the documentary requirements. 1996. a final version will be issued before the award of contract. design. Furthermore. Rule 11 of the Implementing Rules and Regulations of the BOT Law. Paircargo is requesting PBAC to just allow each member of (sic) corporation of the Joint Venture to just execute an agreement that embodies a commitment to infuse the required capital in case the project is awarded to the Joint Venture instead of increasing each corporation's current authorized capital stock just for prequalification purposes. but payment of which shall start upon site possession. Paircargo is negotiating with banks and other institutions for the extension of a Performance Security to the joint venture in the event that the Concessions Agreement (sic) is awarded to them. The basis for the prequalification shall be the proponent's compliance with the minimum technical and financial requirements provided in the Bid Documents and the IRR of the BOT Law. Amendments to the draft Concession Agreement shall be issued from time to time.1996.
. and have adequate resources. On September 20.0%
On August 29.. construction.00 (US$2. 1996. subject to approval by DOTC/MIAA. Paircargo is requesting that they'd (sic) be furnished copy of the approved negotiated agreement between the PBAC and the AEDC at the soonest possible time. upon submission of a written application and payment of a non-refundable fee of P50. Inc. At present. that the project proponent and/or the members are of good financial standing. Next 10 years 5. operation. Therefore. However. However. entitled "Answers to the Queries of PAIRCARGO as Per Letter Dated September 3 and 10.. 1996. e. Inc (Paircargo). construction.000). and/or operation and maintenance phases of the project as the case may be. In September 1996. the consortium composed of People's Air Cargo and Warehousing Co. design. On September 23. Phil. First 5 years ii. as follows: i. For purposes of prequalification. the Second Pre-Bid Conference was held where certain clarifications were made. A commitment to put up equity once awarded the project is not enough to establish that "present" financial capability. In prequalification. the proponent shall include in its financial proposal an additional percentage of gross revenue share of the Government.3. 2 inviting all bidders to a pre-bid conference on July 29.6. The Bid Documents issued by the PBAC provided among others that the proponent must have adequate capability to sustain the financing requirement for the detailed engineering. the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents. a letter testimonial from reputable banks attesting that the project proponent and/or the members of the consortium are banking with them. (Paircargo). this capability shall be measured in terms of: i. Proof of the availability of the project proponent and/or the consortium to provide the minimum amount of equity for the project. Paircargo Consortium) submitted their competitive proposal to the PBAC. the PBAC warranted that based on Sec. (PAGS) and Security Bank Corp. the agency is interested in one's financial capability at the time of prequalification. 11. The project proponent must have adequate capability to sustain the financing requirement for the detailed engineering. the PBAC issued PBAC Bulletin No.000. the PBAC clarified that only those fees and charges denominated as Public Utility Fees would be subject to regulation. 2. A copy of the draft Concession Agreement is included in the Bid Documents. Proponent may offer an Annual Guaranteed Payment which need not be of equal amount. The PBAC also stated that it would require AEDC to sign Supplement C of the Bid Documents (Acceptance of Criteria and Waiver of Rights to Enjoin Project) and to submit the same with the required Bid Security. Next 10 years iii. Any material changes would be made known to prospective challengers through bid bulletins. The minimum amount of equity shall be 30% of the Project Cost. Said amendments shall only cover items that would not materially affect the preparation of the proponent's proposal. total financial capability of all member companies of the Consortium.4 of the Bid Documents considering that the capitalization of each member company is so structured to meet the requirements and needs of their current respective business undertaking/activities. 1996. 5. The following amendments were made on the Bid Documents: a. not future or potential capability. Inc. 1996. (Security Bank) (collectively. Upon the request of prospective bidder People's Air Cargo & Warehousing Co. and those charges which would be actually deemed Public Utility Fees could still be revised.0% 7.
The First Supplement was signed on August 27. On November 26. PIATCO shall transfer the development facility to MIAA. 5. The prohibition imposed by RA 337. 2000. the NEDA merely noted the agreement. Paircargo. Among the provisions of the 1997 Concession Agreement that were amended by the ARCA were: Sec. Inc. The appointment of Lufthansa as the facility operator. the Second Supplement on September 4. then DOTC Secretary
Amado Lagdameo. AEDC informed the PBAC in writing of its reservations as regards the Paircargo Consortium. 1997.04 concerning the assignment by Concessionaire of its interest in the Development Facility. and that based on the documents submitted by Paircargo and the established prequalification criteria. Sec. On October 16. Go. 2. On October 7. 4. the Government and PIATCO signed three Supplements to the ARCA. 1997. through then DOTC Secretary Arturo T. the Government and PIATCO signed an Amended and Restated Concession Agreement (ARCA). The Secretary of the DOTC approved the finding of the PBAC. The PBAC gave its reply on October 2. Sec.75 billion for the same period. 7. 1996. On July 12. AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated its objections as regards the prequalification of PIATCO. September 24. The PBAC then proceeded with the opening of the second envelope of the Paircargo Consortium which contained its Technical Proposal.03 as regards the periodic adjustment of public utility fees and charges. 1997. in accordance with the Bid Documents. in view of the restrictions imposed by Section 21-B of the General Banking Act and Sections 1380 and 1381 of the Manual Regulations for Banks and Other Financial Intermediaries.02 (a) dealing with the exclusivity of the franchise given to the Concessionaire. 1997. On October 3. signed the "Concession Agreement for the Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III" (1997 Concession Agreement). The lack of corporate approvals and financial capability of PAGS. the PBAC prequalified the Paircargo Consortium. of the BOT agreement between the DOTC and PIATCO. Alvarez. as amended (the General Banking Act) on the amount that Security Bank could legally invest in the project. and gave AEDC 30 working days or until November 28. the Government. Paircargo Consortium incorporated into Philippine International Airport Terminals Co. On April 16. Thus. the PBAC formally informed AEDC that it had accepted the price proposal submitted by the Paircargo Consortium. 2001 (collectively. for prequalification purposes. 5. Sec. On September 26.08 (c) dealing with the proceeds of Concessionaire's insurance. 1. through its President. 3. Sec. otherwise. the PBAC had found that the challenger. and e. Sec. Subsequently. As AEDC failed to match the proposal within the 30-day period. the voting members of the PBAC and Pantaleon D. AEDC filed with the Regional Trial Court of Pasig a Petition for Declaration of Nullity of the Proceedings. 1999. 1996 within which to match the said bid. and the Third Supplement on June 22.11 pertaining to the definition of "certificate of completion". the NEDA-ICC conducted an ad referendum to facilitate the approval. rentals and other charges in accordance with the rates or schedules stipulated in the 1997 Concession Agreement. the DOTC submitted the concession agreement for the secondpass approval of the NEDA-ICC. 1996. issued a notice to Paircargo Consortium regarding AEDC's failure to match the proposal. which include: a. The Agreement provided that the concession period shall be for twenty-five (25) years commencing from the in-service date. Mandamus and Injunction against the Secretary of the DOTC. and may be renewed at the option of the Government for a period not exceeding twenty-five (25) years. 1996. and Sec. AEDC again manifested its objections and requested that it be furnished with excerpts of the PBAC meeting and the accompanying technical evaluation report where each of the issues they raised were addressed. and 10% share in gross revenues for the last ten years of operation. On February 27. 1996. The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture. However. in view of the Philippine requirement in the operation of a public utility. c. the DOTC issued the notice of award for the project to PIATCO.
. the project would be awarded to Paircargo. on a no-objection basis.10 with respect to the temporary take-over of operations by GRP. informing AEDC that it had considered the issues raised by the latter. 1997. AEDC reiterated its objections. On July 9. The Government granted PIATCO the franchise to operate and maintain the said terminal during the concession period and to collect the fees. had prequalified to undertake the project. particularly with respect to Paircargo's financial capability. and PIATCO. 1996. AEDC offered to pay the government a total of P135 million as guaranteed payment for 27 years while Paircargo Consortium offered to pay the government a total of P17. On the following day. 10.16 pertaining to the taxes. As the ad referendum gathered only four (4) of the required six (6) signatures. 1996. 6. At the end of the concession period. Sec. Enrile. 5. 1996. the entire Article VIII concerning the provisions on the termination of the contract. On April 17. duties and other imposts that may be levied on the Concessionaire. Henry T. The lack of corporate approvals and financial capability of PAIRCARGO. 1998.02 providing for the venue of the arbitration proceedings in case a dispute or controversy arises between the parties to the agreement.the first envelope containing the prequalification documents of the Paircargo Consortium. the PBAC opened the third envelope submitted by AEDC and the Paircargo Consortium containing their respective financial proposals. on December 11. On April 11. in his capacity as Chairman of the PBAC Technical Committee.05 pertaining to the Special Obligations of GRP.5% share in gross revenues for the next ten years of operation. Sec. b. the Chairman of the PBAC. (PIATCO). in addition to the foregoing.. Both proponents offered to build the NAIA Passenger Terminal III for at least $350 million at no cost to the government and to pay the government: 5% share in gross revenues for the first five years of operation. d. 1997.
Villarama. During the pendency of the case before this Court. Pichay. the BOT Law and its Implementing Rules and Regulations.05 (d) of the ARCA referring to the obligation of MIAA to provide sufficient funds for the upkeep. are the dominant players in the industry with an aggregate market share of 70%. 2002. Paras. such as in-flight catering. Congressmen Salacnib Baterina. 2003 PIATCO commenced arbitration proceedings before the International Chamber of Commerce. the Office of the Solicitor General and the Office of the Government Corporate Counsel prayed that the present petitions be given due course and that judgment be rendered declaring the 1997 Concession Agreement. 6. 2002. and Sec. 2002. ramp and ground support. 2003. incremental and consequential costs and losses consequent to the existence of such structures. on November 29. the Court is again faced with the task of resolving complicated issues made difficult by their intersecting legal and economic implications. Jacinto V. The First Supplement also provided a stipulation as regards the construction of a surface road to connect NAIA Terminal II and Terminal III in lieu of the proposed access tunnel crossing Runway 13/31. removal. 155001 and 155661 In G. passenger handling. to several international airlines at the NAIA. Nantes. Meanwhile. The Second Supplement to the ARCA contained provisions concerning the clearing. Petitioners' Legal Standing to File the present Petitions a. It also amended Sec. the service providers. Rafael P. DNATA-Wings Aviation Systems Corp.02 (a) (iii) of the ARCA referring to the Payments of Percentage Share in Gross Revenues.. the Third Supplement provided for the obligations of the Concessionaire as regards the construction of the surface road connecting Terminals II and III. this Court has never shirked from its solemn duty to dispense justice and resolve "actual controversies involving rights which are legally demandable and enforceable.01 (c) of the ARCA pertaining to the Disposition of Terminal Fees. We shall first dispose of the procedural issues raised by respondent PIATCO which they allege will bar the resolution of the instant controversy. Harlin Cast Abayon and Benasing O. aircraft maintenance and provisions.4 On December 11. filed before this Court a petition for prohibition to enjoin the enforcement of said agreements. 2002.. and the MacroAsia Group. Zialcita. On September 17. On December 10. The First Supplement to the ARCA amended Sec. 3 On November 6. 2002. It defined the scope of works. Miascor. and it provided for some additional obligations on the part of PIATCO as regards the said structures. DNATA and MacroAsia. the swapping of obligations between GRP and PIATCO regarding the improvement of Sales Road. the ARCA and the Supplements thereto void for being contrary to the Constitution. and to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction. and further providing additional special obligations on the part of GRP aside from those already enumerated in Sec. and other services. maintenance. Nograles.36 of the ARCA defining "Revenues" or "Gross Revenues". Eduardo C. 2002. On October 24. together with Philippine Airlines (PAL). G. it provided for the procedure for the demolition of the said structures and the consideration for the same which the GRP shall pay PIATCO. 2. On March 6.R.2 On October 15. Sec. claiming that they stand to lose their employment upon the implementation of the questioned agreements. The Court is aware of the far reaching fall out effects of the ruling which it makes today. Nos. joining the cause of the petitioning workers. Willie B. Hon. 1. The Office of the Solicitor General and the Office of the Government Corporate Counsel filed their respective Comments in behalf of the public respondents. 6. 2. Finally. ramp and ground support. Jr. Prospero C. respondent PIATCO informed the Court that on March 4. Some of these service providers are the Miascor Group. and the changes in the timetable.05 of the ARCA. this Court will not begin to do otherwise today. stated that she will not "honor (PIATCO) contracts which the Executive Branch's legal offices have concluded (as) null and void.02 of the ARCA by inserting an introductory paragraph. 2002. Prospero A. They filed their Comment-In-Intervention defending the validity of the assailed agreements and praying for the dismissal of the petitions. 155001 individual petitioners are employees of various service providers 7 having separate concession contracts with MIAA and continuing service agreements with various international airlines to provide in-flight catering. passenger handling. International Court of Arbitration (ICC) by filing a Request for Arbitration with the Secretariat of the ICC against the Government of the Republic of the Philippines acting through the DOTC and MIAA. the MIAA which is charged with the maintenance and operation of the NAIA Terminals I and II.Supplements). it provided for time extensions. 6. demolition or disposal of subterranean structures uncovered or discovered at the site of the construction of the terminal by the Concessionaire. Clavel Martinez and Constantino Jaraula filed a similar petition with this Court. No. cargo handling and
. cargo handling and warehousing." 5 Respondent PIATCO filed its Comments to the present petitions on November 7 and 27. moved to intervene in
the case as Respondents-Intervenors. After the oral argument. In their consolidated Memorandum."6 To be sure. aircraft maintenance and provisions. Macaranbon. several employees of the MIAA likewise filed a petition assailing the legality of the various agreements. Sec. repair and/or replacement of all airport facilities and equipment which are owned or operated by MIAA. in her speech at the 2002 Golden Shell Export Awards at Malacañang Palace. In the present cases. 2002. had existing concession contracts with various service providers to offer international airline airport services. another group of Congressmen. filed a motion for intervention and a petition-in-intervention. the Court then resolved in open court to require the parties to file simultaneously their respective Memoranda in amplification of the issues heard in the oral arguments within 30 days and to explore the possibility of arbitration or mediation as provided in the challenged contracts. the workers of the international airline service providers. the Court heard the case on oral argument.R. President Gloria Macapagal Arroyo. For more than a century and whenever the exigencies of the times demand it.
the substantial capital investments required and the high rate of fees.warehousing and other services. but also that he sustained or is in imminent danger of sustaining some direct injury as a result of its enforcement. Inc. 8 With respect to the petitioning service providers and their employees. they are especially interested in the PIATCO Contracts.10 We hold that petitioners have the requisite standing. it has been held that the interest of a person assailing the constitutionality of a statute must be direct and personal. upon the commencement of operations of the NAIA IPT III. suits are not brought by parties who have been personally injured by the operation of a law or any other government act but by concerned citizens. These petitioners filed the instant action for prohibition as taxpayers and as parties whose rights and interests stand to be violated by the implementation of the PIATCO Contracts. and non-profit civic organizations were allowed to initiate and prosecute actions
. The question on legal standing is whether such parties have "alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions. In the above-mentioned cases.15 this Court held "[i]n line with the liberal policy of this Court on locus standi. 11 They cite provisions of the PIATCO Contracts which require disbursement of unappropriated amounts in compliance with the contractual obligations of the Government. Petitioners-Intervenors in the same case are all corporations organized and existing under Philippine laws engaged in the business of providing in-flight catering. they allege that they will be effectively barred from providing international airline airport services at the NAIA Terminals I and II as all international airlines and passengers will be diverted to the NAIA IPT III. ramp and ground support. a property right which is zealously protected by the Constitution. No. specific provisions of the BOT Law and its Implementing Rules and Regulations. They allege that the Government obligations in the PIATCO Contracts which compel government expenditure without appropriation is a curtailment of their prerogatives as legislators. taxpayers or voters who actually sue in the public interest. by entering into said contracts. aircraft maintenance and provisions. In Kilosbayan. Moreover. b. Each of the petitioners-intervenors have separate and subsisting concession agreements with MIAA and with various international airlines which they allege are being interfered with and violated by respondent PIATCO. have committed grave abuse of discretion amounting to lack or excess of jurisdiction which can be remedied only by a writ of prohibition. 155547. passenger handling. public interest demands that we take a more liberal view in determining whether the petitioners suing as legislators. renewed so as to allow each of the petitioning
service providers to recoup their investments and obtain a reasonable return thereon. 155661. The financial prejudice brought about by the PIATCO Contracts on petitioners and petitioners-intervenors in these cases are legitimate interests sufficient to confer on them the requisite standing to file the instant petitions. not only that the law or any government act is invalid. With respect to existing concession agreements between MIAA and international airport service providers regarding certain services or operations. Raquiza14 wherein this Court held that appropriation must be made only on amounts immediately demandable. the 1997 Concession Agreement and the ARCA uniformly provide that such services or operations will not be carried over to the NAIA IPT III and PIATCO is under no obligation to permit such carry over except through a separate agreement duly entered into with PIATCO. petitioners constitute employees of MIAA and Samahang Manggagawa sa Paliparan ng Pilipinas . petitioners have a direct and substantial interest to protect by reason of the implementation of the PIATCO Contracts. they entered into their respective contracts with the MIAA with the understanding that the said contracts will be in force for the stipulated period.R. subsisting concession agreements between MIAA and petitioners-intervenors and service contracts between international airlines and petitioners-intervenors stand to be nullified or terminated by the operation of the NAIA IPT III under the PIATCO Contracts. Municipality of Imus13 and Gonzales v.a legitimate labor union and accredited as the sole and exclusive bargaining agent of all the employees in MIAA. taxpayers and citizens have locus standi to file the instant petition. the Government shall cause the closure of Ninoy Aquino International Airport Passenger Terminals I and II as international passenger terminals. and not merely that he suffers thereby in some indefinite way.R. They allege that as members of the House of Representatives. except those international airports already existing at the time of the execution of the agreement. Petitioners in both cases raise the argument that the PIATCO Contracts contain stipulations which directly contravene numerous provisions of the Constitution. No. Petitioners anchor their petition for prohibition on the nullity of the contracts entered into by the Government and PIATCO regarding the build-operate-and-transfer of the NAIA IPT III. The contracts further provide that upon the commencement of operations at the NAIA IPT III. with no assurance that subsisting contracts with MIAA and other international airlines will be respected. v.R. The petitioning service providers will thus be compelled to contract with PIATCO alone for such services. petitioners filed the petition for prohibition as members of the House of Representatives. Petitioning employees of various service providers at the NAIA Terminals I and II and of MIAA on the other hand allege that with the closure of the NAIA Terminals I and II as international passenger terminals under the PIATCO Contracts. Petitioners-Intervenors allege that as taxpaying international airline and airport-related service operators. ordinary taxpayers. and public policy. No. citizens and taxpayers. petitioners assail the provisions in the 1997 Concession Agreement and the ARCA which grant PIATCO the exclusive right to operate a commercial international passenger terminal within the Island of Luzon. there being no plain. contrary to the mandate of the Constitution that "[n]o money shall be paid out of the treasury except in pursuance of an appropriation made by law. Also included as petitioners are labor unions MIASCOR Workers Union-National Labor Union and Philippine Airlines Employees Association. In particular. speedy or adequate remedy in the ordinary course of law. cargo handling and warehousing and other services to several international airlines at the Ninoy Aquino International Airport. They stand to lose their source of livelihood. and even association of planters. They filed the petition as taxpayers and persons who have a legitimate interest to protect in the implementation of the PIATCO Contracts. He must be able to show. members of Congress. Guingona. In G. because the contracts compel the Government and/or the House of Representatives to appropriate funds necessary to comply with the provisions therein. each one of them stands to be irreparably injured by the implementation of the PIATCO Contracts. v. Petitioners contend that the DOTC and the MIAA. and thereafter. Although we are not unmindful of the cases of Imus Electric Co. Petitioning service providers stress that despite the very competitive market. 155547 In G. G. they stand to lose employment." 9 Accordingly." 12 Standing is a peculiar concept in constitutional law because in some cases. It must appear that the person complaining has been or is about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute or act complained of.
Accordingly. the entire net worth of Security Bank. The object of arbitration is precisely to allow an expeditious determination of a dispute. should not be considered. . In this connection. it is still within the wide discretion of the Court to waive the requirement and so remove the impediment to its addressing and resolving the serious constitutional questions raised. considering the nature of the controversy before the Court. Moreover. need not be determined by a trial court. The facts necessary to resolve these legal questions are well established and. . .02 of the ARCA have been filed at the instance of respondent PIATCO. PIATCO's predecessor. in effect. we hold that the arbitration step taken by PIATCO will not oust this Court of its jurisdiction over the cases at bar. They allege that in computing the ability of the Paircargo Consortium to meet the minimum equity requirements for the project. This contention is based on the restriction under R. The Court is aware that arbitration proceedings pursuant to Section 10. this Court. Jr. PIATCO alleges that submission of this controversy to this Court at the first instance is a violation of the rule on hierarchy of courts. "insofar as taxpayers' suits are concerned . to the merits of the instant controversy. even if." 17 As such ". 20 even after finding that the arbitration clause in the Distributorship Agreement in question is valid and the dispute between the parties is arbitrable. Moreover. Both petitioners and respondents agree that these cases are of transcendental importance as they involve the construction and operation of the country's premier international airport. PIATCO relies. 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. this Court affirmed the trial court's decision
denying petitioner's Motion to Suspend Proceedings pursuant to the arbitration clause under the contract. I Is PIATCO a qualified bidder? Public respondents argue that the Paircargo Consortium. 19 It is easy to discern that exceptional circumstances exist in the cases at bar that call for the relaxation of the rule. Cal stating that the Paircargo Consortium is found to have a combined net worth of P3. 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. . on the strength of the Memorandum dated October 14. In Del Monte Corporation-USA v. sufficient to meet the equity requirements of the project. including the arbitration clause stipulated therein."18 In view of the serious legal questions involved and their impact on public interest. this Court held that as contracts produce legal effect between the parties. their assigns and heirs. Ramos questioning the financial capability of the Paircargo Consortium on the ground that it does not have the financial resources to put up the required minimum equity of P2. 1996 issued by the DOTC Undersecretary Primitivo C.700. acts. rulings. only the parties to the Distributorship Agreement are bound by its terms. hence.before this Court to question the constitutionality or validity of laws. No. Now.00. result in multiplicity of suits. citing its previous ruling in Salas. Other Procedural Matters Respondent PIATCO further alleges that this Court is without jurisdiction to review the instant cases as factual issues are involved which this Court is ill-equipped to resolve. Thus. the BOT Law and its Implementing Rules and Regulations. require that financial capability will be evaluated based on total financial capability of all the member companies of the [Paircargo] Consortium. Undersecretary Cal opined: The Bid Documents.21 held that to tolerate the splitting of proceedings by allowing arbitration as to some of the parties on the one hand and trial for the others on the other hand would. procedural bars may be lowered to give way for the speedy disposition of the instant cases. strictly speaking. we resolve to grant standing to the petitioners. they cannot be bound by the arbitration clause provided for in the ARCA and hence. A speedy and decisive resolution of all the critical issues in the present controversy. (this Court) is not devoid of discretion as to whether or not it should be entertained.900. 3 and 5. or orders of various government agencies or instrumentalities. including those raised by petitioners. cannot be compelled to submit to arbitration proceedings.22 Thus. this Court is of the view that the crux of the instant controversy involves significant legal questions. Laperal Realty Corporation. duplicitous procedure and unnecessary delay. Court of Appeals. following the rule on hierarchy of courts. In so ruling. a member of the consortium. The rule on hierarchy of courts will not also prevent this Court from assuming jurisdiction over the cases at bar. After a thorough study and careful evaluation of the issues involved. the Challenger
. Antonio Henson of AEDC to President Fidel V. as clarified through Bid Bulletin Nos. 337. The said rule may be relaxed when the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of this Court's primary jurisdiction. they [the petitioners] are not covered by the definition. cannot be made before an arbitral tribunal.A." 16 Further. was not a duly pre-qualified bidder on the unsolicited proposal submitted by AEDC as the Paircargo Consortium failed to meet the financial capability required under the BOT Law and the Bid Documents. They contend that trial courts have concurrent jurisdiction with this Court with respect to a special civil action for prohibition and hence. on the other hand. The said Memorandum was in response to a letter from Mr.000.000. Legal Effect of the Commencement of Arbitration Proceedings by PIATCO There is one more procedural obstacle which must be overcome. resort must first be had before the trial courts. v.000. In the said Memorandum. the crucial issues submitted for resolution are of first impression and they entail the proper legal interpretation of key provisions of the Constitution. Considering that there are parties to the case who are neither parties to the Distributorship Agreement nor heirs or assigns of the parties thereto. This Court ruled that arbitration proceedings could be called for but only with respect to the parties to the contract in question. Again. decisions.00. we ruled that the interest of justice would best be served if the trial court hears and adjudicates the case in a single and complete proceeding.000. as amended or the General Banking Act that a commercial bank cannot invest in any single enterprise in an amount more than 15% of its net worth.
the entire amount of its net worth could not be invested in a single undertaking or enterprise. Accordingly.504. as well as a government-owned and controlled bank.000.4 Pre-qualification Requirements.00 to invest as its equity for the project.000. Other Limitations and Restrictions. invest in the equity of a non-allied undertaking. in case of a build-operate-and-transfer arrangement. construction and/or operation and maintenance phases of the project. No. the Monetary Board.25 the Paircargo Consortium had to show to the satisfaction of the PBAC that it had the ability to provide the minimum equity for the project in the amount of at least P2.4 of the same document). organizational and legal standards " required by the law. The Challenger has complied with this requirement. the 1994 Implementing Rules and Regulations of the BOT Law provide: Section 5.377. (b) the equity investment in any one enterprise whether allied or non-allied shall not exceed fifteen percent (15%) of the net worth of the bank. technical. In fact.00. the Paircargo Consortium or any challenger to the unsolicited proposal of AEDC has to show that it possesses the requisite financial capability to undertake the project in the minimum amount of 30% of the project cost through (i) proof of the ability to provide a minimum amount of equity to the project.00 respectively. the contract shall be awarded to the bidder "who. This is to
Further. has submitted the lowest bid and most favorable terms of the project. 7718. xxx xxx xxx
correlate with the required debt-to-equity ratio of 70:30 in Section 2. 24 Further. may authorize a commercial bank. whether allied or non-allied in accordance with the provisions of R. whenever it shall deem appropriate and necessary to further national development objectives or support national priority projects.650. and (d) the equity investment in other banks shall be deducted from the investing bank's net worth for purposes of computing the prescribed ratio of net worth to risk assets.23 Under the BOT Law. that they are in good financial standing. having satisfied the minimum financial. or own a majority or all of the equity in a financial intermediary other than a commercial bank or a bank authorized to provide commercial banking services: Provided. Paircargo's Audited Financial Statements as of 1993 and 1994 indicated that it had a net worth of P2. 1996 amending the financial capability requirements for pre-qualification of the project proponent as follows: 6. xxx xxx xxx
c. 3.1 IRR of the BOT Law) but not for pre-qualification (Section 5.4 of the Bid Documents . as the case may be. No. (c) the equity investment of the bank. The financial statement or the net worth is not the sole basis in establishing financial capability.592.A.A.28 We agree with public respondents that with respect to Security Bank. the minimum amount of equity needed.515. To recap. proof of sufficient equity is required as one of the conditions for award of contract (Section 12. net worth reflected in the Financial Statement should not be taken as the amount of the money to be used to answer the required thirty percent (30%) equity of the challenger but rather to be used in establishing if there is enough basis to believe that the challenger can comply with the required 30% equity. and (ii) a letter testimonial from reputable banks attesting that the project proponent and/or members of the consortium are banking with them. The debt portion of the project financing should not exceed 70% of the actual project cost.700. The minimum amount of equity to which the proponent's financial capability will be based shall be thirty percent (30%) of the project cost instead of the twenty percent (20%) specified in Section 3.A." To impose that as a requirement now will be nothing less than unfair.00 or roughly P9.183. It is not a requirement that the net worth must be "unrestricted. the powers of an Investment House as provided in Presidential Decree No.242. 27 Security Bank's Audited Financial Statements as of 1995 show that it has a net worth equivalent to its capital funds in the amount of P3. (emphasis supplied) Pursuant to this provision.523. the PBAC issued PBAC Bulletin No.6. and that they have adequate resources. As the minimum project cost was estimated to be US$350. financial capability may also be established by testimonial letters issued by reputable banks. Financial Capability: The project proponent must have adequate capability to sustain the financing requirements for the detailed engineering design.755. or of its wholly or majority-owned subsidiary.00 that could support a project costing approximately P13 Billion.00 and P3. as amended by R.783.was found to have a combined net worth of P3.00.000. The provisions in this or in any other Act to the contrary notwithstanding.095. 129. 26 PAGS' Audited Financial Statements as of 1995 indicate that it has approximately P26. R. 21-B. as amended or the General Banking Act: Sec.01a of the draft concession agreement. in a single nonallied undertaking shall not exceed thirty-five percent (35%) of the total equity in the enterprise nor shall it exceed thirty-five percent (35%) of the voting stock in that enterprise. and that they have adequate resources .735.00.926. 337. that they are in good financial standing. a bank authorized to provide commercial banking services. Basis of Pre-qualification The basis for the pre-qualification shall be on the compliance of the proponent to the minimum technical and financial requirements provided in the Bid Documents and in the IRR of the BOT Law.123. to operate under an expanded commercial banking authority and by virtue thereof exercise. The government agency/LGU concerned shall determine on a project-to-project basis and before pre-qualification. 6957. That (a) the total investment in equities shall not exceed fifty percent (50%) of the net worth of the bank.000. this capability shall be measured in terms of (i) proof of the ability of the project proponent and/or the consortium to provide a minimum amount of equity to the project. and (ii) a letter testimonial from reputable banks attesting that the project proponent or members of the consortium are banking with them. As stated in Bid Bulletin No.421. — The following limitations and
. 3 dated August 16. in addition to powers authorized for commercial banks. For purposes of pre-qualification. based on the above provisions of law. the 1993 Manual of Regulations for Banks provides: SECTION X383.
X121. in accordance with the 70:30 debt-to-equity ratio prescribed in the Bid Documents. Thus: Competition must be legitimate. This would open doors to abuse and defeat the very purpose of a public bidding. honest and competitive public bidding. the foundation of a fair and competitive public bidding would be defeated. II Is the 1997 Concession Agreement valid? Petitioners and public respondents contend that the 1997 Concession Agreement is invalid as it contains provisions that substantially depart from the draft Concession Agreement included in the Bid Documents.restrictions shall also apply regarding equity investments of banks. It argued further that said intention is expressed in Part C (6) of Bid Bulletin No. Thus the award of the contract by the PBAC to the Paircargo Consortium. A public bidding would indeed be a farce if after the contract is awarded.55 or only 6. not only `bidding upon a common standard. The relevant government authority is duty-bound to ensure that the awardee of the contract possesses the minimum required financial capability to complete the project. With respect to Security Bank. the maximum amount which may be invested by it would only be 15% of its net worth in view of the restrictions imposed by the General Banking Act. regulations. Disregarding the investment ceilings provided by applicable law would not result in a proper evaluation of whether or not a bidder is pre-qualified to undertake the project as for all intents and purposes. the PBAC should determine the maximum amounts that each member of the consortium may commit for the construction. The PBAC should not be allowed to speculate on the future financial ability of the bidder to undertake the project on the basis of documents submitted. To allow the PBAC to estimate the bidder's future financial capability would not secure the viability and integrity of the project. X106 and Subsec. The PBAC has determined that any prospective bidder for the construction. Thus.5. Thus. said bidder should be properly disqualified. the maximum amounts which the Paircargo Consortium may invest in the project fell short of the minimum amounts prescribed by the PBAC. 3 issued by the PBAC which states: 6. If the winning bidder is allowed to later include or modify certain provisions in the contract awarded such that the contract is altered in any material respect.871. but more importantly. such ceiling or legal restriction determines the true maximum amount which a bidder may invest in the project. Said amendments shall only cover items that would not materially affect the preparation of the proponent's proposal. as the legal effects of the disqualification of respondent PIATCO's predecessor would come into play and necessarily result in the nullity of all the subsequent contracts entered by it in pursuance of the project. A restrictive and conservative application of the rules and procedures of public bidding is necessary not only to protect the impartiality and regularity of the proceedings but also to ensure the financial and technical reliability of the project. however. is null and void. — The equity investments of banks in any single enterprise shall not exceed at any time fifteen percent (15%) of the net worth of the investing bank as defined in Sec. after considering the maximum amounts that may be validly invested by each of its members is P558. the same undertaking. that the Concession Agreement attached to the Bid Documents is intended to be a draft. the determination of whether or not a bidder is pre-qualified to undertake the project requires an evaluation of the financial capacity of the said bidder at the time the bid is submitted based on the required documents presented by the bidder. 30
Thus. Otherwise. if the maximum amount of equity that a bidder may invest in the project at the time the bids are submitted falls short of the minimum amounts required to be put up by the bidder. i.08% of the project cost. the law requires the government agency to examine and determine the ability of the bidder to fund the entire cost of the project by considering the maximum amounts that each bidder may invest in the project at the time of pre-qualification . In the field of government contract law. on the contract bidded upon. and DOTC/MIAA.55. Thus.656. the Court feels that it is necessary to discuss in full the pressing issues of the present controversy for a complete resolution thereof. PIATCO maintains. upon the same thing. the same subject matter. and that this intention was clear to all participants.095. Considering that at the pre-qualification stage. alteration or modification. operation and maintenance of the NAIA IPT III project at the time of pre-qualification . the maximum amount that Security Bank could validly invest in the Paircargo Consortium is only P528.755. including AEDC. representing 15% of its entire net worth. public bidding aims to protect the public interest by giving the public the best possible advantages through open competition. In any single enterprise..384. 29 an amount substantially less than the prescribed minimum equity investment required for the project in the amount of P2. It has been held that: The basic rule in public bidding is that bids should be evaluated based on the required documents submitted before and not after the opening of bids. with respect to the bidder's financial capacity at the pre-qualification stage. They maintain that a substantial departure from the draft Concession Agreement is a violation of public policy and renders the 1997 Concession Agreement null and void. and not designed to injure or defraud the government . and guidelines of the bidding process is the only safeguard to a fair. a. competition requires. the winning bidder may
. Each bidder must be able to bid on the same thing.00 or 30% of the project cost. operation and maintenance of the NAIA IPT III project should prove that it has the ability to provide equity in the minimum amount of 30% of the project cost. Not simply in terms of application of the procedural rules and regulations imposed by the relevant government agency. at the earliest opportunity. The total net worth therefore of the Paircargo Consortium.525. in the case of Paircargo Consortium. While it would be proper at this juncture to end the resolution of the instant controversy. This is especially true in the case at bar which involves the investment of billions of pesos by the project proponent. Further. fair and honest.000. By its very nature. fair and honest. then the essence of fair competition in the public bidding is destroyed. we hold that Paircargo Consortium was not a qualified bidder.e.' but also that it be legitimate. The purpose of pre-qualification in any public bidding is to determine.31 An essential element of a publicly bidded contract is that all bidders must be on equal footing. Amendments to the Draft Concessions Agreement Amendments to the Draft Concessions Agreement shall be issued from time to time. a common basis. Strict observance of the rules. The rationale is obvious. a disqualified bidder. the ability of the bidder to undertake the project. subject to change.
33 In fact. and (3) new fees and charges that may be imposed by PIATCO which have not been previously imposed or collected at the Ninoy Aquino International Airport Passenger Terminal I. He who bids or offers the best terms is awarded the contract subject of the bid. (2) aircraft tacking fees. Inc. i.32 The same rule was restated by Chief Justice Stuart of the Supreme Court of Minnesota: The law is well settled that where. when taken as a whole. pursuant to Administrative Order No.. or even cancel it. Series of 1993. Thus: It is inherent in public biddings that there shall be a fair competition among the bidders. The specifications in such biddings provide the common ground or basis for the bidders. municipal authorities can only let a contract for public work to the lowest responsible bidder. 1. the proposals and specifications therefore must be so framed as to permit free and full competition . (3) groundhandling fees. the draft Concession Agreement includes the following:36 (1) aircraft parking fees. For fees under the first category. and
. is null and void: The Court agrees with the contention of counsel for the plaintiffs that the due execution of a contract after public bidding is a limitation upon the right of the contracting parties to alter or amend it without another public bidding. and to give the public the best possible advantages by means of open competition between the bidders. those which are subject to periodic adjustment in accordance with a prescribed parametric formula and effective only upon written approval by MIAA. the determination of whether or not a modification or amendment of a contract bidded out constitutes a substantial amendment rests on whether the contract. Under the 1997 Concession Agreement . (3) check-in counter fees. (5) check-in counter rentals. operate equally or indiscriminately upon all bidders.34 this Court quoted with approval the ruling of the trial court that an amendment to a contract awarded through public bidding. (2) fees other than those included in the first category which maybe adjusted by PIATCO whenever it deems necessary without need for consent of DOTC/MIAA. not included or contemplated in the terms and specifications upon which the bids were invited. such changes must not constitute substantial or material amendments that would alter the basic parameters of the contract and would constitute a denial to the other bidders of the opportunity to bid on the same terms .. Delgado Brothers. as in this case. (2) aircraft tacking fees. for otherwise what would a public bidding be good for if after the execution of a contract after public bidding. i. The alterations and modifications in the contract executed between the government and the winning bidder must be such as to render such executed contract to be an entirely different contract from the one that was bidded upon . In the case of Caltex (Philippines). v. and it is obvious that such protection and best possible advantages to the public will disappear if the parties to a contract executed after public bidding may alter or amend it without another previous public bidding. would contain substantially different terms and conditions that would have the effect of altering the technical and/or financial proposals previously submitted by other bidders. the question that comes to fore is this: is the 1997 Concession Agreement the
same agreement that was offered for public bidding. accordingly. the contracting parties may alter or amend the contract. Inc. Hence. Modification on the Public Utility Revenues and Non-Public Utility Revenues that may be collected by PIATCO The fees that may be imposed and collected by PIATCO under the draft Concession Agreement and the 1997 Concession Agreement may be classified into three distinct categories: (1) fees which are subject to periodic adjustment of once every two years in accordance with a prescribed parametric formula and adjustments are made effective only upon written approval by MIAA. The specifications should.e. The glaring distinctions between the draft Concession Agreement and the 1997 Concession Agreement lie in the types of fees included in each category and the extent of the supervision and regulation which MIAA is allowed to exercise in relation thereto. 3 cited by PIATCO to support its argument that the draft concession agreement is subject to amendment. the draft Concession Agreement attached to the Bid Documents? A close comparison of the draft Concession Agreement attached to the Bid Documents and the 1997 Concession Agreement reveals that the documents differ in at least two material respects: a.modify the contract and include provisions which are favorable to it that were not previously made available to the other bidders.e. fees which are subject to adjustment and effective upon MIAA approval are classified as "Public Utility Revenues" and include: 37 (1) aircraft parking fees. the PBAC also clarified that "[s]aid amendments shall only cover items that would not materially affect the preparation of the proponent's proposal. Nor can they enter into a contract with the best bidder containing substantial provisions beneficial to him. at their will? Public biddings are held for the protection of the public. and (6) porterage fees. (4) rentals and airline offices. in the PBAC Bid Bulletin No. the pertinent portion of which was quoted above." While we concede that a winning bidder is not precluded from modifying or amending certain provisions of the contract bidded upon. .35 Hence. as amended. when such subsequent amendment was made without a new public bidding.
PIATCO is able to enjoy the benefits of depreciations of the Philippine Peso. under the 1997 Concession Agreement. With respect to terminal fees that may be charged by PIATCO. Provided that adjustments shall be made effective only after the written express approval of the MIAA. MIAA reserves the right to regulate (1) lobby and vehicular parking fees and (2) other new fees and charges that may be imposed by PIATCO. "Public Utility Revenues. i. By stipulating that "Public Utility Revenues" will be paid to PIATCO in US Dollars while payments by PIATCO to the Government are in Philippine currency under the 1997 Concession Agreement. this was included within the category of "Public Utility Revenues" under the 1997 Concession Agreement. adjustment of fees under the third category is not subject to MIAA regulation. There is an obvious relaxation
Government of the liabilities of PIATCO in the event of the latter's
. check-in-counter rentals and porterage fees shall be allowed only once every two years and in accordance with the Parametric Formula attached hereto as Annex F. the equivalent provision under the Agreement reads: Section 6. gives PIATCO an added benefit which was not available at the time of bidding. b.42 However. xxx xxx xxx 1997 Concession
of the extent of control and regulation by MIAA with respect to the particular fees that may be charged by PIATCO. Moreover. under Section 6.03 of the draft Concession Agreement. aircraft tacking fees. Finally. except terminal fees. in this respect. all that MIAA can do is to require PIATCO to explain and justify the fees set by PIATCO. 41 as shown earlier. i. under the 1997 Concession Agreement. Moreover. with respect to (1) vehicular parking fee. While the vehicular parking fee.03. When taken as a whole." 38 Thus. The implication of the reduced number of fees that are subject to MIAA approval is best appreciated in relation to fees included in the second category identified above.e. porterage fee and greeter/well wisher fee constitute Non-Public Utility Revenues of Concessionaire. The first adjustment shall be made prior to the In-Service Date of the Terminal. Periodic Adjustment in Fees and Charges. the changes under the 1997 Concession Agreement with respect to reduction in the types of fees that are subject to MIAA regulation and the relaxation of such regulation with respect to other fees are significant amendments that substantially distinguish the draft Concession Agreement from the 1997 Concession Agreement. shall be contingent only on the conformity of the adjustments with the above said parametric formula. further.39 On the other hand. Under the 1997 Concession Agreement. rentals and airline offices. with respect to the third category of fees that may be imposed and collected by PIATCO. The full text of said provision is quoted below: Section 6. that such approval of the MIAA.01 if in its judgment the users of the airport shall be deprived of a free option for the services they cover. periodic adjustment of once every two years in accordance with a prescribed parametric formula and effective only upon written approval by MIAA. rentals from airline offices and porterage fees are no longer subject to MIAA regulation. ground handling fees. Such regulation may be made by periodic adjustment and is effective only upon written approval of MIAA.. Adjustments of all other fees imposed and collected by PIATCO are entirely within its control. GRP may intervene and require Concessionaire to explain and justify the fee it may set from time to time. This classification is significant because under the 1997 Concession Agreement. the same is further subject to "Interim Adjustments" not previously stipulated in the draft Concession Agreement. under the 1997 Concession Agreement. Further. Assumption by the
(c) Concessionaire shall at all times be judicious in fixing fees and charges constituting Non-Public Utility Revenues in order to ensure that End Users are not unreasonably deprived of services. The MIAA reserves the right to regulate under the foregoing terms and conditions the lobby and vehicular parking fees and other new fees and charges as contemplated in paragraph 2 of Section 6. terminal fees are not included in the types of fees that may be subject to "Interim Adjustment. Provided. no such stipulation was included." except terminal fees. under the 1997 Concession Agreement. Adjustments in the aircraft parking fees.e. In the draft Concession Agreement.(4) Terminal Fees. It cannot be denied that under the 1997 Concession Agreement only "Public Utility Revenues" are subject to MIAA regulation." 43 Finally. vehicular parking fee is subject to MIAA regulation and approval under the second paragraph of Section 6. clearly gives PIATCO more favorable terms than what was available to other bidders at the time the contract was bidded out. groundhandling fees. It is not very difficult to see that the changes in the 1997 Concession Agreement translate to direct and concrete financial advantages for PIATCO which were not available at the time the contract was offered for bidding. "Public Utility Revenues" are subject to an "Interim Adjustment" of fees upon the occurrence of certain extraordinary events specified in the agreement..40 Thus. are denominated in US Dollars 44 while payments to the Government are in Philippine Pesos. However. with respect to terminal fees.03 Periodic Adjustment in Fees and Charges. under Section 6. the change in the currency stipulated for "Public Utility Revenues" under the 1997 Concession Agreement. under the draft Concession Agreement. The 1997 Concession Agreement. if in the reasonable opinion of GRP the said fees have become exorbitant resulting in the unreasonable deprivation of End Users of such services. new fees and charges that may be imposed by PIATCO which have not been previously imposed or collected at the Ninoy Aquino International Airport Passenger Terminal I. under the 1997 Concession Agreement. fees which PIATCO may adjust whenever it deems necessary without need for consent of DOTC/MIAA are "Non-Public Utility Revenues" and is defined as "all other income not classified as Public Utility Revenues derived from operations of the Terminal and the Terminal Complex.03 of the draft Concession Agreement MIAA has reserved the right to regulate the same under the same conditions that MIAA may regulate fees under the first category.03 thereof while porterage fee is covered by the first paragraph of the same provision. In the draft Concession Agreement. (2) porterage fee and (3) greeter/well wisher fee. while being effectively insulated from the detrimental effects of exchange rate fluctuations.
competitive public bidding aims to protect the public interest by giving the public the best possible advantages through open competition. In view of the above discussion. by written notice. compliance by the project proponent of its undertakings therein would involve a substantial amount of investment. or (ii) allow the Unpaid Creditors.. reimbursements and other related expenses. If the concession company should elect to designate an operator for the Development Facility. In fact. loaned or advanced funds actually used for the Project. argues that the parties to the bidding procedure acknowledge that the draft Concession Agreement is subject to amendment because the Bid Documents permit financing or borrowing." default by PIATCO of its loans used to finance the NAIA IPT III project triggers the occurrence of certain events that leads to the assumption by the Government of the liability for the loans . the 1997 Concession Agreement provides: Section 4. acting in good faith and with due diligence. especially in this case which involves the construction. (c) If GRP should. Expectedly. or designate a qualified operator acceptable to GRP to operate the Development Facility. including all interests. i. and further including amounts owed by Concessionaire to its suppliers. and (3) a basis for the exact comparison of bids. this circumstance is dependent on the existence and availability of a qualified operator who is willing to take over the rights and obligations of PIATCO under the contract. GRP shall. the latter shall form and organize a concession company qualified to take over the operation of the Development Facility. Provided that if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and Concessionaire written notice of its choice. courts should not hesitate to strike down said contract in its entirety for violation of public policy on public bidding. Without going into the validity of this provision at this juncture. an option that was not made available in the draft Concession Agreement.04 Assignment.47 Any government action which permits any substantial variance between the conditions under which the bids are invited and the contract executed after the award thereof is a grave abuse of discretion amounting to lack or excess of jurisdiction which warrants proper judicial action.04 of the 1997 Concession Agreement may be considered a form of security for the loans PIATCO has obtained to finance the project. the concession company shall in good faith identify and designate a qualified operator acceptable to GRP within one hundred eighty (180) days from receipt of GRP's written notice. However. If the concession company. allow the Unpaid Creditors to be substituted as concessionaire. (2) opportunity for competition. Be that as it may. either (i) take over the Development Facility and assume the Attendant Liabilities. A strict adherence on the principles. the Unpaid Creditors and Concessionaire shall immediately inform GRP in writing of such default. By its very nature and characteristic. charges. This financial advantage is a significant modification that translates to better terms and conditions for PIATCO.04 in relation to the definition of "Attendant Liabilities. likewise under the terms and conditions of this Agreement. suffice it to state that Section 4. if qualified. Under the above quoted portions of Section 4. Only in one
. nowhere in the said contract does default of PIATCO's loans figure in the agreement. is unable to designate a qualified operator within the aforesaid period. this Court maintains that amendments to the contract bidded upon should always conform to the general policy on public bidding if such procedure is to be faithful to its real nature and purpose. loaned or advanced funds for the NAIA IPT III project does not result in the assumption by the Government of these liabilities. xxx xxx xxx
instance may the Government escape the assumption of PIATCO's liabilities. The term "Attendant Liabilities" under the 1997 Concession Agreement is defined as: Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the books of the Concessionaire as owing to Unpaid Creditors who have provided. associated fees. however. when the Government so elects and allows a qualified operator to take over as Concessionaire. within one hundred eighty (180) Days from receipt of the joint written notice of the Unpaid Creditors and Concessionaire. They claim that it was the lenders who proposed the amendments to the draft Concession Agreement which resulted in the 1997 Concession Agreement. then GRP shall at the end of the 180-day period take over the Development Facility and assume Attendant Liabilities. However. contractors and sub-contractors. the contract signed by the government and the contract-awardee is an entirely different contract from the contract bidded.04 is an important amendment to the 1997 Concession Agreement because it grants PIATCO a financial advantage or benefit which was not previously made available during the bidding process. as in this case. PIATCO. a circumstance that is not entirely within the control of the Government. and the default has resulted in the acceleration of the payment due date of the Attendant Liability prior to its stated date of maturity. A regulation of the matter which excludes any of these factors destroys the distinctive character of the system and thwarts the purpose of its adoption. 45 It has been held that the three principles in public bidding are (1) the offer to the public. Public bidding is a standard practice for procuring government contracts for public service and for furnishing supplies and other materials. to be substituted as concessionaire and operator of the Development Facility in accordance with the terms and conditions hereof. to curtail favoritism in the award of government contracts and avoid suspicion of anomalies and it places all bidders in equal footing.e. penalties. It is therefore inevitable for the awardee of the contract to seek alternate sources of funds to support the project. Thus. Section 4. the fact that the foregoing substantial amendments
(b) In the event Concessionaire should default in the payment of an Attendant Liability. It aims to secure for the government the lowest possible price under the most favorable terms and conditions. Such default does not directly result in any concomitant right or obligation in favor of the Government. rules and regulations on public bidding must be sustained if only to preserve the integrity and the faith of the general public on the procedure. requirements of financing and borrowing notwithstanding. surcharges. operation and maintenance of the NAIA IPT III.default thereof Under the draft Concession Agreement. indemnities. GRP shall be deemed to have elected to take over the Development Facility with the concomitant assumption of Attendant Liabilities. 46 These are the basic parameters which every awardee of a contract bidded out must conform to. We agree that it is not inconsistent with the rationale and purpose of the BOT Law to allow the project proponent or the winning bidder to obtain financing for the project. default by PIATCO of any of its obligations to creditors who have provided. upon a concrete showing that.
reimbursements and other related expenses. penalties. It is of no moment that the relevant sections are subsumed under the title of "assignment". which is to allow PIATCO's unpaid creditors operate NAIA IPT III. subsidy and equity by the government in these projects are strictly prohibited. surcharges.53 This is but logical for if the government would in the end still be at a risk of paying the debts incurred by the private entity in the BOT projects. Section 4. indemnities. 49 These amounts include "all interests. however. If the concession company. the latter shall form and organize a concession company qualified to takeover the operation of the Development Facility. charges. that if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and Concessionaire written notice of its choice. Section 4. associated fees. direct guarantee. This is why private sector resources are being tapped in order to finance these projects. III Direct Government Guarantee Article IV. The fact that the ARCA superseded the 1997 Concession Agreement did not cure this fatal defect. Section 2(n) of the BOT Law defines direct guarantee as follows:
(b) In the event Concessionaire should default in the payment of an Attendant Liability. is unable to designate a qualified operator within the aforesaid period. associated fees. Section 1. of the 1997 Concession Agreement provides: Section 4. if qualified to be substituted as concessionaire and operator of the Development facility in accordance with the terms and conditions hereof. allow the Unpaid Creditors to be substituted as concessionaire. Article IV. and is in fact encouraged to do so by way of incentives. loaned or advanced funds actually used for the Project. As such. One of the main impetus for the enactment of the BOT Law is the lack of government funds to construct the infrastructure and development projects necessary for economic growth and development. in relation to Article 1. Clearly by providing that the Government "assumes" the attendant liabilities. surcharges. The BOT law allows the private sector to participate. It is not difficult to see that the amendments on (1) the types of fees or charges that are subject to MIAA regulation or control and the extent thereof and (2) the assumption by the Government. indemnities. that even if the Government chooses the second option.04(c). These amendments convert the 1997 Concession Agreement to an entirely different agreement from the contract bidded out or the draft Concession Agreement. reimbursements and other related expenses. This is due to the fact that the Government would only be free from assuming PIATCO's debts if the unpaid creditors would be able to designate a qualified operator within the period provided for in the contract. either (i) take over the Development Facility and assume the Attendant Liabilities. Provided. and the default resulted in the acceleration of the payment due date of the Attendant Liability prior to its stated date of maturity. the Government's assumption of liability is virtually out of its control . The amendments discussed above present new terms and conditions which provide financial benefit to PIATCO which may have altered the technical and financial parameters of other bidders had they known that such terms were available.were made on the 1997 Concession Agreement renders the same null and void for being contrary to public policy .06. the concession company shall in good faith identify and designate a qualified operator acceptable to GRP within one hundred eighty (180) days from receipt of GRP's written notice. acting in good faith and with due diligence. by written notice. GRP shall within one hundred eighty (180) days from receipt of the joint written notice of the Unpaid Creditors and Concessionaire.04(b) and (c). Attendant Liabilities
(n) Direct government guarantee — An agreement whereby the government or any of its agencies or local government units assume responsibility for the repayment of debt directly incurred by the project proponent in implementing the project in case of a loan default. 51 In effect.06. whatever option the Government chooses to take in the event of PIATCO's failure to fulfill its loan obligations. and further including amounts owed by Concessionaire to its suppliers. The provisions providing for direct government guarantee which is prohibited by law is clear from the terms thereof. which consists of PIATCO's unpaid debts. or (ii) allow the Unpaid Creditors."50 This obligation of the Government to pay PIATCO's creditors upon PIATCO's default would arise if the Government opts to take over NAIA IPT III.04 Assignment xxx xxx xxx
Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the books of the Concessionaire as owing to Unpaid Creditors who have provided. under certain conditions.06. then GRP shall at the end of the 180-day period take over the Development Facility and assume Attendant Liabilities . It should be noted. then the purpose of the law is subverted. These amendments cannot be taken as merely supplements to or implementing provisions of those already existing in the draft Concession Agreement. of the
. the Government is still at a risk of being liable to PIATCO's creditors should the latter be unable to designate a qualified operator within the prescribed period. availability and willingness of a qualified operator. the Unpaid Creditors and Concessionaire shall immediately inform GRP in writing of such default. likewise under the terms and conditions of this Agreement. including all interests. Thus. is obligated to pay "all amounts recorded and from time to time outstanding from the books" of PIATCO which the latter owes to its creditors. penalties. (c) If GRP. or designate a qualified operator acceptable to GRP to operate the Development Facility. such as minimizing the unstable flow of returns. GRP shall be deemed to have elected to take over the Development Facility with the concomitant assumption of Attendant Liabilities . The above contractual provisions constitute a direct government guarantee which is prohibited by law. the Government is still at a risk of assuming PIATCO's outstanding loans. in the event that PIATCO defaults in its loan obligations. the 1997 Concession Agreement provided for a direct government guarantee for the debts incurred by PIATCO in the implementation of the NAIA IPT III project. in relation to Article I. The Government under the circumstances provided for in the 1997 Concession Agreement is at the mercy of the existence. contractors and sub-contractors. of the liabilities of PIATCO directly translates concrete financial advantages to PIATCO that were previously not available during the bidding process .52 provided that the government would not have to unnecessarily expend scarcely available funds for the project itself. …. charges. 48 It is clear from the above-quoted provisions that Government. If the concession company should elect to designate an operator for the Development Facility. Section 1.
should the latter fail to appoint a qualified nominee or transferee who will take the place of PIATCO. upon transfer of NAIA IPT III to the Government. Should the Senior Lenders fail to make such an appointment. contractors and subcontractors. would be merely notified by the Senior Lenders of the same and it is the Senior Lenders who are authorized to appoint a qualified nominee or transferee. but is not limited to. Notwithstanding Section 8. The amount of PIATCO's debt that the Government would have to pay as a result of PIATCO's default in its loan obligations -. in the present case. Attendant liabilities as defined in the ARCA includes all amounts owed or thereafter may be owed by PIATCO not only to the Senior Lenders with whom PIATCO has defaulted in its loan obligations but to all other persons who may have loaned. As such the Government is virtually at the mercy of PIATCO (that it would not default on its loan obligations to its Senior Lenders). xxx xxx
. however. to the following parameters: xxx xxx xxx
(iv) If the Concessionaire [PIATCO] is in default under a payment obligation owed to the Senior Lenders.06. interest. or with an agent of such Senior Lenders (which agreement shall be subject to the approval of the Bangko Sentral ng Pilipinas). and without prejudice to any other rights of the Senior Lenders or any Senior Lenders' agent may have (including without limitation under security interests granted in favor of the Senior Lenders). associated fees.54 It is clear from the foregoing contractual provisions that in the event that PIATCO fails to fulfill its loan obligations to its Senior Lenders. charges. charges. in such form as may be reasonably acceptable to both GRP and Senior Lenders. whether payable at maturity. xxx xxx xxx
(vi) if the Senior Lenders. then at the end thereof the Development Facility [NAIA Terminal 3] shall be transferred by the Concessionaire [PIATCO] to GRP or its designee and GRP shall make a termination payment to Concessionaire [PIATCO] equal to the Appraised Value (as hereinafter defined) of the Development Facility [NAIA Terminal 3] or the sum of the Attendant Liabilities. are unable to designate a nominee or effect a transfer in terms and conditions satisfactory to the Senior Lenders within one hundred eighty (180) days after giving GRP notice as referred to respectively in (iv) or (v) above. the Government is then automatically obligated to "directly deal and negotiate" with the Senior Lenders regarding NAIA IPT III. . The only way the Government would not be liable for PIATCO's debt is for a qualified nominee or transferee to be appointed in place of PIATCO to continue the construction. . then GRP and the Senior Lenders shall endeavor in good faith to enter into any other arrangement relating to the Development Facility [NAIA Terminal 3] (other than a turnover of the Development Facility [NAIA Terminal 3] to GRP) within the following one hundred eighty (180) days. and other related expenses . This "pre-condition". or advanced funds or provided financial facilities to Concessionaire [PIATCO] for the Project [NAIA Terminal 3]. the conditions that would make the Government liable for PIATCO's debts is triggered by PIATCO's own default of its loan obligations to its Senior Lenders to which loan contracts the Government was never a party to. this Agreement shall be deemed terminated upon the transfer of the Development Facility [NAIA Terminal 3] to GRP pursuant hereto. without limitation. the ARCA still obligates the Government to pay any and all amounts owed by PIATCO to its lenders in connection with NAIA IPT III. and as a result thereof the Senior Lenders have become entitled to accelerate the Senior Loans. will not take the contract out of the ambit of a direct guarantee by the government as the existence. interest. advances and obligations arising
(c) GRP agrees with Concessionaire (PIATCO) that it shall negotiate in good faith and enter into direct agreement with the Senior Lenders. "all principal. suppliers. If the Senior Lenders and the Government are unable to enter into an agreement after the prescribed period. The proscription against government guarantee in any form is one of the policy considerations behind the BOT Law. charges and expenses of any agents or trustees of such persons or entities). the Senior Lenders shall have the right to notify GRP of the same. reimbursements. advanced funds or provided any other type of financial facilities to PIATCO for NAIA IPT III. by acceleration or otherwise. upon PIATCO's default. if greater . all principal.01(c) hereof. inter alia. the Government is obligated to directly negotiate and enter into an agreement relating to NAIA IPT III with the Senior Lenders. to either in good faith identify and designate a nominee which is qualified under sub-clause (viii)(y) below to operate the Development Facility [NAIA Terminal 3] or transfer the Concessionaire's [PIATCO] rights and obligations under this Agreement to a transferee which is qualified under sub-clause (viii) below. Worse. Clearly." 55 It is clear from the foregoing that the ARCA provides for a direct guarantee by the government to pay PIATCO's loans not only to its Senior Lenders but all other entities who provided PIATCO funds or services upon PIATCO's default in its loan obligation with its Senior Lenders.ARCA provides: Section 4. loaned. operation and maintenance of NAIA IPT III. If no agreement relating to the Development Facility [NAIA Terminal 3] is arrived at by GRP and the Senior Lenders within the said 180-day period. including. the ARCA obligates the Government to pay for all loans. the Government must then pay PIATCO. xxx Section 1.04 Security xxx xxx xxx
and other related expenses (including the fees. should the conditions as stated in the contract occur. by acceleration or otherwise. associated fees. termination payment equal to the appraised value of the project or the value of the attendant liabilities whichever is greater. acting in good faith and using reasonable efforts. The Government was not even given an option as to what course of action it should take in case PIATCO defaulted in the payment of its senior loans. the Senior Lenders (that they would appoint a qualified nominee or transferee or agree to some other arrangement with the Government) and the existence of a qualified nominee or transferee who is able and willing to take the place of PIATCO in NAIA IPT III.in case no qualified nominee or transferee is appointed by the Senior Lenders and no other agreement relating to NAIA IPT III has been reached between the Government and the Senior Lenders -. and further including amounts owed by Concessionaire [PIATCO] to its professional consultants and advisers. with regard. The fact that the Government's obligation to pay PIATCO's lenders for the latter's obligation would only arise after the Senior Lenders fail to appoint a qualified nominee or transferee does not detract from the fact that. whether payable at maturity.includes. availability and willingness of a qualified nominee or transferee is totally out of the government's control. The Government. Attendant Liabilities Attendant Liabilities refer to all amounts in each case supported by verifiable evidence from time to time owed or which may become owing by Concessionaire [PIATCO] to Senior Lenders or any other persons or entities who have provided. reimbursements.
GRP shall. During such take over by GRP.01 [Arbitration]. during the emergency and under reasonable terms prescribed by it. …. insistent."57 The BOT Law clearly and strictly prohibits direct government guarantee. the State in effecting the temporary takeover is exercising its police power. then its inclusion in the contract executed after the said proposal has been accepted is likewise sufficient to invalidate the contract itself. any loss or damage to the Development Facility. This Court has long and consistently adhered to the legal maxim that those that cannot be done directly cannot be done indirectly. 58 To declare the PIATCO contracts valid despite the clear statutory prohibition against a direct government guarantee would not only make a mockery of what the BOT Law seeks to prevent -.but would also render the BOT Law useless for what it seeks to achieve –. provided." 60 The duration of the emergency itself is the determining factor as to how long the temporary takeover by the government would last. 65 Thus. If the parties cannot agree on the reasonable compensation of Concessionaire. the matter shall be resolved in accordance with Section 10. calamities or national disasters. by mere contractual stipulation. (c) In the event the development Facility or any part thereof and/or the operations of Concessionaire or any part thereof. V
. and (3) the government agency or local government unit has invited by publication other interested parties to a public bidding and conducted the same. Clearly. subsidy or equity is required.10 (c) of the 1997 Concession Agreement provides: Section 5. hostilities or national emergency. be countenanced particularly in this instance where the government is exposed to the risk of shouldering hundreds of million of dollars in debt.62 PIATCO cannot. Concessionaire shall be entitled to reasonable compensation for the duration of the temporary take over by GRP. the State may. that upon termination of war. could ill-afford to finance at this point in time. if the temporary take over should occur at the time when Concessionaire is still servicing debts owed to project lenders). operation and maintenance of infrastructure and development projects"59 which are necessary for national growth and development but which the government.which is to expose the government to the risk of incurring a monetary obligation resulting from a contract of loan between the project proponent and its lenders and to which the Government is not a party to -. but not strikes "unless it is of such proportion that would paralyze government service. or declaration concerning or relating to acquisition. The BOT Law and its implementing rules provide that in order for an unsolicited proposal for a BOT project may be accepted. therefore. contravene the Constitutional provision on temporary government takeover and obligate the government to pay "reasonable cost for the use of the Terminal and/or Terminal Complex. The basic rules of justice and fair play alone militate against such an occurrence and must not. (which is in the amount at least equal to the debt service requirements of Concessionaire. the
term "national emergency" was defined to include threat from external aggression. subsidy or equity will "necessarily disqualify a proposal from being treated and accepted as an unsolicited proposal.10 Temporary Take-over of operations by GRP. the Concession Period shall be suspended. the following conditions must first be met: (1) the project involves a new concept in technology and/or is not part of the list of priority projects. whether permanent or temporary. notification. to temporarily take over the operation of any business affected with public interest. be allowed to later on be inserted in the contract resulting from the said proposal. 56 The failure to meet any of the above conditions will result in the denial of the proposal. and illimitable of powers. IV Temporary takeover of business affected with public interest Article XII. Section 5. Police power is the "most essential. This is a form of direct government guarantee." It is the welfare and interest of the public which is the paramount consideration in determining whether or not to temporarily take over a particular business. Article V. Section 17 of the 1987 Constitution provides: Section 17. and other consequential damages. which compensation shall take into account the reasonable cost for the use of the Terminal and/or Terminal Complex. (2) no direct government guarantee. and should not. It stands to reason therefore that if a proposal can be denied by reason of the existence of direct government guarantee. immediately take over the operations of the Terminal and/or the Terminal Complex. section 17 of the 1987 Constitution envisions a situation wherein the exigencies of the times necessitate the government to "temporarily take over or direct the operation of any privately owned public utility or business affected with public interest."64 Its exercise therefore must not be unreasonably hampered nor its exercise be a source of obligation by the government in the absence of damage due to arbitrariness of its exercise. at which time.61 The temporary takeover by the government extends only to the operation of the business and not to the ownership thereof. This in effect would make the Government liable for PIATCO's loans should the conditions as set forth in the ARCA arise."63 Article XII. temporarily take over or direct the operation of any privately owned public utility or business affected with public interest. or on the liability of GRP as aforesaid. likewise. by written notice to Concessionaire. and in the exercise of its police power. the Concession period shall commence to run again. seizure or appropriation by GRP in times of war or national emergency. requiring the government to pay reasonable compensation for the reasonable use of the property pursuant to the operation of the business contravenes the Constitution. unfortunately. become the subject matter of or be included in any notice. subsidy and equity in unsolicited proposals that the mere inclusion of a provision to that effect is fatal and is sufficient to deny the proposal. claim just compensation for the use of the said business and its properties as the temporary takeover by the government is in exercise of its police power and not of its power of eminent domain. The above provision pertains to the right of the State in times of national emergency.to make use of the resources of the private sector in the "financing. A prohibited provision. when the public interest so requires. The private entity-owner affected by the temporary takeover cannot. As such the government is not required to compensate the private entity-owner of the said business as there is no transfer of ownership. Any amount determined to be payable by GRP to Concessionaire shall be offset from the amount next payable by Concessionaire to GRP. In the 1986 Constitutional Commission. In times of national emergency. It is further provided that the presence of direct government guarantee.out of financial facilities extended to PIATCO for the implementation of the NAIA IPT III project should PIATCO default in its loan obligations to its Senior Lenders and the latter fails to appoint a qualified nominee or transferee. the inclusion of which would result in the denial of a proposal cannot. the operations shall be returned to Concessionaire.
79 it is MIAA's responsibility to ensure that whoever by contract is given the right to operate NAIA IPT III will do so within the bounds of the law and with due regard to the rights of third parties and above all. the Government. Section 3. including the cost of litigation and the reasonable fees paid or payable to Concessionaire's counsel of choice."66 The 1987 Constitution strictly regulates monopolies. or control the sale of a particular commodity. and even provides for their prohibition if public interest so requires.72 Both the 1997 Concession Agreement and the ARCA further provide that. the counsel for the petitioners-inintervention for G. a determination must first be made as to whether public interest requires a monopoly.74 This is in accord with the Constitutional mandate that a monopoly which is not prohibited must be regulated. Thus. PIATCO cannot. the efficient functioning of NAIA IPT III is imbued with public interest. through MIAA. the affected service providers in the cases at bar. PIATCO.01 Concession Period xxx xxx xxx
(e) GRP confirms that certain concession agreements relative to certain services and operations currently being undertaken at the Ninoy Aquino International Airport passenger Terminal I have a validity period extending beyond the InService Date. upon commencement of PIATCO's operation of NAIA IPT III. as well as the other terms and conditions thereof. Lazaro78 whose contracts consist of temporary hold-over permits. cannot be violated. render a valid and binding contract nugatory. through the MIAA. Clearly. The state shall regulate or prohibit monopolies when the public interest so requires. PIATCO. however. Section 19 of the 1987 Constitution states: Sec. manufacture a particular article. Terminals 1 and 2 of NAIA would cease to function as international passenger terminals. confirms that these services and operations shall not be carried over to the Terminal and the Concessionaire is under no legal obligation to permit such carry-over except through a separate agreement duly entered into with Concessionaire. thru the MIAA. Nonetheless.Regulation of Monopolies A monopoly is "a privilege or peculiar advantage vested in one or more persons or companies. PIATCO's right to operate NAIA IPT III cannot also violate the rights of third parties. GRP undertakes and hereby holds Concessionaire free and harmless on full indemnity basis from and against any loss and/or any liability resulting from any such litigation. the interest of the public. by the mere expedient of claiming an exclusive right to operate. 2002. Clark Special Economic Zone ("CSEZ") and in Laoag City. has the right and the duty to ensure that it is done in accord with public interest. In contrast to the arrastre and stevedoring service providers in the case of Anglo-Fil Trading Corporation v. the privilege given to PIATCO is subject to reasonable regulation and supervision by the Government through the MIAA. in view of the exclusive right granted to PIATCO. In fine. No. 70 The right granted to PIATCO to exclusively operate NAIA IPT III would be for a period of twenty-five (25) years from the InService Date71 and renewable for another twenty-five (25) years at the option of the government. In entering into a Build–Operate-andTransfer contract for the construction. cannot require the Government to break its contractual obligations to the service providers.73 The operation of an international passenger airport terminal is no doubt an undertaking imbued with public interest. The right granted to the public utility may be exclusive but the exercise of the right cannot run riot. As monopolies are subject to abuses that can inflict severe prejudice to the public. 68 This is with the exception of already existing international airports in Luzon such as those located in the Subic Bay Freeport Special Economic Zone ("SBFSEZ"). does not prevent MIAA to use Terminals 1 and 2 as domestic passenger terminals or in any other manner as it may deem appropriate except those activities that would compete with NAIA IPT III in the latter's operation as an international passenger terminal. is granted the "exclusive right to operate a commercial international passenger terminal within the Island of Luzon" at the NAIA IPT III. operation and maintenance of NAIA IPT III. they are subject to a higher level of State regulation than an ordinary business undertaking. whose period of effectivity. 19. The operation of said public utility can not be done in
an arbitrary manner to the detriment of the public which it seeks to serve. Article XII. the concession contracts of the service providers currently servicing Terminals 1 and 2 would no longer be renewed and those concession contracts whose expiration are subsequent to the In-Service Date would cease to be effective on the said date. including NAIA IPT III."76 the same does not mean that Government must completely surrender its sovereign power to protect public interest in the operation of a public utility as a monopoly. VI
. whether private or public.01(e) of the 1997 Concession Agreement and the ARCA provide: 3.77 We hold that while the service providers presently operating at NAIA Terminal 1 do not have an absolute right for the renewal or the extension of their respective contracts. One contract remains valid until 2008 and the other until 2010.67 Nonetheless. During the oral arguments on December 10. while PIATCO may be authorized to exclusively operate NAIA IPT III as an international passenger terminal. the department to which MIAA is attached. This. have a valid and binding contract with the Government. by law and certainly not by contract. No combinations in restraint of trade or unfair competition shall be allowed. all such amounts shall be fully deductible by way of an offset from any amount which the Concessionaire is bound to pay GRP under this Agreement. monopolies are not per se prohibited by the Constitution but may be permitted to exist to aid the government in carrying on an enterprise or to aid in the performance of various services and functions in the interest of the public .R. consisting in the exclusive right (or power) to carry on a particular business or trade. which is the government agency authorized to operate the NAIA complex. those contracts whose duration extends beyond NAIA IPT III's In-ServiceDate should not be unduly prejudiced. In the cases at bar. These contracts must be respected not just by the parties thereto but also by third parties. in this case PIATCO. GRP through DOTC/MIAA.69 As such. as well as DOTC. In the event Concessionaire becomes involved in any litigation initiated by any such concessionaire or operator. 155001 stated that there are two service providers whose contracts are still existing and whose validity extends beyond the In-Service Date. the government has determined that public interest would be served better if private sector resources were used in its construction and an exclusive right to operate be granted to the private entity undertaking the said project. The provisions of the 1997 Concession Agreement and the ARCA did not strip government. of its right to supervise the operation of the whole NAIA complex. As the primary government agency tasked with the job. under the 1997 Concession Agreement and the ARCA.75 While it is the declared policy of the BOT Law to encourage private sector participation by "providing a climate of minimum government regulations.
Further. WHEREFORE. this Court rules that in view of the absence of the requisite financial capacity of the Paircargo Consortium.04(b) and (c) in relation to Section 1.06 of the ARCA. predecessor of respondent PIATCO. the award by the PBAC of the contract for the construction. the 1997 Concession Agreement. the 1997 Concession Agreement is similarly null and void for being contrary to public policy. operation and maintenance of the NAIA IPT III is null and void. considering that the 1997 Concession Agreement contains material and substantial amendments. which amendments had the effect of converting the 1997 Concession Agreement into an entirely different agreement from the contract bidded upon.06 of the 1997 Concession Agreement and Section 4. being accessory contracts to the ARCA. The provisions under Sections 4. are likewise null and void. the BOT Law and its Implementing Rules and Regulations are also null and void.04(c) in relation to Section 1. the Amended and Restated Concession Agreement and the Supplements thereto are set aside for being null and void.CONCLUSION In sum.
. SO ORDERED. which constitute a direct government guarantee expressly prohibited by. The Supplements. among others.