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THIRD DIVISION

UNIWIDE SALES REALTY AND
RESOURCES CORPORATION,
Petitioner,

G.R. No. 126619
Present:
QUISUMBING, J.,
Chairperson,
CARPIO,
CARPIO MORALES
TINGA, and
VELASCO, JR., JJ.

- versus TITAN-IKEDA CONSTRUCTION
AND DEVELOPMENT CORPORATION,
Respondent.

Promulgated:
December 20, 2006

x ------------------------------------------------------------------------------------x
DECISION
TINGA, J.:

This Petition for Review on Certiorari under Rule 45 seeks the partial
reversal of the 21 February 1996 Decision[1] of the Court of Appeals Fifteenth
Division

in

CA-G.R.

SP

No.

37957

which

modified

the 17

April

1995 Decision[2] of the Construction Industry Arbitration Commission (CIAC).
The case originated from an action for a sum of money filed by TitanIkeda Construction and Development Corporation (Titan) against Uniwide
Sales Realty and Resources Corporation (Uniwide) with the Regional Trial
Court (RTC), Branch 119,[3]Pasay City arising from Uniwide’s non-payment of
certain claims billed by Titan after completion of three projects covered by
agreements they entered into with each other. Upon Uniwide’s motion to

dismiss/suspend proceedings and Titan’s open court manifestation agreeing
to the suspension, Civil Case No. 98-0814 was suspended for it to undergo
arbitration.[4] Titan’s complaint was thus re-filed with the CIAC.[5] Before the
CIAC, Uniwide filed an answer which was later amended and re-amended,
denying the material allegations of the complaint, with counterclaims for
refund of overpayments, actual and exemplary damages, and attorney’s
fees. The agreements between Titan and Uniwide are briefly described
below.

PROJECT 1.[6]
The first agreement (Project 1) was a written “Construction Contract”
entered into by Titan and Uniwide sometime in May 1991 whereby Titan
undertook

to

construct

and Administration Building in

Uniwide’s
Libis, Quezon

Warehouse
City for

Club
a

fee

of P120,936,591.50, payable in monthly progress billings to be certified to by
Uniwide’s representative.[7] The parties stipulated that the building shall be
completed not later than 30 November 1991. As found by the CIAC, the
building was eventually finished on 15 February 1992[8] and turned over to
Uniwide.
PROJECT 2.
Sometime in July 1992, Titan and Uniwide entered into the second
agreement (Project 2) whereby the former agreed to construct an additional
floor and to renovate the latter’s warehouse located at the EDSA Central
Market Area in Mandaluyong City. There was no written contract executed
between the parties for this project. Construction was allegedly to be on the

basis of drawings and specifications provided by Uniwide’s structural
engineers. The parties proceeded on the basis of a cost estimate
ofP21,301,075.77 inclusive of Titan’s 20% mark-up. Titan conceded in its
complaint to having received P15,000,000.00 of this amount. This project
was completed in the latter part of October 1992 and turned over to Uniwide.
PROJECT 3.[9]
The parties executed the third agreement (Project 3) in May 1992. In a
written “Construction Contract,” Titan undertook to construct the Uniwide
Sales

Department

Store

Building

in Kalookan City for

the

price

of P118,000,000.00 payable in progress billings to be certified to by
Uniwide’s representative.[10] It was stipulated that the project shall be
completed not later than 28 February 1993. The project was completed and
turned over to Uniwide in June 1993.
Uniwide asserted in its petition that: (a) it overpaid Titan for
unauthorized additional works in Project 1 and Project 3; (b) it is not liable to
pay the Value-Added Tax (VAT) for Project 1; (c) it is entitled to liquidated
damages for the delay incurred in constructing Project 1 and Project 3; and
(d) it should not have been found liable for deficiencies in the defectively
constructed Project 2.
An Arbitral Tribunal consisting of a chairman and two members was
created in accordance with the CIAC Rules of Procedure Governing
Construction Arbitration. It conducted a preliminary conference with the
parties and thereafter issued a Terms of Reference (TOR) which was signed
by the parties. The tribunal also conducted an ocular inspection, hearings,
and received the evidence of the parties consisting of affidavits which were
subject to cross-examination. On 17 April 1995, after the parties submitted
their respective memoranda, the Arbitral Tribunal promulgated a Decision,
[11]

the decretal portion of which is as follows:

[Uniwide] is held liable to pay in full the VAT on this project. On the other hand.77 which is ordered to be paid to the [Titan] with 12% interest per annum commencing from 19 December 1992 until the date of payment. Branch 119.364.075. On Project 3 – Kalookan: [Uniwide] is held liable for the unpaid balance in the amount of P5.”[12] . Pasay City. 94-0814 entitled Titan-Ikeda Construction Development Corporation. judgment is hereby rendered as follows: On Project 1 – Libis: [Uniwide] is absolved of any liability for the claims made by [Titan] on this Project. Let a copy of this Decision be furnished the Honorable Aurora P. Defendant.158. [Uniwide] is held liable for the unpaid balance in the amount of P6. Navarette Recina. in Civil Case No. in such amount as may be computed by the Bureau of Internal Revenue to be paid directly thereto. Project 2 – Edsa Central: [Uniwide] is absolved of any liability for VAT payment on this project. SO ORDERED.301. Plaintiff – versus – Uniwide Sales Realty and Resources Corporation. [Titan] is absolved of any liability on the counterclaim for defective construction of this project. the same being for the account of the [Titan]. Presiding Judge. The BIR is hereby notified that [Uniwide] Sales Realty and Resources Corporation has assumed responsibility and is held liable for VAT payment on this project. This accordingly exempts Claimant Titan-Ikeda Construction and Development Corporation from this obligation.“WHEREFORE.63 which is ordered to be paid to the [Titan] with 12% interest per annum commencing from 08 September 1993 until the date of payment. pending before said court for information and proper action.

which have acquired expertise because their jurisdiction is confined to specific matters. [18] we ruled that.[17] This rule. (4) one or more of the arbitrators . The issues submitted for resolution of this Court are as follows: [15] (1) Whether Uniwide is entitled to a return of the amount it allegedly paid by mistake to Titan for additional works done on Project 1. (2) there was evident partiality or corruption of the arbitrators or of any of them. As a rule. (3) Whether Uniwide is entitled to liquidated damages for Projects 1 and 3. factual findings of construction arbitrators may be reviewed by this Court when the petitioner proves affirmatively that: (1) the award was procured by corruption. but also finality. Uniwide comes to this Court via a petition for review under Rule 45. In David v. (3) the arbitrators were guilty of misconduct in refusing to hear evidence pertinent and material to the controversy. factual findings of construction arbitrators are final and conclusive and not reviewable by this Court on appeal. Construction Industry and Arbitration Commission. are generally accorded not only respect. Uniwide accordingly filed a petition for review with the Court of Appeals.[16] In particular. especially when affirmed by the Court of Appeals. fraud or other undue means. (2) Whether Uniwide is liable for the payment of the Value-Added Tax (VAT) on Project 1. Uniwide’s motion for reconsideration was likewise denied by the Court of Appeals in its assailed Resolution[14]dated 30 September 1996. Hence.Uniwide filed a motion for reconsideration of the 17 April 1995 decision which was denied by the CIAC in its Resolution dated6 July 1995. findings of fact of administrative agencies and quasi-judicial bodies. [13] which rendered the assailed decision on21 February 1996. as exceptions. however admits of certain exceptions. and (4) Whether Uniwide is liable for deficiencies in Project 2.

Inc. petitioner therein failed to show any serious error of law amounting to grave abuse of discretion resulting in lack of jurisdiction on the part of the Arbitral Tribunal. that a mutual. [21] (2) when the findings of the Court of Appeals are contrary to those of the CIAC. Lim Kim Builders. Inc. in either the methods employed or the results reached by the Arbitral Tribunal. v. Inc.were disqualified to act as such under Section nine of Republic Act No.[24] we refused to review the findings of fact of the CIAC for the reason that petitioner was requiring the Court to go over each individual claim and counterclaim submitted by the parties in the CIAC. A review of the CIAC’s findings of fact would have had the effect of “setting at naught the basic objective of a voluntary arbitration and would reduce arbitration to a largely inutile institution.[19] Other recognized exceptions are as follows: (1) when there is a very clear showing of grave abuse of discretion [20] resulting in lack or loss of jurisdiction as when a party was deprived of a fair opportunity to present its position before the Arbitral Tribunal or when an award is obtained through fraud or the corruption of arbitrators. Inc. In Metro Construction.[25] we reviewed the findings of fact of the Court of Appeals because its findings on the issue of whether petitioner therein was in delay were contrary to the findings of the CIAC. DSM Construction and Development Corporation.[23] Thus. in Hi-Precision Steel Center. in disposing of the detailed claims of the respective parties. v. Inc.[22] and (3) when a party is deprived of administrative due process.” Further. final and definite award upon the subject matter submitted to them was not made. or so imperfectly executed them. or (5) the arbitrators exceeded their powers. [26] we declined to depart from the findings of the Arbitral Tribunal considering that the computations. v. Finally. in Megaworld Globus Asia. Chatham Properties. 876 and willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights of any party have been materially prejudiced... .

provided: . save when there has been a change in the plans and specifications. Uniwide asserts that Titan was not entitled to be paid this amount because the additional works were without any written authorization. we do not hesitate to inquire into these factual issues for the reason that the CIAC and the Court of Appeals.75 paid by Uniwide for additional works done on Project 1. The provision states: Art.as well as the propriety of the awards. We now proceed to discuss the issues in seriatim. It should be noted that the contracts do not contain stipulations on “additional works.481. ) 1724 of the New Civil Code as basis for its claim that it is not liable to pay for “additional works” it did not authorize or agree upon in writing. However. can neither withdraw from the contract nor demand an increase in the price on account of the higher cost of labor or materials. Uniwide cites Article (Art. in conformity with plans and specifications agreed upon with the landowner. differed in their findings.” and prior approval as a requirement before Titan could perform “additional works. The contractor who undertakes to build a structure or any other work for a stipulated price. In the present case.” Uniwide’s liability for “additional works. Payment by Mistake for Project 1 The first issue refers to the P5. only the first issue presented for resolution of this Court is a question of law while the rest are factual in nature. 1724.823. in some matters.” Nonetheless. are unquestionably factual issues that have been discussed by the Arbitral Tribunal and affirmed by the Court of Appeals.

(1)
Such change has been authorized by the
proprietor in writing; and
(2)
The additional price to be paid to the
contractor has been determined in writing by both
parties.
The Court of Appeals did take note of this provision, but deemed it
inapplicable to the case at bar because Uniwide had already paid, albeit with
unwritten reservations, for the “additional works.” The provision would have
been operative had Uniwide refused to pay for the costs of the “additional
works.” Instead, the Court of Appeals applied Art. 1423 [27] of the New Civil
Code and characterized Uniwide’s payment of the said amount as a
voluntary fulfillment of a natural obligation. The situation was characterized
as being akin to Uniwide being a debtor who paid a debt even while it knew
that it was not legally compelled to do so. As such debtor, Uniwide could no
longer demand the refund of the amount already paid.
Uniwide counters that Art. 1724 makes no distinction as to whether
payment for the “additional works” had already been made. It claims that it
had

made

the

payments,

subject

to

reservations,

upon

the

false

representation of Titan-Ikeda that the “additional works” were authorized in
writing. Uniwide characterizes the payment as a “mistake,” and not a
“voluntary” fulfillment under Art. 1423 of the Civil Code. Hence, it urges the
application, instead, of the principle of solutio indebiti under Arts. 2154[28]and
2156[29] of the Civil Code.
To be certain, this Court has not been wont to give an expansive
construction of Art. 1724, denying, for example, claims that it applies to
constructions made of ship vessels,[30] or that it can validly deny the claim for
payment of professional fees to the architect. [31] The present situation though
presents a thornier problem. Clearly, Art. 1724 denies, as a matter of right,

payment to the contractor for additional works which were not authorized in
writing by the proprietor, and the additional price of which was not
determined in writing by the parties.
Yet the distinction pointed out by the Court of Appeals is material. The
issue is no longer centered on the right of the contractor to demand payment
for additional works undertaken because payment, whether mistaken or not,
was already made by Uniwide. Thus, it would not anymore be incumbent on
Titan to establish that it had the right to demand or receive such payment.
But, even if the Court accepts Art. 1724 as applicable in this case, such
recognition does not ipso facto accord Uniwide the right to be reimbursed for
payments already made, since Art. 1724 does not effect such right of
reimbursement. It has to be understood that Art. 1724 does not preclude the
payment to the contractor who performs additional works without any prior
written authorization or agreement as to the price for such works if the
owner decides anyway to make such payment. What the provision does
preclude is the right of the contractor to insist upon payment for
unauthorized additional works.
Accordingly, Uniwide, as the owner who did pay the contractor for such
additional works even if they had not been authorized in writing, has to
establish its own right to reimbursement not under Art. 1724, but under a
different provision of law. Uniwide’s burden of establishing its legal right to
reimbursement becomes even more crucial in the light of the general
presumption contained in Section 3(f), Rule 131 of the Rules of Court that
“money paid by one to another was due to the latter.”
Uniwide undertakes such a task before this Court, citing the provisions
on solutio indebiti under Arts. 2154 and 2156 of the Civil Code. However, it is

not enough to prove that the payments made by Uniwide to Titan were “not
due” because there was no prior authorization or agreement with respect to
additional works. There is a further requirement that the payment by the
debtor was made either through mistake or under a cloud of doubt. In short,
for the provisions on solutio indebiti to apply, there has to be evidence
establishing the frame of mind of the payor at the time the payment was
made.[32]
The CIAC refused to acknowledge that the additional works on Project
1 were indeed unauthorized by Uniwide. Neither did the Court of Appeals
arrive at a contrary determination. There would thus be some difficulty for
this Court to agree with this most basic premise submitted by Uniwide that it
did not authorize the additional works on Project 1 undertaken by Titan. Still,
Uniwide does cite testimonial evidence from the record alluding to a
concession by employees of Titan that these additional works on Project 1
were either authorized or documented.[33]
Yet even conceding that the additional works on Project 1 were not
authorized or committed into writing, the undisputed fact remains that
Uniwide paid for these additional works. Thus, to claim a refund of payments
made under the principle of solutioindebiti, Uniwide must be able to establish
that these payments were made through mistake. Again, this is a factual
matter that would have acquired a mantle of invulnerability had it been
determined by both the CIAC and the Court of Appeals. However, both bodies
failed to arrive at such a conclusion. Moreover, Uniwide is unable to direct
our attention to any pertinent part of the record that would indeed establish
that the payments were made by reason of mistake.
We note that Uniwide alleged in its petition that the CIAC award in
favor of Titan in the amount P5,158,364.63 as the unpaid balance in Project

Said document which was approved by the President of Uniwide expressly indicated that the project involved was the “UNIWIDE SALES WAREHOUSE CLUB & ADMIN BLDG. if there is no provision in the contract as to who should pay the VAT.” computed on the basis of 4% ofP60. 99 and 102 of the National Internal Revenue Code. [34] Thus. Uniwide claims that the VAT was already included in the contract price for Project 1.000.400. This conclusion was drawn from an Order of Payment [37] dated 7 October 1992 wherein Titan billed Uniwide the amount of P2.[35] The contract for Project 1 is silent on which party should shoulder the VAT while the contract for Project 3 contained a provision to the effect that Uniwide is the party responsible for the payment of the VAT.3 included claims for additional works of P1.C. However. was an indication that the parties agreed to pass the VAT for Project 1 to Uniwide but based on a lower contract price..000. in the absence of a written stipulation on the matter.000. it assumed that it was the VAT for Project 3. being an indirect tax. Liability for the Value-Added Tax (VAT) The second issue takes us into an inquiry on who. Q. LIBIS. under the law.000.” The reduced base for the computation of the tax. Uniwide asserts that VAT.00 as billed by Titan for VAT. Indeed.400.00 Contract. [36] Thus.” located at “90 E.18 for which no written authorization was presented.000.214. the CIAC and the Court of Appeals found that the same was for Project 1.00 as “Value Added Tax based on P60.000. according to the Court of Appeals. may be shifted to the buyer by including it in the cash or selling price and it is entirely up to the buyer to agree or not to agree to absorb the VAT. Unfortunately. when Uniwide paid the amount of P2.400.000. it is presumed that it would be the seller. the CIAC found as follows: .00 was paid by Uniwide as VAT for Project 1. is liable for the payment of the VAT.00. AVE.Uniwide concludes. Citing Secs. RODRIGUEZ JR. this issue was not included in its memorandum as one of the issues submitted for the resolution of the Court. We agree with the conclusions of both the CIAC and the Court of Appeals that the amount of P2.087.

591.)[38] Liquidated Damages On the third issue of liquidated damages. In rejecting Uniwide’s claim for liquidated damages. VAT is paid on labor only for construction contracts since VAT had already been paid on the materials purchased. Also. Uniwide only introduced and quantified its claim for liquidated damages in its Memorandum submitted to the CIAC at the end of the arbitration proceeding. the Tribunal holds that the parties is [sic] obliged to pay only a share of the VAT payment up to P60. Since labor costs is [sic] proportionately placed at 60%-40% of the contract price.50. (2) the claim for liquidated damages was not included in the counterclaims stated in Uniwide’s answer to Titan’s complaint. which is not necessarily bound by the Rules of Court. (3) the claim was not formulated as an issue to be resolved by the CIAC in the TOR. The Court of Appeals also noted that the only .00 out of the total contract price of P120. (Emphasis supplied. the CIAC held that there is no legal basis for passing upon and resolving Uniwide’s claim for the following reasons: (1) no claim for liquidated damages arising from the alleged delay was ever made by Uniwide at any time before the commencement of Titan’s complaint.[39] and (4) no attempt was made to modify the TOR to accommodate the same as an issue to be resolved. As explained by Jimmy Gow.000. Whatever is the balance for VAT that remains to be paid on Project 1 – Libis shall remain the obligation of [Titan]. the CIAC rejected such claim while the Court of Appeals held that the matter should be left for determination in future proceedings where the issue has been made clear.936. In fact. Rule 10 of the Rules of Court.000.Without any documentary evidence than Exhibit “H” to show the extent of tax liability assumed by [Uniwide]. the Court of Appeals found that the issue has never been made concrete enough to make Titan and the CIAC aware that it will be an issue.[40] On this matter. the Court of Appeals held that the CIAC is an arbitration body. Uniwide insists that the CIAC should have applied Section 5. simplified accounting computes VAT at 4% of the contract price.

issues outside thereof may not be resolved. It cites the pertinent provisions of the written contracts which contained deadlines for liquidated damages. Uniwide also noted that the evidence show that Project 1 was completed either on 15 February 1992. As already noted in the Decision. while Project 3. the CIAC held: The Rule of Procedure Governing Construction Arbitration promulgated by the CIAC contains no provision on the application of the Rules of Court to arbitration proceedings. suppletory application is made only if it would not contravene a specific provision in the arbitration rules and the spirit thereof.[42] On this point. Rule 10 with more liberality because it was an administrative tribunal free from the rigid technicalities of regular courts. as found by the CIAC. This is for the reason that the formulation of the Terms of Reference is done with the active participation of the parties and their counsel themselves. or 12 March 1992. according to Uniwide’s President. if not the letter of the CIAC rules. The Tribunal holds that such importation of the Rules of Court provision on amendment to conform to evidence would contravene the spirit. was completed in June 1993. Furthermore. Unless the issues thus carefully formulated in the Terms of Reference were expressly showed [sic] to be amended. Hypothetically admitting that there is such a provision. the CIAC should have applied procedural rules such as Section 5. even in a suppletory capacity. “no attempt was . the ruling of the Court of Appeals on the issue of liquidated damages goes against the established judicial policy that a court should always strive to settle in one proceeding the entire controversy leaving no root or branch to bear the seeds of future litigations. According to Uniwide. as shown by Titan’s own evidence.evidence on record to prove delay in the construction of Project 1 is the testimony of Titan’s engineer regarding the date of completion of the project while the only evidence of delay in the construction of Project 3 is the affidavit of Uniwide’s President. The TOR is further required to be signed by all the parties. Uniwide asserts. their respective counsel and all the members of the Arbitral Tribunal. [41] Uniwide claims that the required evidence for an affirmative ruling on its claim is already on the record.

as noted by the Court of Appeals. Titan was not given a chance to present evidence to counter Uniwide’s claim for liquidated damages. Rule 10 of the Rules of Court. instead of carrying it to established tribunals of justice. involves the reference of a dispute to an impartial body. which parties freely consent in advance to abide by the arbitral award issued after proceedings where both parties had the opportunity to be heard. and is intended to avoid the formalities. delay. Luzon Tablante wherein he stated that Project 1 was completed on 10 March . (Emphasis supplied. In this case. Verily. The Rules of Court cannot be used to contravene the spirit of the CIAC rules. the members of which are chosen by the parties themselves. on the other hand. the CIAC cannot make a ruling on it. Uniwide alludes to an alleged judicial admission made by Engr.ever made by the [Uniwide] to modify the TOR in order to accommodate the issues related to its belated counterclaim” on this issue. especially litigation which goes through the entire hierarchy of courts. the expense and vexation of ordinary litigation.[44] As an arbitration body. a party may not be deprived of due process of law by an amendment of the complaint as provided in Section 5.”[43] Voluntary arbitration. The basic objective is to provide a speedy and inexpensive method of settling disputes by allowing the parties to avoid the formalities.”[45] Further. whose policy and objective is to “provide a fair and expeditious settlement of construction disputes through a non-judicial process which ensures harmonious and friendly relations between or among the parties. the delay. Uniwide only introduced and quantified its claim for liquidated damages in its memorandum submitted to the CIAC at the end of the arbitration proceeding. if Uniwide’s claim for liquidated damages was not raised as an issue in the TOR or in any modified or amended version of it. Thus. the CIAC can only resolve issues brought before it by the parties through the TOR which functions similarly as a pre-trial brief.) Arbitration has been defined as “an arrangement for taking and abiding by the judgment of selected persons in some disputed matter. expense and aggravation which commonly accompany ordinary litigation.

1992. Contrarily.77.000. Evidence submitted for one purpose may not be considered for any other purpose. Uniwide’s belated claim constitutes an admission that the delay was justified and implies a waiver of its right to such damages. the establishment of the mere fact of delay is not sufficient for the imposition of liquidated damages.77 for Project 2. We disagree. It is nonetheless alleged by Uniwide that Titan failed to submit any “as-built” plans for Project 2.301. It was not offered to prove the fact of delay.00 paid by Uniwide to Titan for Project 2 constitutes full payment.000. namely: (1) whether or not it was necessary for Titan to submit “as-built” plans before it can be paid by Uniwide. even assuming. The CIAC. [46] Furthermore. Uniwide further claims that Titan had substantially overcharged Uniwide for Project 2. or may be admissible for one purpose and not for another. there being uncontradicted expert testimony that the . we need to resolve four sub-issues. It must be remembered that the purpose for which evidence is offered must be specified because such evidence may be admissible for several purposes under the doctrine of multiple admissibility. held Uniwide liable for deficiency relating to Project 2 in the amount ofP6. Project 2: “as-built” plans. The testimony of Engr. as affirmed by the Court of Appeals. otherwise the adverse party cannot interpose the proper objection. such plans allegedly serving as a condition precedent for payment.075.301. It now claims that by virtue of Engr. that said testimony on the date of completion of Project 1 is admitted. and (4) whether or not Titan can be held liable for defective construction of Project 2. (2) whether or not there was overpricing of the project.075. (3) whether or not the P15. Titan had admitted that it was in delay. Tablante’s statement. overpricing. It must further be shown that delay was attributable to the contractor if not otherwise justifiable. defective construction To determine whether or not Uniwide is liable for the unpaid balance of P6. Tablante was offered only to prove that Project 1 was indeed completed. for the sake of argument.

[Uniwide]’s own architects.48 was arrived at.812. Furthermore. found the testimony of this consultant suspect and ruled that the total contract price for Project 2 isP21. Uniwide claims that. site. construction. and public welfare. the true price for Project 2 is only P7. as evidenced by the structural damage on four columns as observed on ocular inspection by the CIAC and confirmed by Titan’s project manager. The argument that said plans are required by Section 308 of Presidential Decree No. On the necessity of submitting “as-built” plans.60. health. property.075. occupancy. and maintenance” of buildings constructed and not as a requirement for payment to the contractor.075. the total project cost was P21.60. Dau Branch Project (Exhibit “2-A” for [Uniwide] and made as a common exhibit by [Titan] who had it marked at [sic] its own Exhibit “U”).750.” The submission of these plans is necessary only in furtherance of the law’s purpose by setting minimum standards and requirements to control the “location. 1098 (National Building Code) and by Section 2. The purpose of the law is “to safeguard life.11 of its Implementing Rules before payment can be made is untenable.77. The CIAC and the Court of Appeals. Tablante to the effect that the “as-built” plans are required before payment can be claimed by Titan is a mere legal conclusion which is not binding on this Court. use.total cost of Project 2 did not exceed P7.123. Together with the agreed upon mark-up of 20% on said amount.301.123. The CIAC held: The Cost Estimate for Architectural and Site Development Works for the EDSA Central. consistent with the principles of sound environmental management and control. however. Uniwide alleged that the works performed were structurally defective. which was admittedly prepared by Fermindoza and Associates. .812. shows that the amount of P17.[47] The testimony of Engr. this Court rules that the submission of such plans is not a pre-requisite for Titan to be paid by Uniwide. according to one of its consultants.896. quality of materials.77.301. design.

301.77.) Accordingly. Le Consultech. it is alleged. This is the same amount reflected in the Order of Payment prepared by Uniwide’s representative.77. grossly exaggerated the price may properly be dismissed.075. deducting the P15.000. As held by the CIAC: The Tribunal holds that [Uniwide] has not introduced any evidence to sustain its charge of fraudulent conspiracy. it being the mode agreed upon by which its liability for the project cost was to be determined.00. Jimmy Gow. and signed by no less than four top officers and architects of Le Consultech.301. As a matter of fact. Inc.The Tribunal holds that the foregoing document is binding upon the [Uniwide]. He only made that conclusion by the process of his own “logical reasoning” arising from his consultation with other contractors who gave him a much lower estimate for the construction of the Dau Project.075. It claims that the CIAC and the Court of Appeals .075. it is significant to point out.[50] Uniwide asserts that Titan should not have been allowed to recover on Project 2 because the said project was defective and would require repairs in the amount of P800. admitted on cross-examination that he does not have any direct evidence to prove his charge of connivance or complicity between the [Titan] and his own representatives. There is thus no reason to invalidate the binding character of Exhibit “2-A” which.[49] (Emphasis supplied. [48] (Emphasis supplied.000.000. Claims of connivance or fraudulent conspiracy between Titan and Uniwide’s representatives which.301. is [Uniwide]’s own evidence.00 already paid by Uniwide from the total contract price of P21. the unpaid balance due for Project 2 is P6. Uniwide is bound by the amount indicated in the above document. Inc.) Indeed. endorsing for payment by Uniwide to Titan the amount of P6.77. [Uniwide]’s own principal witness.

should have applied Nakpil and Sons v. Court of Appeals[51] and Art. according to these evidence. What transpired in the said ocular inspection is described thus: On 30 January 1995. an ocular inspection was conducted by the Arbitral Tribunal as requested by [Uniwide]. Photographs were taken of the alleged construction defects. Cruz.[52] And. the CIAC concluded as follows: It is likewise the holding of this Tribunal that [Uniwide]’s counterclaim of defective construction has not been sufficiently proven. has been severely impaired. The photographs and transcript of the ocular inspection form part of the records and considered as evidence. 1723 of the New Civil Code holding a contractor responsible for damages if the edifice constructed falls within fifteen years from completion on account of defects in the construction or the use of materials of inferior quality furnished by him or due to any violation of the terms of the contract. On this matter. he gave such assurance of the soundness of his opinion as an expert that a certain column was heavily damaged judging from the external cracks that was readily apparent x x x x x xx On insistence of the Tribunal. the CIAC conducted an ocular inspection of the premises on 30 January 1995. clarificatory questions were asked and manifestations on observations were made by the parties and their respective counsels. the plaster was chipped off and revealed a structurally sound column x x x . [Uniwide]’s principal witness on this issue. The credibility of Engr. The entire proceedings were recorded on tape and subsequently transcribed. an actual ripping off of the plaster of a certain column to expose the alleged structural defect that is claimed to have resulted in its being “heavily damaged” was done. During the ocular inspection of the premises.

no matter how cleverly disguised they might be as "legal questions. We are bound by this finding of fact by the CIAC. 1008 created an arbitration facility to which the construction industry in the Philippines can have recourse. Construction Industry and Arbitration Commission.[55] that: x x x Executive Order No. as admitted by Mr. The Court will not review the factual findings of an arbitral tribunal upon the artful allegation that such body had "misapprehended facts" and will not pass upon issues which are. in the construction industry. and in any other area for that matter. a public policy the implementation of which is necessary and important for the realization of national development goals. was in fact an old column. at bottom." The parties here had recourse to arbitration and chose the arbitrators themselves. The CIAC held that the post-tensioning of the new concrete slab could not have caused any of the defects manifested by the old columns. they must have had confidence in such arbitrators. issues of fact.Further. 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. . Gow himself [53] xxxx (Emphasis supplied. Inc.[54] which was reiterated inDavid v. The Court will not.) Uniwide had the burden of proving that there was defective construction in Project 2 but it failed to discharge this burden. it turns out that what was being passed off as a defective construction by [Titan]. It is worthy to stress our ruling in Hi-Precision Steel Center. v. Even the credibility of its own witness was severely impaired. Further. Aware of the objective of voluntary arbitration in the labor field. Lim Kim Steel Builders. The Executive Order was enacted to encourage the early and expeditious settlement of disputes in the construction industry. it was found that the concrete slab placed by Titan was not attached to the old columns where cracks were discovered. Inc.

SO ORDERED. DANTE O.therefore. more relaxed rule would result in setting at naught the basic objective of a voluntary arbitration and would reduce arbitration to a largely inutile institution. the petition is DENIED and the Decision of the Court of Appeals dated 21 February 1996 in CA-G. Any other. premises considered. in reaching its factual conclusions. SP No. permit the parties to relitigate before it the issues of facts previously presented and argued before the Arbitral Tribunal. 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. TINGA Associate Justice WE CONCUR: LEONARDO A. 37957 is hereby AFFIRMED.) WHEREFORE.R. and an award obtained through fraud or the corruption of arbitrators. QUISUMBING Associate Justice Chairperson . (Emphasis supplied. 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. save only where a clear showing is made that.

it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division. VELASCO. PUNO Chief Justice . JR. Article VIII of the Constitution. LEONARDO A. Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the op4inion of the Court’s Division.ANTONIO T. Third Division CERTIFICATION Pursuant to Section 13. and the Division Chairperson’s Attestation. CARPIO Associate Justice CONCHITA CARPIO MORALES Associate Justice PRESBITERO J. REYNATO S. QUISUMBING Associate Justice Chairperson.

G. February 13. CARPIO.G. Respondents.versus - QUISUMBING. 54-77 and 155-178.. as determined by the BIR may be passed on to the petitioner. JR. pp. The dispositive portion of the [1] said decision states: “WHEREFORE. Petitioner.R.Rollo. SO ORDERED. and in lieu thereof. TINGA. subject to such defenses as it may raise with regard to its computation. No. CARPIO MORALES. 2008 x-----------------------------------------------------------------------------------------x . judgment is hereby rendered that the Value-Added Tax for Project 3.” BENGUET CORPORATION. REALTY AND MINING Promulgated: CORPORATION. Chairperson. 10-33. In all other aspects. b) The denial of petitioner’s claims for liquidated damages is hereby made without prejudice. AND NATURAL RESOURCES -MINES ADJUDICATION BOARD and J. the judgment of the CIAC herein appealed from is hereby MODIFIED in the following respects: a) The ruling holding petitioner liable directly to the BIR for the VAT on Project 3 and exempting respondent from the said obligation is hereby DELETED.. and DEPARTMENT OF ENVIRONMENT VELASCO. 163101 Present: . c) The interest of 12% per annum attached to the unpaid balances for Projects 2 and 3 is hereby REDUCED to 6% per annum. J. JJ. the said judgment is hereby AFFIRMED.

within a reasonable time after the completion of the examination. R-M-2000-01) entitled Benguet Corporation (Benguet) v. Realty. 1987 [4] between Benguet and J. 0124-01 (Mines Administrative Case No. The March 17. J. The December 2.G.G. situated in Barangay Luklukam. APSA-V-0009 jointly filed by J. Benguet should also cause the examination of the mining claims for the purpose of determining whether or not they are worth developing with reasonable probability of profitable production. Realty as claimowner and Benguet as operator. 2004 Resolution denied Benguet’s Motion for Reconsideration. 1987. Bonito-III.G.: The instant petition under Rule 65 of the Rules of Court seeks the annulment of the December 2.DECISION VELASCO. Benguet and J. The Facts On June 1.. In the RAWOP. JR. Realty was acknowledged as the owner of four mining claims respectively named as Bonito-I. Benguet obligated itself to perfect the rights to the mining claims and/or otherwise acquire the mining rights to the mineral claims. Benguet undertook also to furnish J.G. Municipality of Jose Panganiban. 2002 Decision [1] and March 17. Bonito-II. Sitio Bagong Bayan. J. Within 24 months from the execution of the RAWOP.G. 2001 Decision [3] of the MAB Panel of Arbitrators (POA) which canceled the Royalty Agreement with Option to Purchase (RAWOP) dated June 1. Moreover. 2002 Decision upheld the March 19. Camarines Norte. The parties also executed a Supplemental Agreement [5] dated June 1. The mining claims were covered by MPSA Application No.8656 hectares. Realty with a report on the examination. 2004 Resolution[2] of the Department of Environment and Natural ResourcesMining Adjudication Board (DENR-MAB) in MAB Case No. 1987. and Bonito-IV. also within the examination . Realty and Mining Corporation (J. wherein J. Realty).G. Realty entered into a RAWOP.G. with a total area of 288. and excluded Benguet from the joint Mineral Production Sharing Agreement (MPSA) application over four mining claims.

Tachuling. Realty a letter dated March 8.[6] It is also provided in the RAWOP that if the mining claims were placed in commercial production by Benguet. wrote J. Realty.. on February 9. Realty. Benguet must then place the mining claims into commercial productive stage within 24 months from the written notice.e. The fact that your company has failed to perform the obligations set forth in the RAWOP.[7] In response.G. Violation of the Contract by allowing high graders to operate on our claim.period. through its President.4 million to rehabilitate the mines. then sent a letter to the President of Benguet informing the latter that it was terminating the RAWOP on the following grounds: a. 1999. Benguet shall conduct all necessary exploration in accordance with a prepared exploration program. b. Thus.G. issued a letter informing J.G. Benguet’s Manager for Legal Services. Johnny L. [8]therein alleging that Benguet complied with its obligations under the RAWOP by investing PhP 42. If it chooses to do so and before the expiration of the examination period. 1989. Realty should be entitled to a royalty of five percent (5%) of net realizable value. Antonio N. Tan. Benguet may undertake to develop the mining claims upon written notice to J. 1999. J. d. No stipulation was provided with respect to the term limit of the RAWOP. and that the commercial operation was hampered by the non-issuance of a Mines Temporary Permit by the Mines and Geosciences Bureau (MGB) which must be considered as force . on August 9. J. to undertake development works within 2 years from the execution of the Agreement. Reynaldo P.G.G. and to royalty for any production done by Benguet whether during the examination or development periods. Mendoza. c. Realty of its intention to develop the mining claims. i. However. Non-payment of the royalties thereon as provided in the RAWOP. the Executive Vice-President of Benguet.

It appeared that. On March 19. Benguet then argued that the royalties due to J. entitling Benguet to an extension of time to prosecute such permit. Realty were already operating prior to Benguet’s taking over of the premises. The dispositive portion stated: WHEREFORE. Realty were in fact in its office and ready to be picked up at any time. Realty had the obligation of ejecting such small scale miners. Realty that it should submit the disagreement to arbitration rather than unilaterally terminating the RAWOP.G. 2001. 2004 Resolution of the MAB. R-M-2000-01. docketed as Mines Administrative Case No. and (2) whether Benguet violated the RAWOP justifying the unilateral cancellation of the RAWOP by J. J. the MAB issued the assailed December 2. docketed as DENR Case No. Realty was to pick-up checks from Benguet representing such royalties. Realty. SO ORDERED.majeure. Thereafter. Realty filed a Petition for Declaration of Nullity/Cancellation of the RAWOP[9] with the Legaspi City POA. It also reminded J. 2002 Decision. Benguet filed a Notice of Appeal[11] with the MAB on April 23. Realty allegedly refused to collect such checks from Benguet.G. and that J. the June 01. 2000.G. starting August 1994. Realty v. “BONITO-III” and “BONITO-IV”. Thus. premises considered. the POA issued a Decision. Benguet then filed a Motion for Reconsideration of the assailed Decision which was denied in the March 17. . previously.G. On June 7. Benguet also alleged that the nature of the mining business made it difficult to specify a time limit for the RAWOP. 2001.G. Therefrom. Benguet. Benguet posited that there was no valid ground for the termination of the RAWOP. “BONITO-II”. Hence. J.G. [10] dwelling upon the issues of (1) whether the arbitrators had jurisdiction over the case. 2000-01 and entitled J. Region V. However.G. Benguet further claimed that the high graders mentioned by J. the practice by J.G. 1987 [RAWOP] and its Supplemental Agreement is hereby declared cancelled and without effect. BENGUET is hereby excluded from the joint MPSA Application over the mineral claims denominated as “BONITO-I”.G. Benguet filed the instant petition.

The Questioned Decision of the Honorable Board in cancelling the RAWOP prejudice[d] the substantial rights of Benguet under the contract to the unjust enrichment of JG Realty. thus: .” However.[13] ruling that a decision of the MAB must first be appealed to the Court of Appeals (CA) under Rule 43 of the Rules of Court. “A petition for review by certiorari and question of law may be filed by the aggrieved party with the Supreme Court within thirty (30) days from receipt of the order or decision of the [MAB]. and (3) Did the cancellation of the RAWOP amount to unjust enrichment of J. The Honorable Board exceeded its jurisdiction when it sustained the cancellation of the Royalty Agreement for alleged breach of contract despite the absence of evidence. Realty at the expense of Benguet? The Court’s Ruling Before we dwell on the substantive issues.. we find that the instant petition can be denied outright as Benguet resorted to an improper remedy. (RA) 7942 or the “Philippine Mining Act of 1995” states. (2) Was the cancellation of the RAWOP supported by evidence?. The last paragraph of Section 79 of Republic Act No. the issues are: (1) Should the controversy have first been submitted to arbitration before the POA took cognizance of the case?. 3.[12] Restated. this Court has already invalidated such provision in Carpio v. Sulu Resources Development Corp. There was serious and palpable error when the Honorable Board failed to rule that the contractual obligation of the parties to arbitrate under the Royalty Agreement is mandatory. 2. We held. before recourse to this Court may be had.The Issues 1.G.

129 as amended by RA No. The parties still have a remedy and a competent tribunal to grant this remedy. the Court realizes that under Batas Pambansa (BP) Blg. Third. Indiscriminate enactment of legislation enlarging the appellate jurisdiction of this Court would unnecessarily burden it. Section 3 of Revised Administrative . though not expressly listed.Section 30 of Article VI of the 1987 Constitution. mandates that “[n]o law shall be passed increasing the appellate jurisdiction of the Supreme Court as provided in this Constitution without its advice and consent.” On the other hand.To summarize. factual controversies are usually involved in decisions of quasi-judicial bodies.” This provision is obviously an expansion of the Court’s appellate jurisdiction. other than a court or legislature. appeals from their judgments and final orders are now required to be brought to the CA on a verified petition for review. MAB falls under this definition. there are sufficient legal footings authorizing a review of the MAB Decision under Rule 43 of the Rules of Court. the introductory words in Section 1 of Circular No. what is changed is only the procedure by which the appeal is to be made or decided. Fourth. which affects the rights of private parties through either adjudication or rule-making. in the exercise of its rule-making power. 7942 provides that decisions of the MAB may be reviewed by this Court on a “petition for review by certiorari. First. 7902. should be deemed included therein. transfers to the CA pending cases involving a review of a quasi-judicial body’s decisions. A quasi-judicial agency or body has been defined as an organ of government. Section 79 of RA No. Under the rule. The aggrieved party’s right to appeal is preserved. and the CA. hence. it is no different from the other quasi-judicial bodies enumerated under Rule 43. 1-91––“among these agencies are”––indicate that the enumeration is not exclusive or conclusive and acknowledge the existence of other quasi-judicial agencies which. the Revised Rules of Civil Procedure included Rule 43 to provide a uniform rule on appeals from quasi-judicial agencies. an expansion to which this Court has not consented. such transfer relates only to procedure. Second. By including questions of fact among the issues that may be raised in an appeal from quasijudicial agencies to the CA. has more elbow room to resolve them. when the Supreme Court. it does not impair the substantive and vested rights of the parties. hence. Besides. which is likewise tasked to resolve questions of fact.

or unless exceptional and compelling circumstances justify availment of a remedy falling within and calling for the exercise of our primary jurisdiction. the Carpio ruling was not applied to Asaphil as the petition in the latter case was filed in 1999 or three years before the promulgation of Carpio in 2002. According to Section 3 of Rule 43. 0124-01 should be maintained. “[a]n appeal under this Rule may be taken to the Court of Appeals within the period and in the manner herein provided whether the appeal involves questions of fact. Petitioner having failed to properly appeal to the CA under Rule 43. of law. Even if we entertain the petition although Benguet skirted the appeal to the CA via Rule 43. 2004 when the Carpio decision was already applicable.[14] The above principle was reiterated in Asaphil Construction and Development Corporation v.Circular No. On this ground alone. the judicial policy of observing the hierarchy of courts dictates that direct resort from administrative agencies to this Court will not be entertained. Here. 1-95 and Section 3 of Rule 43 explicitly expanded the list of such issues. the petition was filed on April 28. the decision of the MAB has become final and executory. appeals from quasi-judicial agencies even only on questions of law may be brought to the CA. unless the redress desired cannot be obtained from the appropriate lower tribunals. Tuason.” Hence. still. or mixed questions of fact and law. 2002 Decision and March 17. First Issue: The case should have first been brought to voluntary arbitration before the POA Secs. the instant petition must be denied.02 of the RAWOP pertinently provide: . (Asaphil). Fifth.[15]However.01 and 11. the December 2. 2004 Resolution of the DENR-MAB in MAB Case No. thus Benguet should have filed the appeal with the CA. 11. Jr.

xxxx 11. differences or disagreements between BENGUET and the OWNER with reference to anything whatsoever pertaining to this Agreement that cannot be amicably settled by them shall not be cause of any action of any kind whatsoever in any court or administrative agency but shall. Benguet initiated and filed an Adverse Claim docketed as MAC-R- . 2 of RA 876 on persons and matters subject to arbitration.11. terms and conditions as they may deem convenient. stating: Besides. Benguet is already estopped in questioning the jurisdiction of the Panel of Arbitrators to hear and decide the case. meanwhile.[16] Thus. in denying such argument. one to be selected by BENGUET. On the other hand. by its own act.[17] The MAB. there is nothing wrong with the terms and conditions of the agreement. be referred to a Board of Arbitrators consisting of three (3) members.01 Arbitration Any disputes. except to enforce the decision of the majority of the Arbitrators. the POA ruled that: While the parties may establish such stipulations clauses.02 Court Action No action shall be instituted in court as to any matter in dispute as hereinabove stated. As pointed out in the appealed Decision. citing Sec. But to state that an aggrieved party cannot initiate an action without going to arbitration would be tying one’s hand even if there is a law which allows him to do so. Benguet argues that the POA should have first referred the case to voluntary arbitration before taking cognizance of the case. upon notice of one party to the other. another to be selected by the OWNER and the third to be selected by the aforementioned two arbitrators so appointed. the same must not be contrary to law and public policy. At a glance. denied Benguet’s contention on the ground of estoppel.

[19] In its July 20.[20] J. Realty’s petition. It also argued that the POA cannot be considered as a “court” under the contemplation of RA 876 and that jurisprudence saying that there must be prior resort to arbitration before filing a case with the courts is inapplicable to the instant case as the POA is itself already engaged in arbitration. we rule for Benguet. In this particular case (MAC-R-M-2000-02) now subject of the appeal. incidental. Such submission or contract may include question[s] arising out of valuations.G. precedent or subsequent to any issue between the parties. Realty reiterated the above rulings of the POA and MAB. Sec. such as RA 876. (Emphasis supplied. It argued that RA 7942 or the “Philippine Mining Act of 1995” is a special law which should prevail over the stipulations of the parties and over a general law.–– Two or more persons or parties may submit to the arbitration of one or more arbitrators any controversy existing between them at the time of the submission and which may be the subject of an action.) .G.M-2000-02 over the same mining claims without undergoing contractual arbitration. when Benguet itself did not merely move for the dismissal of the case but also filed an Answer with counterclaim seeking affirmative reliefs from the Panel of Arbitrators. the MAB ruled that the contractual provision on arbitration merely provides for an additional forum or venue and does not divest the POA of the jurisdiction to hear the case. On this issue. save upon such grounds as exist at law for the revocation of any contract. 2004 Comment. Such submission or contract shall be valid.[18] Moreover. 2 of RA 876 elucidates the scope of arbitration: Section 2. appraisals or other controversies which may be collateral. Persons and matters subject to arbitration. enforceable and irrevocable. or the parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between them. Benguet is likewise in estoppel from questioning the competence of the Panel of Arbitrators to hear and decide in the summary proceedings J.

6 and 7 of RA 876: Section 6.In RA 9285 or the “Alternative Dispute Resolution Act of 2004. the proceeding shall be dismissed. The court shall hear the parties. 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. 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. Such is not the case here. xxxx . petitioner correctly cites several cases whereby arbitration clauses have been upheld by this Court. If the finding be that no agreement in writing providing for arbitration was made. a contractual stipulation that requires prior resort to voluntary arbitration before the parties can go directly to court is not illegal and is in fact promoted by the State. and upon being satisfied that the making of the agreement or such failure to comply therewith is not in issue. an order shall be made summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.––A party aggrieved by the failure.[21] Moreover. shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. If the making of the agreement or default be in issue the court shall proceed to summarily hear such issue. Hearing by court. To reiterate. 32 thereof that domestic arbitration shall still be governed by RA 876. availment of voluntary arbitration before resort is made to the courts or quasi-judicial agencies of the government is a valid contractual stipulation that must be adhered to by the parties.” the Congress reiterated the efficacy of arbitration as an alternative mode of dispute resolution by stating in Sec. Clearly. or that there is no default in the proceeding thereunder. Thus. If the finding be that a written provision for arbitration was made and there is a default in proceeding thereunder. As stated in Secs. the contention that RA 7942 prevails over RA 876 presupposes a conflict between the two laws.

NLRC. Inc. After the special proceeding of arbitration has been pursued and completed.” While a voluntary arbitrator is not part of the governmental unit or labor department’s personnel.) In other words. in BF Corporation v. the court or quasi-judicial agency shall determine whether such contractual provision for arbitration is sufficient and effective. we already ruled: In this connection.B. 876 provides that proceedings therein have only been stayed. Stay of civil action.G. Besides. for the stay is not in default in proceeding with such arbitration. upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration. (Emphasis supplied. in Reformist Union of R. is misplaced. then the lower court may confirm the award made by the arbitrator. on motion of the defendant. Section 7 of Republic Act No. Court of Appeals. said arbitrator renders . the court in which such suit or proceeding is pending. it bears stressing that the lower court has not lost its jurisdiction over the case. and as a mode of arbitration where the parties are compelled to accept the resolution of their dispute through arbitration by a third party. Realty’s contention.Section 7. That the applicant. that prior resort to arbitration is unavailing in the instant case because the POA’s mandate is to arbitrate disputes involving mineral agreements.––If any suit or proceeding be brought upon an issue arising out of an agreement providing for the arbitration thereof. If in affirmative. A distinction must be made between voluntary and compulsory arbitration. compulsory arbitration has been defined both as “the process of settlement of labor disputes by a government agency which has the authority to investigate and to make an award which is binding on all the parties. Saordino.[22] J. shall stay the action or proceeding until an arbitration has been had in accordance with the terms of the agreement: Provided. the Court had the occasion to distinguish between the two types of arbitrations: Comparatively. the court or quasi-judicial agency shall then order the enforcement of said provision. vs. Liner. in the event a case that should properly be the subject of voluntary arbitration is erroneously filed with the courts or quasi-judicial agencies. In Ludo and Luym Corporation v.

POA has no jurisdiction over the dispute which is governed by RA 876. Realty filed DENR Case No.G. we find that Benguet is already estopped from questioning the POA’s jurisdiction.) There is a clear distinction between compulsory and voluntary arbitration.[25] In sum. Hence. As to J. when J. The arbitration provided by the POA is compulsory. indeed. one to be selected by BENGUET. must be held binding against them.G. Realty’s contention that the provisions of RA 876 cannot apply to the instant case which involves an administrative agency. another to be selected by the OWNER and the third to be selected by the aforementioned two arbiters so appointed. Benguet filed its answer and participated in the proceedings before the POA. J. while the nature of the arbitration provision in the RAWOP is voluntary. R-M-2000-01 and again participated in the MAB . Secondly. However. 2001 POA Decision was rendered.01 of the RAWOP states that: [Any controversy with regard to the contract] shall not be cause of any action of any kind whatsoever in any court or administrative agency but shall. the arbitration law. the provision on mandatory resort to arbitration. [23] (Emphasis supplied. it filed an appeal with the MAB in Mines Administrative Case No. an administrative agency. upon notice of one party to the other. Thus. Realty’s argument on this matter must fail.G. when the adverse March 19. on the issue of whether POA should have referred the case to voluntary arbitration. it must be pointed out that Section 11. [24] (Emphasis supplied. 2000-01. not involving any government agency. As it were. be referred to a Board of Arbitrators consisting of three (3) members. freely entered into by the parties. we find that.) There can be no quibbling that POA is a quasi-judicial body which forms part of the DENR. Region V.arbitration services provided for under labor laws.

Further. Benguet then thus concludes that it did not violate the RAWOP for nonpayment of royalties. Benguet claims that the lengthy time of approval of the application is due to the failure of the MGB to approve it.G. In this factual milieu. Realty were available for pick-up in its office and it is the latter which refused to claim them. With regard to the failure to pursue the MPSA application. it filed a motion for reconsideration with the MAB. When the adverse December 2. 2004 MAB Resolution was issued. APSA-V-0009 over the mining claims.G. Realty’s royalties for the mining claims. Benguet argues that the approval of the application is solely in the hands of the MGB. Benguet claims that the checks representing payments for the royalties of J.G. 2002 MAB Decision was promulgated. . and (2) Benguet’s failure to seriously pursue MPSA Application No. To redo the proceedings fully participated in by the parties after the lapse of seven years from date of institution of the original action with the POA would be anathema to the speedy and efficient administration of justice. Benguet’s arguments are bereft of merit. Second Issue: The cancellation of the RAWOP was supported by evidence The cancellation of the RAWOP by the POA was based on two grounds: (1) Benguet’s failure to pay J.proceedings. In other words. Benguet filed a petition with this Court pursuant to Sec. What Benguet should have done was to immediately challenge the POA’s jurisdiction by a special civil action for certiorari when POA ruled that it has jurisdiction over the dispute. Realty has the burden of proving that the former did not pay such royalties following the principle that the complainants must prove their affirmative allegations. When the adverse March 17. the Court rules that the jurisdiction of POA and that of MAB can no longer be questioned by Benguet at this late hour. 79 of RA 7942 impliedly recognizing MAB’s jurisdiction. As to the royalties. Benguet reasons that J.

Benguet’s claim that J.[26] Thus. 14. The fact that there was the previous practice whereby J. the contract must be considered as the law between the parties and binding on both. Realty had no obligation to furnish Benguet with a Board Resolution considering that the RAWOP itself provided for such payment scheme. National Labor Relations Commission: As a general rule.G.G.05 of the RAWOP provides: 14. the general rule is that the burden rests on the defendant to . The mode of payment is embodied in a contract between the parties. Any and all deposits so made by BENGUET shall be a full and complete acquittance and release to [sic] BENGUET from any further liability to the OWNER of the amounts represented by such deposits. Benguet had the obligation to deposit the checks. The allegation of nonpayment is not a positive allegation as claimed by Benguet. this Court ruled in Jimenez v. one who pleads payment has the burden of proving it.G.05 Bank Account OWNER shall maintain a bank account at ___________ or any other bank from time to time selected by OWNER with notice in writing to BENGUET where BENGUET shall deposit to the OWNER’s credit any and all advances and payments which may become due the OWNER under this Agreement as well as the purchase price herein agreed upon in the event that BENGUET shall exercise the option to purchase provided for in the Agreement. As such. Realty informed Benguet of the bank account where deposits of its royalties may be made. the RAWOP itself provides for the mode of royalty payment by Benguet. after J. Realty must prove nonpayment of its royalties is both illogical and unsupported by law and jurisprudence. (Emphasis supplied. J. Realty picked-up the checks from Benguet is unavailing. Thus. Notably.) Evidently.G.Sec. Even where the plaintiff must allege non-payment. Rather. such is a negative allegation that does not require proof and in fact transfers the burden of proof to Benguet.

Realty has been admitted and supported by the provisions of the RAWOP.[27] (Emphasis supplied.” Article 22 of the Civil Code provides that “[e]very person who through an act of performance by another. acquires or comes into possession of something at the expense .) In the instant case. as follows: We have held that “[t]here is unjust enrichment when a person unjustly retains a benefit to the loss of another. Inc. the burden to prove such obligation rests on Benguet. In Car Cool Philippines. Thus. Benguet was remiss in prosecuting the MPSA application and clearly failed to comply with its obligation in the RAWOP. the obligation of Benguet to pay royalties to J. v. obligated itself to perfect the rights to the mining claims and/or otherwise acquire the mining rights to the mineral claims but failed to present any evidence showing that it exerted efforts to speed up and have the application approved. The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment.G. Such allegations would show that. Benguet never even alleged that it continuously followed-up the application with the MGB and that it was in constant communication with the government agency for the expeditious resolution of the application. justified. APSA-V-0009 and to further develop such mining claims. APSA-V-0009 has been pending with the MGB for a considerable length of time. or when a person retains money or property of another against the fundamental principles of justice. Benguet. in the RAWOP. In fact. or any other means. therefore.prove payment. the cancellation of the RAWOP was based on valid grounds and is. we defined unjust enrichment. indeed. equity and good conscience. rather than on the plaintiff to prove nonpayment. The necessary implication of the cancellation is the cessation of Benguet’s right to prosecute MPSA Application No. Ushio Realty and Development Corporation. Third Issue: There is no unjust enrichment in the instant case Based on the foregoing discussion. It should also be borne in mind that MPSA Application No.

R.. and (2) that such benefit is derived at another’s expense or damage. Petitioner. in TINGA. 2002 Decision and March 17.. ALBERTO A. No costs. JR.. Branch 256 of Regional Trial Court of Muntinlupa City.) Clearly. 2004 Resolution of the DENR-MAB in MAB Case No. CARPIO MORALES. Benguet has no one to blame but itself for its predicament.. CARPIO. there is no unjust enrichment in the instant case as the cancellation of the RAWOP. and PACIFIC GENERAL STEEL Promulgated: MANUFACTURING CORPORATION. . [28] (Emphasis supplied. SO ORDERED. WHEREFORE. JJ. There is no unjust enrichment when the person who will benefit has a valid claim to such benefit.” The principle of unjust enrichment under Article 22 requires two conditions: (1) that a person is benefited without a valid basis or justification.versus - QUISUMBING. HON. which left Benguet without any legal right to participate in further developing the mining claims. G. we DISMISS the petition. was brought about by its violation of the RAWOP. LERMA. J. 143581 Present: . KOREA TECHNOLOGIES CO. and AFFIRM the December 2. and his capacity as Presiding Judge of VELASCO. 1987 RAWOP.of the latter without just or legal ground. LTD. Hence. Chairperson. 0124-01 upholding the cancellation of the June 1. shall return the same to him. No.

1997. 1997[2] amending the terms of payment.. the total contract price amounted to USD 1. 1997. instead of hastening the resolution of their dispute. the parties wittingly or unwittingly prolonged the controversy. Thus. Ltd. speedy and less hostile methods have long been favored by this Court. KOGIES would install and initiate the operation of the plant for which PGSMC bound itself to pay USD 306. and negotiation. inKorea.: In our jurisdiction. 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.. 2008 x-----------------------------------------------------------------------------------------x DECISION VELASCO. January 7. Regrettably. while private respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic corporation. particularly in civil and commercial disputes. conciliation. The contract was executed in the Philippines. an Amendment for Contract No. Arbitration along with mediation.224. being inexpensive. Cavite. the parties executed.000 upon the plant’s production of the 11-kg. JR. Petitioner Korea Technologies Co. .000.Respondents. the policy is to favor alternative methods of resolving disputes. PGSMC and KOGIES executed a Contract [1] whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in Carmona. On April 7.530. KLP970301 dated March 5. LPG cylinder samples. On March 5.000. (KOGIES) is a Korean corporation which is engaged in the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants. 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. J.

The monthly rental was PhP 322.079-square meter property with a 4. 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.000 for the installation and initial operation of the plant.560 commencing on January 1. the initial operation could not be conducted as PGSMC encountered financial difficulties affecting the supply of materials.[5] When KOGIES deposited the checks. Inc. On the same date. PGSMC entered into a Contract of Lease [3] with Worth Properties. 1998.On October 14. thus forcing the parties to agree that KOGIES would be deemed to have completely complied with the terms and conditions of the March 5.000. 0316412 dated January 30. (Worth) for use of Worth’s 5. KOGIES sent a demand letter[6] to PGSMC threatening criminal action for violation of Batas Pambansa Blg. equipment. 0316413 dated March 30.” Thus.500. 1998.[7] On June 1. and (2) BPI Check No. 1998 for PhP 4. PGSMC replied that the two checks it issued KOGIES were fully funded but the payments were stopped for reasons previously made known to KOGIES. 1997 contract. 1998 with a 10% annual increment clause. gleaned from the Certificate [4] executed by the parties on January 22. after the installation of the plant. the wife of PGSMC’s President faxed a letter dated May 7. For the remaining balance of USD306.000. delivered. on May 8.500.000. 22 in case of nonpayment. and installed in the Carmona plant. and facilities for the manufacture of LPG cylinders were shipped. However. PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5. the machineries.224. 1998. PGSMC paid KOGIES USD 1. 1998 to KOGIES’ President who was then staying at a Makati City hotel. Subsequently. 1998 for PhP 4. PGSMC issued two postdated checks: (1) BPI Check No. 1997 on the ground that KOGIES had altered .032-square meter warehouse building to house the LPG manufacturing plant. On May 14. 1997. 1998. these were dishonored for the reason “PAYMENT STOPPED.

and facilities installed in the plant would be dismantled and transferred on July 4. 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. It also insisted that their disputes should be settled by arbitration as agreed upon in Article 15.S. by unilaterally rescinding the contract without resorting to arbitration. which was subsequently extended until July 22. KOGIES filed a Complaint for Specific Performance. and facilities installed in the Carmona plant.the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC. On June 15. on July 1. 1998. 1998. as amended. PGSMC filed before the Office of the Public Prosecutor an Affidavit-Complaint for Estafa docketed as I. No. 1998. On July 3. President of KOGIES. Likewise. 1998 letter threatening that the machineries. 98-03813 against Mr. 15 of their Contract. In its complaint. 1998. 15 of the Contract as amended. 98-117 [8] against PGSMC before the Muntinlupa City Regional Trial Court (RTC). docketed as Civil Case No. Thus. 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. the arbitration clause of their contract. KOGIES averred that PGSMC violated Art. 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. 1998. 1998. KOGIES instituted an Application for Arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul. On June 23. 1998 Certificate. equipment. Five days later. The RTC granted a temporary restraining order (TRO) on July 4. Koreapursuant to Art. . 1998. 1998. Dae Hyun Kang. PGSMC again wrote KOGIES reiterating the contents of its June 1. and that PGSMC would dismantle and transfer the machineries. equipment.

257. .224. Cavite and transfer the same to another site: and therefore denies plaintiff’s application for a writ of preliminary injunction. the RTC held that Art. was null and void for being against public policy as it ousts the local courts of jurisdiction over the instant controversy. and that KOGIES was liable for damages amounting to PhP 4. in view of the foregoing consideration.000. the value of the machineries and equipment as shown in the contract such that KOGIES no longer had proprietary rights over them. 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. After the parties submitted their Memoranda. 1998. the arbitration clause. KOGIES’ prayer for an injunctive writ was denied. PGSMC averred that it has already paid PhP 2. PGSMC filed its Answer with Compulsory Counterclaim[9] 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.000 for altering the quantity and lowering the quality of the machineries and equipment.000. [10] The dispositive portion of the Order stated: WHEREFORE. Incorporated at Carmona. 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. Moreover. And finally. that KOGIES was not entitled to the PhP 9. On July 17.500. on July 23.000 covered by the checks for failing to completely install and make the plant operational. the RTC issued an Order denying the application for a writ of preliminary injunction. PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the TRO since Art. 1998. reasoning that PGSMC had paid KOGIES USD 1.920 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. 1998. 15.On July 9.

Court of Appeals.224. Inc.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.On July 29. 1998. relying on Chung Fu Industries (Phils. 1998 and seeking dismissal of PGSMC’s counterclaims. equipment. KOGIES filed its Reply to Answer and Answer to Counterclaim. After KOGIES filed a Supplemental Memorandum with Motion to Dismiss[13] answering PGSMC’s memorandum of July 22. KOGIES.530.).[15] In the meantime. PGSMC filed a Motion for Inspection of Things [16] to determine whether there was indeed alteration of the quantity and lowering of quality of the machineries and equipment. 1998 Order denying its application for an injunctive writ claiming that the contract was not merely for machinery and facilities worth USD 1. KOGIES points out that the arbitration clause under Art.). It claimed that it had performed all the undertakings under the contract and had already produced certified samples of LPG cylinders. It averred that whatever was unfinished was PGSMC’s fault since it failed to procure raw materials due to lack of funds.[11] KOGIES denied it had altered the quantity and lowered the quality of the machinery. and facilities it delivered to the plant. . 1998. 2044 of the Civil Code and as held by this Court in Chung Fu Industries (Phils. on August 4. KOGIES. v.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. filed its Motion for Reconsideration[14] of the July 23. 15 of the Contract as amended was a valid arbitration stipulation under Art.[12] insisted that the arbitration clause was without question valid. Inc. Moreover. and whether these were properly installed. 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.

KOGIES filed before the Court of Appeals (CA) a petition for certiorari [18] docketed as CA-G. 49249 informing the CA about the October 19. 1998. 1998 RTC Order granting inspection of the plant and denying dismissal of PGSMC’s compulsory counterclaims. 1998 RTC Order. 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. without waiting for the resolution of its October 2. .R. and preliminary injunction to enjoin the RTC and PGSMC from inspecting. the trial court issued an Order (1) granting PGSMC’s motion for inspection. SP No. KOGIES filed a Supplement to the Petition [20] in CA-G. and (3) denying KOGIES’ motion to dismiss PGSMC’s compulsory counterclaims as these counterclaims fell within the requisites of compulsory counterclaims. In the meantime. 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. 1998 urgent motion for reconsideration. SP No. on October 19. and to direct the RTC to enforce the specific agreement on arbitration to resolve the dispute. the Branch Sheriff filed his Sheriff’s Report[21] finding that the enumerated machineries and equipment were not fully and properly installed. mandamus. 1998 RTC Orders and praying for the issuance of writs of prohibition. On November 11. 1998 RTC Order.[19] Thereafter.R. dismantling. 1998. It also reiterated its prayer for the issuance of the writs of prohibition. (2) denying KOGIES’ motion for reconsideration of the July 23.On September 21. mandamus and preliminary injunction which was not acted upon by the CA. on October 12. and transferring the machineries and equipment in the Carmona plant. KOGIES filed an Urgent Motion for Reconsideration[17] of the September 21. seeking annulment of the July 23. 1998. On October 2. 49249. Ten days after. 1998. 1998. 1998 and September 21. 1998.

this determination by the RTC was a factual finding beyond the ambit of a petition for certiorari. the CA rendered the assailed Decision [22] affirming the RTC Orders and dismissing the petition for certiorari filed by KOGIES. 1998 RTC Order which was the plain. On the issue of nonpayment of docket fees and non-attachment of a certificate of non-forum shopping by PGSMC. For the same reason.000.530.The Court of Appeals affirmed the trial court and declared the arbitration clause against public policy On May 30. the CA held that the counterclaims of PGSMC were compulsory ones and payment of docket fees was not required since the Answer with counterclaim was not an initiatory pleading. and that since the assailed orders were interlocutory. . On the issue of the validity of the arbitration clause. the CA reasoned that KOGIES’ contention that the total contract price for USD 1. According to the CA. 1998 andSeptember 21. and adequate remedy available. which was for all the machineries and equipment. 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.224. According to the CA. Moreover.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. The CA found that the RTC did not gravely abuse its discretion in issuing the assailed July 23. speedy. 1998 Orders. 2000. the CA said a certificate of non-forum shopping was also not required. the RTC must be given the opportunity to correct any alleged error it has committed. 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. these cannot be the subject of a petition for certiorari. Furthermore.

DECREEING PRIVATE RESPONDENT’S COUNTERCLAIMS TO BE ALL COMPULSORY NOT NECESSITATING PAYMENT OF DOCKET FEES AND CERTIFICATION OF NON-FORUM SHOPPING. we have this Petition for Review on Certiorari under Rule 45. 1998 OR WITHOUT GIVING THE TRIAL COURT AN OPPORTUNITY TO CORRECT ITSELF. The Issues Petitioner posits that the appellate court committed the following errors: a. DISMISSING THE SAME FOR ALLEGEDLY “WITHOUT MERIT.”[23] The Court’s Ruling . b. RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT WAITING FOR THE RESOLUTION OF THE MOTION FOR RECONSIDERATION OF THE ORDER DATED SEPTEMBER 21. INSTEAD. 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. PROCLAIMING THE TWO ORDERS DATED JULY 23 AND SEPTEMBER 21. AND CONCLUDING THAT THE TRIAL COURT’S FINDING ON THE SAME QUESTION WAS IMPROPERLY RAISED IN THE PETITION BELOW. d. 1998 NOT TO BE PROPER SUBJECTS OF CERTIORARI AND PROHIBITION FOR BEING “INTERLOCUTORY IN NATURE.” f. 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.Hence. NOT GRANTING THE RELIEFS AND REMEDIES PRAYED FOR IN HE (SIC) PETITION AND. c. e.

We disagree with KOGIES. it should have paid docket fees and filed a certificate of non-forum shopping. 5[24] of Rule 7. . that effective August 16. 8 on existing counterclaim or crossclaim states. and that its failure to do so was a fatal defect.” On July 17. as amended by A. We stress. the rule that was effective at the time the Answer with Counterclaim was filed. As aptly ruled by the CA. It is a responsive pleading. 7. 1998. Sec. 1998 in accordance with Section 8 of Rule 11. 2004 KOGIES strongly argues that when PGSMC filed the counterclaims. “A compulsory counterclaim or a cross-claim that a defending party has at the time he files his answer shall be contained therein. 2004 under Sec. The rules on the payment of docket fees for counterclaims and cross claims were amended effective August 16. however. 1997 Revised Rules of Civil Procedure. the courts a quo did not commit reversible error in denying KOGIES’ motion to dismiss PGSMC’s compulsory counterclaims. As to the failure to submit a certificate of forum shopping. hence.The petition is partly meritorious. Rule 141.M. at the time PGSMC filed its Answer incorporating its counterclaims against KOGIES. Before we delve into the substantive issues. docket fees are now required to be paid in compulsory counterclaim or cross-claims. it was not liable to pay filing fees for said counterclaims being compulsory in nature. the counterclaims of PGSMC were incorporated in its Answer with Compulsory Counterclaim datedJuly 17. we shall first tackle the procedural issues. 04-2-04-SC. PGSMC’s Answer is not an initiatory pleading which requires a certification against forum shopping under Sec. 1997 Revised Rules of Civil Procedure. 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. However. [27] Thus. Pescarich Manufacturing Corporation. incorporating in said appeal the grounds for assailing the interlocutory orders. where the interlocutory order was issued without or in excess of jurisdiction or with grave abuse of discretion. 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. 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. we held: The proper remedy in such cases is an ordinary appeal from an adverse judgment on the merits.” [26] The CA erred on its reliance on Gamboa. speedy. . the Court allows certiorari as a mode of redress. in Yamaoka v. 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.[28] Also.[25] the CA also pronounced that “certiorari and Prohibition are neither the remedies to question the propriety of an interlocutory order of the trial court.[29] 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. the remedy is certiorari. Cruz.Interlocutory orders proper subject of certiorari Citing Gamboa v. appeals from interlocutory orders would open the floodgates to endless occasions for dilatory motions. The general rule is that interlocutory orders cannot be challenged by an appeal. Thus. 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.

KOGIES’ only remedy was to assail the RTC’s interlocutory order via a petition for certiorari under Rule 65. the arbitration clause.Prematurity of the petition before the CA Neither do we think that KOGIES was guilty of forum shopping in filing the petition for certiorari. The Core Issue: Article 15 of the Contract We now go to the core issue of the validity of Art. 1998 RTC Order directing the branch sheriff to inspect the plant. 1998 motion for reconsideration to be proper. Moreover. the circumstances in this case would allow an exception to the rule that before certiorari may be availed of. Thus. 1998 motion for reconsideration of KOGIES of the September 21. The reason behind the rule is “to enable the lower court. and facilities when he is not competent and knowledgeable on said matters is evidently flawed and devoid of any legal support. 15 of the Contract. there is real and imminent threat of irreparable destruction or substantial damage to KOGIES’ equipment and machineries. 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. in the first instance. equipment. Indeed. out of or in . to pass upon and correct its mistakes without the intervention of the higher court.—All disputes. controversies. the petitioner must have filed a motion for reconsideration and said motion should have been first resolved by the court a quo. Note that KOGIES’ motion for reconsideration of the July 23. We find the resort to certiorari based on the gravely abusive orders of the trial court sans the ruling on the October 2. Arbitration. or differences which may arise between the parties. 1998 RTC Order which denied the issuance of the injunctive writ had already been denied. 1998 RTC Order relating to the inspection of things.”[30] The September 21. It provides: Article 15. and the allowance of the compulsory counterclaims has not yet been resolved. While the October 2.

The contract in this case was perfected here in the Philippines. 2038. There has been no showing that the parties have not dealt with each other on equal footing. Petitioner is correct.[35] 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. we likewise ruled that “[t]he provision to submit to arbitration any . 2044 provides. We find no reason why the arbitration clause should not be respected and complied with by both parties. Nonetheless.” (Emphasis supplied.[31] 2039. Art. 2044 pursuant to Art. Art. our laws ought to govern. In Gonzales v. 2039 and 2040. is valid. rescinded. good customs..[36] Again in Del Monte Corporation-USA v. Climax Mining Ltd. Established in this jurisdiction is the rule that the law of the place where the contract is made governs. Korea in accordance with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board. shall finally be settled by arbitration in Seoul.[34] may be voided. Court of Appeals. or annulled. public order. as applied to Art.) Arts. (Emphasis supplied. The arbitration clause was mutually and voluntarily agreed upon by the parties. or public policy. but these would not denigrate the finality of the arbitral award. or against morals. “Any stipulation that the arbitrators’ award or decision shall be final. without prejudice to Articles 2038. Therefore.) Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null and void. 2043.[32] and 2040[33] abovecited refer to instances where a compromise or an arbitral award.relation to or in connection with this Contract or for the breach thereof. 2044 of the Civil Code sanctions the validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral award. It has not been shown to be contrary to any law. Lex loci contractus. The award rendered by the arbitration(s) shall be final and binding upon both parties concerned.

courts should liberally construe arbitration clauses. we declared that: Being an inexpensive. 1953 of Republic Act No. This Court has sanctioned the validity of arbitration clauses in a catena of cases.”[39] And in LM Power Engineering Corporation v. and that the arbitral award is final and binding. is not contrary to public policy. Provided such clause is susceptible of an interpretation that covers the asserted dispute..”[37] Arbitration clause not contrary to public policy The arbitration clause which stipulates that the arbitration must be done in Seoul.[40] Having said that the instant arbitration clause is not against public policy. 876 was adopted to supplement the New Civil Code’s provisions on arbitration. v. we held that “[i]n this jurisdiction. especially of the commercial kind. Brushing aside a contractual agreement calling for arbitration between the parties would be a step backward. In BF Corporation v. arbitration––along with mediation. Republic Act No.dispute arising therefrom and the relationship of the parties is part of that contract and is itself a contract. Aside from unclogging judicial dockets. this Court has countenanced the settlement of disputes through arbitration. arbitration has been held valid and constitutional. Inc. Even before the approval on June 19. we come to the question on what governs an arbitration clause .. Court of Appeals. Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods. Inc. Korea in accordance with the Commercial Arbitration Rules of the KCAB. 876. an order to arbitrate should be granted.. Juan Ysmael and Co. conciliation and negotiation––is encouraged by the Supreme Court. Any doubt should be resolved in favor of arbitration. speedy and amicable method of settling disputes. In the 1957 case of Eastboard Navigation Ltd. arbitration also hastens the resolution of disputes.[38] this Court had occasion to rule that an arbitration clause to resolve differences and breaches of mutually agreed contractual terms is valid. It is thus regarded as the “wave of the future” in international civil and commercial disputes. Capitol Industrial Construction Groups.

INTERNATIONAL COMMERCIAL ARBITRATION SEC. RA 9285 incorporated the UNCITRAL Model law to which we are a signatory For domestic arbitration proceedings. 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.specifying that in case of any dispute arising from the contract. 19. (RA) 9285.––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. the Philippines committed itself to be bound by the Model Law. As signatory to the Arbitration Rules of the UNCITRAL Model Law on International Commercial Arbitration [41] of the United Nations Commission on International Trade Law (UNCITRAL) in the New York Convention on June 21. 1985. 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. copy of which is hereto attached as Appendix “A”. Interpretation of Model Law. We have even incorporated the Model Law in Republic Act No. 20. promulgated on April 2. 19 and 20 of Chapter 4 of the Model Law are the pertinent provisions: CHAPTER 4 . 2004. 1985 (United Nations Document A/40/17) and recommended for enactment by the General Assembly in Resolution No. and for Other Purposes. SEC. 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 . Secs. 1985. we have particular agencies to arbitrate disputes arising from contractual relations. the arbitration rules of our domestic arbitration bodies would not be applied. In case a foreign arbitral body is chosen by the parties. Adoption of the Model Law on International Commercial Arbitration.––In interpreting the Model Law. 40/72 approved on December 11.

and mandates the referral to arbitration in such cases. (2) Foreign arbitral awards must be confirmed by the RTC . 24.International Trade Law dated March 25. and are deemed retroactive in that sense and to that extent. 24. refer the parties to arbitration unless it finds that the arbitration agreement is null and void. Thus. or upon the request of both parties thereafter. 9/264. RA 9285 is applicable to the instant case. thus: SEC.––A court before which an action is brought in a matter which is the subject matter of an arbitration agreement shall.[42] 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 Under Sec. Likewise. 1998 and it is still pending because no arbitral award has yet been rendered. if at least one party so requests not later than the pre-trial conference. inoperative or incapable of being performed. KOGIES filed its application for arbitration before the KCAB on July 1. the retroactive application of procedural laws does not violate any personal rights because no vested right has yet attached nor arisen from them. 1985 entitled. “International Commercial Arbitration: Analytical Commentary on Draft Trade identified by reference number A/CN. the RTC does not have jurisdiction over disputes that are properly the subject of arbitration pursuant to an arbitration clause. it nonetheless applies in the instant case since it is a procedural law which has a retroactive effect. Well-settled is the rule that procedural laws are construed to be applicable to actions pending and undetermined at the time of their passage.” While RA 9285 was passed only in 2004. Referral to Arbitration. As a general rule.

Foreign Arbitral Award Not Foreign Judgment. 43.–– A foreign arbitral award when confirmed by a court of a foreign country. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York Convention. thus: SEC. Sec. The Court may. 47 and 48. and 44 relative to Secs. 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. . SEC. on grounds of comity and reciprocity. the party shall supply a duly certified translation thereof into any of such languages. 44. which court under Sec. If the award or agreement is not made in any of the official languages. RA 9285 incorporated these provisos to Secs.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. recognize and enforce a non-convention award as a convention award. 36 of the UNCITRAL Model Law may refuse recognition or enforcement on the grounds provided for. 42. 42. The applicant shall establish that the country in which foreign arbitration award was made in party to the New York Convention. 35[43] of the UNCITRAL Model Law stipulates the requirement for the arbitral award to be recognized by a competent court for enforcement. Application of the New York Convention. shall be recognized and enforced as a foreign arbitral award and not as a judgment of a foreign court. xxxx SEC.––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.––The New York Convention shall govern the recognition and enforcement of arbitral awards covered by said Convention. 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.

shall be enforced in the same manner as final and executory decisions of courts of law of the Philippines xxxx SEC.––Proceedings for recognition and enforcement of an arbitration agreement or for vacations. or (iv) in the National Judicial Capital Region. or the act to be enjoined is located. like the National Labor Relations Commission and Mines Adjudication Board. or if any part cannot be served notice at such address. SEC. upon the instance of any party. correction or modification of an arbitral award. Notice of Proceeding to Parties.––In a special proceeding for recognition and enforcement of an arbitral award. whose final judgments are stipulated to be final and binding. and when confirmed. 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. but not immediately executory in the sense that they may still be judicially reviewed. at such party’s last known address. at the option of the applicant. The notice shall be sent al least fifteen (15) days before the date set for the initial hearing of the application. 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. Thus. (ii) where the asset to be attached or levied upon.A foreign arbitral award. 47. Venue and Jurisdiction. 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. the Court shall send notice to the parties at their address of record in the arbitration. 48. Therefore. when confirmed by the Regional Trial Court. setting aside. (3) The RTC has jurisdiction to review foreign arbitral awards . (iii) where any of the parties to the dispute resides or has his place of business. the final foreign arbitral awards are similarly situated in that they need first to be confirmed by the RTC. are enforced as final and executory decisions of our courts of law.

If the award or agreement is not made in any of the official languages. still the foreign arbitral . reject. 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 Regional Trial Court may. vacate its decision and may also. Rejection of a Foreign Arbitral Award. 42 in relation to Sec.Sec. 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. Application of the New York Convention. on the application of the party claiming recognition or enforcement of the award. xxxx SEC. Secs. order the party to provide appropriate security. Any other ground raised shall be disregarded by the Regional Trial Court. The applicant shall establish that the country in which foreign arbitration award was made is party to the New York Convention. Thus. the party shall supply a duly certified translation thereof into any of such languages. 42 and 45 provide: SEC. while the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by the parties.––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. 45 of RA 9285 designated and vested the RTC with specific authority and jurisdiction to set aside. 42. or vacate a foreign arbitral award on grounds provided under Art.––The New York Convention shall govern the recognition and enforcement of arbitral awards covered by said Convention. 34(2) of the UNCITRAL Model Law. 45. if it considers it proper. If the application for rejection or suspension of enforcement of an award has been made.

or corrects an arbitral award. modifying or correcting an arbitral award may be appealed to the Court of Appeals in accordance with the rules and procedure to be promulgated by the Supreme Court. while final and binding.[46] (5) RTC decision of assailed foreign arbitral award appealable Sec.award is subject to judicial review by the RTC which can set aside. rejecting or vacating the award by the RTC are provided under Art. relied upon by KOGIES is applicable insofar as the foreign arbitral awards. modifies. Inc. For foreign or international arbitral awards which must first be confirmed by the RTC. 25 of RA 876. do not oust courts of jurisdiction since these arbitral awards are not absolute and without exceptions as they are still judicially reviewable. vacates. [45] they may only be assailed before the RTC and vacated on the grounds provided under Sec. the grounds for setting aside. reject. vacating. setting aside.—A decision of the Regional Trial Court confirming. Appeal from Court Decision or Arbitral Awards. In this sense. 34(2) of the UNCITRAL Model Law. . are subject to judicial review on specific grounds provided for. rejects. thus: SEC. which also need confirmation by the RTC pursuant to Sec. 46. 23 of RA 876 [44] and shall be recognized as final and executory decisions of the RTC. (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.). 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. or vacate it. Chapter 7 of RA 9285 has made it clear that all arbitral awards. For final domestic arbitral awards. whether domestic or foreign. what this Court held in Chung Fu Industries (Phils.

is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied and incorporated in RA 9285.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. PGSMC has remedies to protect its interests Thus. it has available remedies under RA 9285. Thereafter. PGSMC must submit to the foreign arbitration as it bound itself through the subject contract. With our disquisition above. stipulating that the arbitral award is final and binding. 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. petitioner is correct in its contention that an arbitration clause. . a party may not unilaterally rescind or terminate the contract for whatever cause without first resorting to arbitration. being bound to the contract of arbitration. it must be noted that there is nothing in the subject Contract which provides that the parties may dispense with the arbitration clause. does not oust our courts of jurisdiction as the international arbitral award. Finally. Unilateral rescission improper and illegal Having ruled that the arbitration clause of the subject contract is valid and binding on the parties. and not contrary to public policy. based on the foregoing features of RA 9285. the award of which is not absolute and without exceptions. While it may have misgivings on the foreign arbitration done in Korea by the KCAB. 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. consequently.

are matters proper for arbitration. 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. 1998. 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. whatever findings and conclusions made by the RTC Branch Sheriff from the inspection made on October 28. it is incumbent upon PGSMC to abide by its commitment to arbitrate. Where an arbitration clause in a contract is availing. 1998 RTC Orders pertaining to the grant of the inspection of the equipment and machineries have to be recalled and nullified. and not through an extrajudicial rescission or judicial action. KOGIES instituted an Application for Arbitration before the KCAB in Seoul. Korea pursuant to Art. 15 of the Contract as amended. as the subject matter of the motion is under the primary jurisdiction of the mutually agreed arbitral body. the KCAB inKorea. In addition. Indeed. 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 and October 19. the trial court gravely abused its discretion in granting PGSMC’s Motion for Inspection of Things on September 21. . Thus. 1998. 1998.What this Court held in University of the Philippines v. is not applicable to the instant case on account of a valid stipulation on arbitration. the ownership of equipment and payment of the contract price. For these reasons. we note that on July 1. Cavite.[48] 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. given the alleged fact that PGSMC could not supply the raw materials required to produce the sample LPG cylinders. De Los Angeles[47] and reiterated in succeeding cases. as ordered by the trial court on October 19. 1998. the September 21. and whether there was substantial compliance by KOGIES in the production of the samples. Corollarily.

It is settled that questions of fact cannot be raised in an original action for certiorari. Sec.530.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. Firstly. we find it to be in order considering the factual milieu of the instant case. yet the RTC under Sec. RTC has interim jurisdiction to protect the rights of the parties Anent the July 23. 1998 Order denying the issuance of the injunctive writ paving the way for PGSMC to dismantle and transfer the equipment and machineries. 28 pertinently provides: . However. Petitioner’s position is untenable.[49] Whether or not there was full payment for the machineries and equipment and installation is indeed a factual issue prohibited by Rule 65. 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.000 was for the whole plant and its installation is beyond the ambit of a Petition for Certiorari. 28 of RA 9285 has jurisdiction to hear and grant interim measures to protect vested rights of the parties. The RTC’s determination of such factual issue constitutes grave abuse of discretion and must be reversed and set aside. 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.

(iii) (iv) to prevent irreparable loss or injury. (b) The following rules on interim or provisional relief shall be observed: Any party may request that provisional relief be granted against the adverse party. 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. before constitution of the tribunal. a request for an interim measure of protection. from a Court to grant such measure. or to compel any other appropriate act or omission. and the evidence supporting the request. or modification thereof. who has been nominated. (e) The order shall be binding upon the parties. the party against whom the relief is requested. (f) Either party may apply with the Court for assistance in implementing or enforcing an interim measure ordered by an arbitral tribunal. describing in appropriate detail the precise relief. the grounds for the relief. The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator. . has accepted the nomination and written communication of said nomination and acceptance has been received by the party making the request. to provide security for the performance of any to produce or preserve any evidence. 28. Such relief may be granted: (i) (ii) obligation.—(a) It is not incompatible with an arbitration agreement for a party to request. the request may be made with the Court. (c) The order granting provisional relief may be conditioned upon the provision of security or any act or omission specified in the order. (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. After constitution of the arbitral tribunal and during arbitral proceedings. Grant of interim Measure of Protection.SEC.

(c) Provide a means of preserving assets out of which a subsequent award may be satisfied. and reasonable attorney's fees.(g) A party who does not comply with the order shall be liable for all damages resulting from noncompliance. as it has in relation to proceedings in courts. Art. the arbitral tribunal orders a party to: (a) Maintain or restore the status quo pending determination of the dispute. (b) Take action that would prevent. or (d) Preserve evidence that may be relevant and material to the resolution of the dispute. including all expenses. paid in obtaining the order’s judicial enforcement. Power of arbitral tribunal to order interim measures xxx xxx xxx (2) An interim measure is any temporary measure. irrespective of whether their place is in the territory of this State. 17(2) of the UNCITRAL Model Law on ICA defines an “interim measure” of protection as: Article 17.) Art. whether in the form of an award or in another form. by which. at any time prior to the issuance of the award by which the dispute is finally decided. . or refrain from taking action that is likely to cause. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim measures: Article 17 J. The court shall exercise such power in accordance with its own procedures in consideration of the specific features of international arbitration. current or imminent harm or prejudice to the arbitral process itself. Court-ordered interim measures A court shall have the same power of issuing an interim measure in relation to arbitration proceedings. (Emphasis ours.

Likewise.A. Section 14 of Republic Act (R. otherwise known as the “Alternative Dispute Resolution Act of 2004.560 as monthly rentals or PhP3. which governs the parties’ arbitral dispute. In addition. .” We explicated this way: As a fundamental point. 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. Secondly. allows the application of a party to a judicial authority for interim or conservatory measures.) No.In the recent 2006 case of Transfield Philippines. 9285. 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. Luzon Hydro Corporation. v. PGSMC was losing PhP322. Considering that the LPG plant was non-operational.A. The Rules of the ICC. we were explicit that even “the pendency of an arbitral proceeding does not foreclose resort to the courts for provisional reliefs.87M for 1998 alone without considering the 10% annual rent increment in maintaining the plant.” 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. the pendency of arbitral proceedings does not foreclose resort to the courts for provisional reliefs. considering that the equipment and machineries are in the possession of PGSMC. it has the right to protect and preserve the equipment and machineries in the best way it can. 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. R.[50] It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of protection. Inc. Thirdly.

PGSMC to preserve the subject equipment and machineries Finally. KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on the contract. WHEREFORE. 98-117 are REVERSED and SET ASIDE. while the KCAB can rule on motions or petitions relating to the preservation or transfer of the equipment and machineries as an interim measure. 2000 CA Decision in CA-G. (2) The September 21. 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.Fourthly. PGSMC therefore must preserve and maintain the subject equipment and machineries with the diligence of a good father of a family [51] until final resolution of the arbitral proceedings and enforcement of the award.R. has accorded an interim measure of protection to PGSMC which would otherwise been irreparably damaged. while PGSMC may have been granted the right to dismantle and transfer the subject equipment and machineries. the July 23. 1998 Order of the RTC allowing the transfer of the equipment and machineries given the non-recognition by the lower courts of the arbitral clause. this petition is PARTLY GRANTED.KOGIES is amply protected by the arbitral action it has instituted before the KCAB. . yet on hindsight. SP No. 1998 and October 19. PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its contract with KOGIES. in that: (1) The May 30. Fifth. 49249 is REVERSED and SET ASIDE. by our decision. 1998 RTC Orders in Civil Case No. and corollarily. Moreover. if any. Besides. the award of which can be enforced in our jurisdiction through the RTC.

. JJ. UNIFARM MULTIPURPOSE COOPERATIVE. No. HIDECO SUGAR MILLING CO. (Special Former Sixth Division).OCCIDENTAL LEYTE FARMERS MULTI-PURPOSE COOPERATIVE. INC. INC. Petitioners. INC. (OLFAMCA). Chairperson. PUNO. and ORMOC SUGAR MILLING CO. (UNIFARM) and ORMOC NORTH DISTRICT IRRIGATION MULTI. CARPIO.(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. ORMOC SUGARCANE G. and (4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment and machineries. INC.. andORDERED to preserve and maintain them until the finality of whatever arbitral award is given in the arbitration proceedings. INC. . No pronouncement as to costs. (OSPA)..R. if it had not done so. -versus- CORONA..J. (ONDIMCO). C. and THE COURT OF APPEALS BERSAMIN.Present: PURPOSE COOPERATIVE. SO ORDERED.. LEONARDO-DE CASTRO. INC. 156660 PLANTERS’ ASSOCIATION.

2001 and the Resolution dated October 30. Branch 12 upholding petitioners’ legal personality to demand arbitration from respondents and directing respondents to nominate two arbitrators to represent them in the Board of Arbitrators. Promulgated: August 24.: Before the Court is a special civil action for certiorari assailing the Decision[1] dated December 7. . 1999 issued by the Regional Trial Court (RTC) of Ormoc City. 56166 which set aside the Joint Orders[2] dated August 26.Respondents.R. J. 2009 x----------------------------------------------------------------------------------------x DECISION LEONARDO-DE CASTRO. 1999 and October 29. 2002 of the Court of Appeals (CA) in CA-G. SP No.

. without the written consent of the existing and recognized associations except to Planters whose plantations are situated in areas beyond thirty (30) kilometers from the mill. then the said 1% shall revert to the centrals. The 1% aid shall be used by the association for any purpose that it may deem fit for its members. Article VII of the milling contracts provides that 34% of the sugar and molasses produced from milling the Planter’s sugarcane shall belong to the centrals (respondents) as compensation. Article XX provides that all differences and controversies which may arise between the parties concerning the agreement shall be submitted for discussion to a Board of . Inc. Respondents Hideco Sugar Milling Co. Inc. petitioners presented representative samples of the milling contracts. Petitioners assert that the relationship between respondents and the individual sugar planters is governed by milling contracts. (OSCO) are sugar centrals engaged in grinding and milling sugarcane delivered to them by numerous individual sugar planters. as aid to the said association. 760 Planters enlisted with ONDIMCO.Petitioners are associations organized by and whose members are individual sugar planters (Planters). Article XIV. laborers and their dependents. To buttress this claim. 65% thereof shall go to the Planter and the remaining 1% shall go the association to which the Planter concerned belongs. The membership of each association follows: 264 Planters were members of OSPA. (Hideco) and Ormoc Sugar Milling Co. who may or may not be members of an association such as petitioners. [3] Notably. If the Planter was not a member of any association. 533 Planters belong to OLFAMCA. 617 Planters joined UNIFARM. during the life of the milling contract. paragraph B[4] states that the centrals may not. sign or execute any contract or agreement that will provide better or more benefits to a Planter. and the rest belong to BAP-MPC which did not join the lawsuit.

. respectively. Respondents filed a motion to dismiss on ground of lack of cause of action because petitioners had no milling contract with respondents. Thus.A. 1999. 876. Petitioners. Recovery of Equal Additional Benefits. Petitioners contended that respondents unduly accorded the independent Planters more benefits and thus prayed that an order be issued directing the parties to commence with arbitration in accordance with the terms of the milling contracts. had no legal standing whatsoever to demand or sue for arbitration. without impleading any of their individual members. and not petitioners. docketed as Civil Case Nos. Petitioners claimed that respondents violated the Milling Contract when they gave to independent planters who do not belong to any association the 1% share. executed milling contracts. Respondents and these 80 Planters were the signatories of the milling contracts. two (2) by the Planter and the fifth to be appointed by the four appointed by the parties. consisting of five (5) members—two (2) of which shall be appointed by the centrals. Attorney’s Fees and Damages. On June 4. only some eighty (80) Planters who were members of OSPA. it was the individual Planters. filed twin petitions with the RTC forArbitration under R. instead of reverting said share to the centrals.Arbitration. According to respondents. petitioners. 3696-O and 3697-O. not being privy to the milling contracts. against HIDECO and OSCO. They also demanded that respondents be penalized by increasing their member Planters’ 65% share provided in the milling contract by 1%. one of the petitioners. to 66%. who had legal standing to invoke the arbitration clause in the milling contracts.

if the respondents fail to nominate their two arbitrators. to wit: When these cases were called for hearing today. the RTC issued a Joint Order [5] denying the motion to dismiss. The CA held that petitioners neither . the CA rendered its challenged Decision. directs the respondents to nominate two arbitrators to represent HIDECO/HISUMCO and OSCO in the Board of Arbitrators within fifteen (15) days from receipt of this Order. On December 7. respondents elevated the case to the CA through a Petition for Certiorari with Prayer for the Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction. 2001. 1999. xxx Their subsequent motion for reconsideration having been denied by the RTC in its Joint Order [6] dated October 29. setting aside the assailed Orders of the RTC.On August 26. xxx However. counsels for the petitioners and respondents argued their respective stand. upon proper motion by the petitioners. then the Court will be compelled to use its discretion to appoint the two (2) arbitrators. as embodied in the Milling Contract and R. 876.A. and directing respondents to nominate two arbitrators to the Board of Arbitrators. declaring the existence of a milling contract between the parties. The petitioners have the right to sue in behalf of the planters. The Court is convinced that there is an existing milling contract between the petitioners and respondents and these planters are represented by the officers of the associations. acting on the petitions. This Court. 1999.

and granting such incidental relief as law and justice require. xxx xxx xxx (emphasis ours) The instant recourse is improper because the resolution of the CA was a final order from which the remedy of appeal was available under Rule 45 in relation to Rule 56. but it too was denied by the CA in its Resolution[7] dated October 30. board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its jurisdiction. It is elementary that for certiorari to prosper. In the main. a person aggrieved thereby may file a verified petition in the proper court. the CA concluded that petitioners had no legal personality to bring the action against respondents or to demand for arbitration. speedy and adequate remedy in the course of law. Section 1 of Rule 65 states: Section 1. it must be noted that petitioners filed the instant petition for certiorari under Rule 65 of the Rules of Court. or with grave abuse of discretion amounting to lack or excess of its or his jurisdiction and there is no appeal. or any plain. speedy and adequate . The existence and availability of the right of appeal proscribes resort to certiorari because one of the requirements for availment of the latter is precisely that there should be no appeal. the requirement that there is no appeal. board or officer. Petitioners filed a motion for reconsideration. Thus. 2002. the instant petition. At the outset.had an existing contract with respondents nor were they privy to the milling contracts between respondents and the individual Planters. Petition for Certiorari. to challenge the judgment of the CA. – When any tribunal. nor any plain. it is not enough that the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction. alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal.

they would. [8] The proper mode of recourse for petitioners was to file a petition for review of the CA’s decision under Rule 45. Petitioners principally argue that the CA committed a grave error in setting aside the challenged Joint Orders of the RTC which allegedly unduly curtailed the right of petitioners to represent their planters-members and enforce the milling contracts with respondents. For where the court has jurisdiction over the case. Where the issue or question involved affects the wisdom or legal soundness of the decision – not the jurisdiction of the court to render said decision – the same is beyond the province of a special civil action for certiorari. Stripped to the core. respondents in their own name without impleading the individual Planters. the present petition will still not prosper.[9] Moreover. or demand arbitration from. the pivotal issue here is whether or not petitioners ― sugar planters’ associations ― are clothed with legal personality to file a suit against. Erroneous findings and conclusions do not render the appellate court vulnerable to the corrective writ of certiorari. we agree with the findings of the CA.remedy in the ordinary course of law must likewise be satisfied. . at most constitute errors of law and not abuse of discretion correctable by certiorari. 876. On this point. even if this Court overlooks the procedural lapse committed by petitioners and decides this matter on the merits. Petitioners assert the said which orders were issued in accordance with Article XX of the Milling Contract and the applicable provisions of Republic Act (R.A.) No. even if its findings are not correct.

and known as an agreement to submit to arbitration. No. An agreement to arbitrate is a contract. Except where a compulsory arbitration is provided by statute. save upon such grounds as exist at law for the revocation of any contract. and the rights and liabilities of the parties are controlled by the law of contracts. or the parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between them.[11] In an agreement for arbitration. the relation of the parties is contractual. and an agreement to abide by the award. . 876 (the Arbitration Law)[10] pertinently provides: Sec. either in express language or by implication. usually stipulated upon in a civil contract between the parties. xxx (Emphasis ours) The foregoing provision speaks of two modes of arbitration: (a) an agreement to submit to arbitration some future dispute. – Two or more persons or parties may submit to the arbitration of one or more arbitrators any controversy existing between them at the time of the submission and which may be the subject of an action. 2. the first step toward the settlement of a difference by arbitration is the entry by the parties into a valid agreement to arbitrate.Section 2 of R. Article XX of the milling contract is an agreement to submit to arbitration because it was made in anticipation of a dispute that might arise between the parties after the contract’s execution. termed the submission agreement. and (b) an agreement submitting an existing matter of difference to arbitrators. including an agreement to arbitrate some specific thing. Such submission or contract shall be valid.A. enforceable and irrevocable. the ordinary elements of a valid contract must appear. Persons and matters subject to arbitration.

The requirements that an arbitration agreement must be written and subscribed by the parties thereto were enunciated by the Court in B. included as a stipulation in their individual milling contracts. There is no legal basis for petitioners' purported right to demand arbitration when they are not parties to the milling contracts. only about eighty (80) Planters. it was established that there were more than two thousand (2. . By their own allegation. The other petitioners failed to prove that any of their members had milling contracts with respondents. none of the petitioners were parties or signatories to the milling contracts. No milling contracts signed by members of the other petitioners were presented before the CA.e. The CA further found that of those 2. who were all members of petitioner OSPA. Only eighty (80) Planters who were all members of OSPA were shown to have such an agreement to arbitrate. This circumstance is fatal to petitioners' cause since they anchor their right to demand arbitration from the respondent sugar centrals upon the arbitration clause found in the milling contracts.000) Planters in the district at the time the case was commenced at the RTC in 1999. Simply put. It is likewise undisputed that the eighty (80) milling contracts that were presented were signed only by the member Planter concerned and one of the Centrals as parties. especially when the language of the arbitration clause expressly grants the right to demand arbitration only to the parties to the contract. i.[12] During the proceedings before the CA.000 Planters. CA. In other words. in fact individually executed milling contracts with respondents. much less. petitioners do not have any agreement to arbitrate with respondents.F. Corporation v. they have juridical personalities separate and distinct from that of their member Planters. petitioners are associations duly existing and organized under Philippine law.

to enforce such contract of submission. shall be in writing and subscribed by the party sought to be charged. Form of Arbitration Agreement – A contract to arbitrate a controversy thereafter arising between the parties. as one’s name.that respondents had an agreement to arbitrate with the petitioner associations themselves. That word may sometimes be construed to mean to give consent to or to attest. 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. providing for arbitration of any controversy. shall be deemed a consent of the parties to the jurisdiction of the Court of First Instance of the province or city where any of the parties resides. Even assuming that all the petitioners were able to present milling contracts in favor of their members.A. as well as a submission to arbitrate an existing controversy. 876 provides: Section 4. The making of a contract or submission for arbitration described in section two hereof. or by his lawful agent. it is undeniable that under the arbitration clause in these contracts it is the parties thereto who have the right to submit a controversy or dispute to arbitration. to sign at the end of a document. Section 4 of R. To subscribe means to write underneath.[13] .

whether as a party or as a representative of their member Planters.A. Moreover.Petitioners would argue that they could sue respondents. petitioners could not initiate arbitration proceedings in their own name as they had done in the present case. As mere agents. notwithstanding the fact that they were not signatories in the milling contracts because they are the recognized representatives of the Planters. Even if Section 4 of R. Indeed. every action must be prosecuted or defended in the name of the real party in interest. Rule 3. Parties in interest. 876 allows the agreement to arbitrate to be signed by a representative. or the party entitled to the avails of the suit. they should have brought the suit in the name of the principals that they purportedly represent. This claim has no leg to stand on since petitioners did not sign the milling contracts at all. A real party in interest is the party who stands to be benefited or injured by the judgment in the suit. The individual Planter and the appropriate central were the only signatories to the contracts and there is no provision in the milling contracts that the individual Planter is authorizing the association to represent him/her in a legal action in case of a dispute over the milling contracts. Unless otherwise authorized by law or these Rules. the principal is still the one who has the right to demand arbitration. . to wit: Sec. 2. Section 2 of the Rules of Court requires suits to be brought in the name of the real party in interest. No. even assuming that petitioners are indeed representatives of the member Planters who have milling contracts with the respondents and assuming further that petitioners signed the milling contracts as representatives of their members.

they are the ones who would benefit from and could violate it. Thus. One cannot do so. Court of Appeals. Limbaring[14] that: As applied to the present case. the purposes of this provision are 1) to prevent the prosecution of actions by persons without any right. the plaintiff must be the real party in interest. and for whose benefit it was not expressly made. 2) to require that the actual party entitled to legal relief be the one to prosecute the action. pursuant to sound public policy. and 4) to discourage litigation and keep it within certain bounds.[15] this Court held that the agents of the parties to a contract do not have the right to bring an action even if they . (emphasis ours) In Uy v. When the plaintiff is not the real party in interest. this provision has two requirements: 1) to institute an action. as consistently held by the Court. One having no material interest to protect cannot invoke the jurisdiction of the court as the plaintiff in an action. the case is dismissible on the ground of lack of cause of action. Interest within the meaning of the Rules means material interest or an interest in issue to be affected by the decree or judgment of the case. as distinguished from mere curiosity about the question involved. and 2) the action must be prosecuted in the name of the real party in interest. cannot maintain an action on it. Only the contracting parties are bound by the stipulations in the contract. one who is not a party to a contract.We held in Oco v. xxx xxx xxx The parties to a contract are the real parties in interest in an action upon it. title or interest in the case. Necessarily. even if the contract performed by the contracting parties would incidentally inure to one’s benefit. 3) to avoid a multiplicity of suits.

either as plaintiff or defendant. In sum. To quote from that decision: …[Petitioners] are mere agents of the owners of the land subject of the sale.rendered some service on behalf of their principals. (emphasis and words in brackets ours) The main cause of action of petitioners in their request for arbitration with the RTC is the alleged violation of the clause in the milling contracts involving the proportionate sharing in the proceeds of the harvest. Verily. an authorization from the individual member planter is a sine qua nonfor the association or any of its officers to bring an action before the court of law. The mere fact that petitioners were organized for the purpose of advancing the interests and welfare of their members does not necessarily . Since a contract may be violated only by the parties thereto as against each other. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. As agents. generally. Assuming petitioners had properly brought the case in the name of their members who had existing milling contracts with respondents. the party who would be injured or benefited by a decision in the arbitration proceedings will be the member Planters involved and not petitioners. petitioners are not the real parties in interest in the present case. in an action upon that contract must. In the same manner that an officer of the corporation cannot bring action in behalf of a corporation unless it is clothed with a board resolution authorizing an officer to do so. petitioners must still prove that they were indeed authorized by the said members to institute an action for and on the members' behalf. the real parties-in-interest. from petitioners' own allegations. either be parties to said contract. they only render some service or do something in representation or on behalf of their principals. Petitioners essentially demand that respondents increase the share of the member Planters to 66% to equalize their situation with those of the nonmember Planters.

ART. If a contract should contain some stipulation in favor of a third person. as they contend. Lastly. As we see it. The heir is not liable beyond the value of the property he received from the decedent. except in case where the rights and obligations arising from the contract are not transmissible by their nature. All the pleadings from the RTC to this Court belie this claim. A mere incidental benefit or interest of a person is not sufficient. or by stipulation or by provision of law. . their assigns and heirs. he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. petitioners theorize that they could demand and sue for arbitration independently of the Planters because the milling contract is a contract pour autrui under Article 1311 of the Civil Code. Under Section 3 of Rule 3. 1311. the beneficiary shall be included in the title of the case and shall be deemed to be the real party in interest.mean that petitioners have the authority to represent their members in legal proceedings. petitioners need a power-of-attorney to represent the Planters whether in the lawsuit or to demand arbitration. including the present arbitration proceedings. The contracting parties must have clearly and deliberately conferred a favor upon a third person. petitioners had no intention to litigate the case in a representative capacity. the individual Planters were not even impleaded as parties to this case.[16] None was ever presented here. Contracts take effect only between the parties. where the action is allowed to be prosecuted by a representative. As repeatedly pointed out earlier. In addition.

(2) the stipulation must be a part. said one per centum (1%) shall revert to the CENTRAL. laborers and their dependents. the requisites of a stipulation pour autrui or a stipulation in favor of a third person are the following: (1) there must be a stipulation in favor of a third person. not a mere incidental benefit or interest. The 1% aid shall be used by the association for any purpose that it may deem fit for its members. by any stretch of the imagination. (4) the third person must have communicated his acceptance to the obligor before its revocation. The foregoing provision cannot. as computed from the weight and analysis of the sugarcane delivered by the PLANTER. not the whole. if the PLANTER is not a member of any association recognized by the CENTRAL.To summarize.[17] These requisites are not present in this case. be considered as a stiputation pour autrui or for the benefit of the petitioners. shall belong to the CENTRAL. sixty five per centum (65%) thereof to the PLANTER. Article VI of the Milling Contract is the solitary provision that mentions some benefit in favor of the association of which the planter is a member and we quote: VI SHARE IN THE SUGAR Thirty four per centrum (34%) of the sugar ad molasses resulting from the milling of the PLANTER’s sugarcane. and one per centum (1%) as aid to the association of the PLANTER. of the contract. provided that. The primary rationale for the said stipulation is to ensure a just . (3) the contracting parties must have clearly and deliberately conferred a favor upon a third person. and (5) neither of the contracting parties bears the legal representation or authorization of the third party. or for its other socio-economic projects.

is not sufficient. it is a stipulation meant to benefit the Planters. petition is hereby DISMISSED. No. an incidental benefit or interest. The only interest of the association therein is that its member Planter will not be put at a disadvantage vis a vis other Planters. 175404 . Not only that. the associations’ interest in these milling contracts is only incidental to their avowed purpose of advancing the welfare and rights of their member Planters. which another person gains. the Court finds no grave abuse of discretion nor reversible error committed by the CA in setting aside the Joint Orders issued by the RTC. In other words.[18] Even the clause stating that respondents must secure the consent of the association if respondents grant better benefits to a Planter has for its rationale the protection of the member Planter. Costs against petitioners. In all. INC. To be considered a pour autrui provision. it is explicit that said share reverts back to respondent sugar centrals if the contracting Planter is not affiliated with any recognized association. The contracting parties must have clearly and deliberately conferred a favor upon a third person. Thus. WHEREFORE.share in the proceeds of the harvest to the Planters. G. Even the 1% share to be given to the association as aid does not redound to the benefit of the association but is intended to be used for its member Planters. CARGILL PHILIPPINES.. SO ORDERED.R.

JJ. Present: CARPIO. 2006 of the Court of Appeals (CA) in CA G. ABAD.R. 2006 and the [2] Resolution dated November 13.: Before us is a petition for review on certiorari seeking to reverse and set aside the Decision[1] dated July 31. INC. . 2011 x--------------------------------------------------x DECISION PERALTA. SP No..Petitioner. J. January 31. PERALTA. REGALA Promulgated: Respondent.versus - NACHURA. and MENDOZA. SAN FERNANDO TRADING. Chairperson. J. The factual antecedents are as follows: .. 50304.

to be opened by September 15. as seller. petitioner filed a Motion to Dismiss/Suspend Proceedings and To Refer Controversy to Voluntary Arbitration. the parties agreed that instead of January/February 1997.On June 18. was never consummated because respondent never returned the proposed agreement bearing its written acceptance or conformity nor did respondent open the Irrevocable Letter of Credit at sight. Inc. Inc. despite demands from respondent. Respondent alleged that it entered into a contract dated July 11. Petitioner. It claimed that the contract contained an arbitration clause. respondent San Fernando Regala Trading. [4] wherein it argued that the alleged contract between the parties. In its Complaint. that the delivery of the molasses was to be made in January/February 1997 and payment was to be made by means of an Irrevocable Letter of Credit payable at sight. On July 24. dated July 11. Petitioner contended that the controversy between the parties was whether or not the alleged contract between the parties was legally in existence and the RTC was not the proper forum to ventilate such issue. wherein it was agreed upon that respondent would purchase from petitioner 12. that sometime prior to September 15. failed to comply with its obligations under the contract. filed with the Regional Trial Court (RTC) of Makati City a Complaint for Rescission of Contract with Damages[3] against petitioner Cargill Philippines. 1998. 1996. to be opened upon petitioner's advice. 1996. respondent alleged that it was engaged in buying and selling of molasses and petitioner was one of its various sources from whom it purchased molasses. thus.000 metric tons of Thailand origin cane blackstrap molasses at the price of US$192 per metric ton. 1998. the latter prayed for rescission of the contract and payment of damages. the delivery would be made in April/May 1997 and that payment would be by an Irrevocable Letter of Credit payable at sight. to wit: . 1996. 1996 with petitioner.

thus. Respondent filed an Opposition. considering that the requirements imposed by the provisions of the Arbitration Law had not been complied with. . petitioner maintained that the cited decisions were already inapplicable. wherein it argued that the RTC has jurisdiction over the action for rescission of contract and could not be changed by the subject arbitration clause. 876. having been rendered prior to the effectivity of the New Civil Code in 1950 and the Arbitration Law in 1953.) No. In its Reply. It cited cases wherein arbitration clauses. respondent argued that the arbitration clause relied upon by petitioner is invalid and unenforceable. had been struck down as void for being contrary to public policy since it provided that the arbitration award shall be final and binding on both parties. such as the subject clause in the contract. or the Arbitration Law. the RTC must either dismiss the case or suspend the proceedings and direct the parties to proceed with arbitration.[5] that respondent must first comply with the arbitration clause before resorting to court. ousting the courts of jurisdiction. The Arbitration Award shall be final and binding on both parties. In its Rejoinder.ARBITRATION Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be settled by arbitration in the City of New Yorkbefore the American Arbitration Association. thus. pursuant to Sections 6[6] and 7[7] of Republic Act (R.A.

that the arbitration clause did not violate any of the cited provisions of the Arbitration Law. but did not impose the sanction of dismissal. the RTC rendered an Order. that the arbitral award shall be final and . the RTC did not find the suspension of the proceedings warranted. the RTC found that there was no clear basis for petitioner's plea to dismiss the case. i.[9] In denying the motion. pursuant to Section 7 of the Arbitration Law. The RTC said that the provision directed the court concerned only to stay the action or proceeding brought upon an issue arising out of an agreement providing for the arbitration thereof. disapproval and modification. defendant's “Motion To Dismiss/Suspend Proceedings and To Refer Controversy To Voluntary Arbitration” is hereby DENIED. However. since the Arbitration Law contemplates an arbitration proceeding that must be conducted in the Philippines under the jurisdiction and control of the RTC. and that there must be an appeal from the judgment of the RTC. Defendant is directed to file its answer within ten (10) days from receipt of a copy of this order.By way of Sur-Rejoinder. 1998. the arbitration clause contemplated an arbitration proceeding in New York before a non-resident arbitrator (American Arbitration Association)..e. On September 17. and that the arbitral award is subject to court approval. petitioner contended that respondent had even clarified that the issue boiled down to whether the arbitration clause contained in the contract subject of the complaint is valid and enforceable. The RTC found that the arbitration clause in question contravened these procedures. [8] the dispositive portion of which reads: Premises considered. and before an arbitrator who resides in the country.

binding on both parties. The RTC said that to apply Section 7 of the
Arbitration Law to such an agreement would result in disregarding the other
sections of the same law and rendered them useless and mere surplusages.

Petitioner filed its Motion for Reconsideration, which the RTC denied in
an Order[10] dated November 25, 1998.

Petitioner filed a petition for certiorari with the CA raising the sole
issue that the RTC acted in excess of jurisdiction or with grave abuse of
discretion in refusing to dismiss or at least suspend the proceedings a quo,
despite the fact that the party's agreement to arbitrate had not been
complied with.

Respondent filed its Comment and Reply. The parties were then
required to file their respective Memoranda.

On July 31, 2006, the CA rendered its assailed Decision denying the
petition and affirming the RTC Orders.

In denying the petition, the CA found that stipulation providing for
arbitration in contractual obligation is both valid and constitutional; that
arbitration as an alternative mode of dispute resolution has long been
accepted in our jurisdiction and expressly provided for in the Civil Code; that
R.A. No. 876 (the Arbitration Law) also expressly authorized the arbitration
of domestic disputes. The CA found error in the RTC's holding that Section 7
of R.A. No. 876 was inapplicable to arbitration clause simply because the
clause failed to comply with the requirements prescribed by the law. The CA
found that there was nothing in the Civil Code, or R.A. No. 876, that require
that arbitration proceedings must be conducted only in the Philippines and
the arbitrators should be Philippine residents. It also found that the RTC

ruling effectively invalidated not only the disputed arbitration clause, but all
other agreements which provide for foreign arbitration. The CA did not find
illegal or against public policy the arbitration clause so as to render it null
and void or ineffectual.

Notwithstanding such findings, the CA still held that the case cannot be
brought under the Arbitration Law for the purpose of suspending the
proceedings before the RTC, since in its Motion to Dismiss/Suspend
proceedings, petitioner alleged, as one of the grounds thereof, that the
subject contract between the parties did not exist or it was invalid; that the
said contract bearing the arbitration clause was never consummated by the
parties, thus, it was proper that such issue be first resolved by the court
through an appropriate trial; that the issue involved a question of fact that
the RTC should first resolve. Arbitration is not proper when one of the
parties repudiated the existence or validity of the contract.

Petitioner's motion for reconsideration was denied in a Resolution
dated November 13, 2006.

Hence, this petition.

Petitioner alleges that the CA committed an error of law in ruling that
arbitration cannot proceed despite the fact that: (a) it had ruled, in its
assailed decision, that the arbitration clause is valid, enforceable and binding
on the parties; (b) the case of Gonzales v. Climax Mining Ltd.[11] is
inapplicable here; (c) parties are generally allowed, under the Rules of Court,
to adopt several defenses, alternatively or hypothetically, even if such

defenses are inconsistent with each other; and (d) the complaint filed by
respondent with the trial court is premature.

Petitioner alleges that the CA adopted inconsistent positions when it
found the arbitration clause between the parties as valid and enforceable
and yet in the same breath decreed that the arbitration cannot proceed
because petitioner assailed the existence of the entire agreement containing
the arbitration clause. Petitioner claims the inapplicability of the
cited Gonzales case decided in 2005, because in the present case, it was
respondent who had filed the complaint for rescission and damages with the
RTC, which based its cause of action against petitioner on the alleged
agreement dated July 11, 2006 between the parties; and that the same
agreement contained the arbitration clause sought to be enforced by
petitioner in this case. Thus, whether petitioner assails the genuineness and
due execution of the agreement, the fact remains that the agreement sued
upon provides for an arbitration clause; that respondent cannot use the
provisions favorable to him and completely disregard those that are
unfavorable, such as the arbitration clause.

Petitioner contends that as the defendant in the RTC, it presented two
alternative defenses, i.e., the parties had not entered into any agreement
upon which respondent as plaintiff can sue upon; and, assuming that such
agreement existed, there was an arbitration clause that should be enforced,
thus, the dispute must first be submitted to arbitration before an action can
be instituted in court. Petitioner argues that under Section 1(j) of Rule 16 of
the Rules of Court, included as a ground to dismiss a complaint is when a
condition precedent for filing the complaint has not been complied with; and
that submission to arbitration when such has been agreed upon is one such
condition precedent. Petitioner submits that the proceedings in the RTC
must be dismissed, or at least suspended, and the parties be ordered to
proceed with arbitration.
On March 12, 2007, petitioner filed a Manifestation [12] saying that the
CA's rationale in declining to order arbitration based on the

is inapplicable in this case. Respondent contends that the Gonzales case. It claims that the Arbitration Law which petitioner invoked as basis for its Motion prescribed. is inappropriate. 98-1376 presents the principal issue of whether under the facts alleged in the complaint. i. Respondent contends that Section 8 of the Rules of Court. the decisions of the RTC and the CA declining referral of the dispute between the parties to arbitration would still be correct.. such as complaint. even if such defenses are inconsistent with each other refers to allegations in the pleadings. because it had been ruled that the arbitration agreement can be implemented notwithstanding that one of the parties thereto repudiated the contract which contained such agreement based on the doctrine of separability. counterclaim. which was decided in 2007. appeal by a petition for review oncertiorari under Rule 45. cross-claim.2005 Gonzales ruling had been modified upon a motion for reconsideration decided in 2007. In its Comment. third-party complaint. Respondent argues that even if the existence of the contract and the arbitration clause is conceded. that the CA decision lost its legal basis. that such issue constitutes a judicial question or one that requires the exercise of judicial function and cannot be the subject of arbitration. which it repudiates. respondent argues that certiorari under Rule 65 is not the remedy against an order denying a Motion to Dismiss/Suspend Proceedings and To Refer Controversy to Voluntary Arbitration. its reliance on the contract. a remedy. Finally. but not to a motion to dismiss. respondent is entitled to rescind its contract with petitioner and for the latter to pay damages. This is so because respondent's complaint filed in Civil Case No. alternatively or hypothetically. especially as to the doctrine of separability enunciated therein. respondent claims that petitioner's argument is premised on the existence of a contract with respondent containing a provision for arbitration.e. under its Section 29. However. which allowed a defendant to adopt in the same action several defenses. . answer.

or from a judgment entered upon an award through certiorariproceedings. it must also consider itself bound by the rest of the terms and conditions contained thereunder notwithstanding that respondent may find some provisions to be adverse to its position. x x x An appeal may be taken from an order made in a proceeding under this Act. respondent admitted the existence of all the provisions contained thereunder. Climax Mining Ltd. 876. including the arbitration clause. decided in 2005. is not correct since in the resolution of the Gonzales' motion for reconsideration in 2007. it had been ruled that an arbitration agreement is effective notwithstanding the fact that one of the parties thereto repudiated the main contract which contained it.A. To support its argument. which provides: Section 29. No. respondent cites the case of Gonzales v. but such appeals shall be limited to question of law. x x x. that respondent’s citation of the Gonzales case. wherein we ruled the impropriety of a . that if respondent relies on said contract for its cause of action against petitioner. petitioner insists that respondent filed an action for rescission and damages on the basis of the contract.In its Reply. to show that the validity of the contract cannot be the subject of the arbitration proceeding and that it is the RTC which has the jurisdiction to resolve the situation between the parties herein. We first address the procedural issue raised by respondent that petitioner’s petition for certiorari under Rule 65 filed in the CA against an RTC Order denying a Motion to Dismiss/Suspend Proceedings and to Refer Controversy to Voluntary Arbitration was a wrong remedy invoking Section 29 of R.[13] (Gonzales case). thus.

citing Section 29 of R.A. but not a question of jurisdiction.A. We found that Gonzales’ petition for certiorari raises a question of law. 876 contending thatcertiorari under Rule 65 can be availed of only if there was no appeal or any adequate remedy in the ordinary course of law. Climax-Arimco assailed the mode of review availed of by Gonzales.A. We find the cited case not in point. In the Gonzales case. Climax-Arimco filed before the RTC of Makati a petition to compel arbitration under R. 876.A. any supposed error committed by it will amount to nothing more than an error of judgment . 876 when he ordered Gonzales to proceed with arbitration and appointed a sole arbitrator after making the determination that there was indeed an arbitration agreement. It had been held that as long as a court acts within its jurisdiction and does not gravely abuse its discretion in the exercise thereof.petition for certiorari under Rule 65 as a mode of appeal from an RTC Order directing the parties to arbitration. We then ruled that Gonzales' petition for certiorari should be dismissed as it was filed in lieu of an appeal by certiorari which was the prescribed remedy under R. 876 and the petition was filed far beyond the reglementary period. No. 876 provides for an appeal from such order. that R.A. that Judge Pimentel acted in accordance with the procedure prescribed in R. No. Gonzales filed a petition for certiorari with Us contending that Judge Pimentel acted with grave abuse of discretion in immediately ordering the parties to proceed with arbitration despite the proper. valid and timely raised argument in his Answer with counterclaim that the Addendum Contract containing the arbitration clause was null and void. No. pursuant to the arbitration clause found in the Addendum Contract it entered with Gonzales. Judge Oscar Pimentel of the RTC of Makati then directed the parties to arbitration proceedings. No. No.

notwithstanding the finding that an arbitration agreement existed.” However. In La Naval Drug Corporation v. and adequate remedy in the ordinary course of law. the RTC denied petitioner's motion and directed petitioner to file an answer.[15] it was held that R. petitioner’s resort to a petition for certiorari is the proper remedy. the proceedings shall be dismissed. it acted in excess of its jurisdiction and since there is no plain. Notably. the RTC found the existence of the arbitration clause. petitioner raises before the CA the issue that the respondent Judge acted in excess of jurisdiction or with grave abuse of discretion in refusing to dismiss. or at least suspend.[14] In this case. since it said in its decision that “hardly disputed is the fact that the arbitration clause in question contravenes several provisions of the Arbitration Law x x x and to apply Section 7 of the Arbitration Law to such an agreement would result in the disregard of the afore-cited sections of the Arbitration Law and render them useless and mere surplusages. the proceedings a quo. No. .A. the statute ordains that the court shall issue an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof. If the court. 876 explicitly confines the court’s authority only to the determination of whether or not there is an agreement in writing providing for arbitration. finds that no such agreement exists. despite the fact that the party’s agreement to arbitrate had not been complied with. In issuing the Order which denied petitioner's Motion to Dismiss/Suspend Proceedings and to Refer Controversy to Voluntary Arbitration. In so doing. instead of ordering the parties to proceed to arbitration. speedy. upon the other hand.reviewable by a timely appeal and not assailable by a special civil action of certiorari. In the affirmative. Court of Appeals. the RTC went beyond its authority of determining only the issue of whether or not there is an agreement in writing providing for arbitration by directing petitioner to file an answer.

[19] A contract is required for arbitration to take place and to be binding. the contract sued upon by respondent provides for an arbitration clause. [18] The enactment of R. as an alternative mode of settling disputes. Arbitration. We find merit in the petition.We now proceed to the substantive issue of whether the CA erred in finding that this case cannot be brought under the arbitration law for the purpose of suspending the proceedings in the RTC. [20] Submission to arbitration is a contract [21] and a clause in a contract providing that all matters in dispute between the parties shall be referred to arbitration is a contract. has long been recognized and accepted in our jurisdiction.[22] The provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of the contract and is itself a contract. No.A. as a system of settling commercial disputes of an international character. to wit: ARBITRATION Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be settled by arbitration in the City of . 2004 further institutionalized the use of alternative dispute resolution systems. in the settlement of disputes. [16] R. 9285 on April 2.[23] In this case. including arbitration. is likewise recognized. Foreign arbitration.A. No. 876[17] authorizes arbitration of domestic disputes.

Climax Mining Ltd. (G.No. Arbitration is not proper when one of the parties repudiates the existence or validity of the contract. it is but proper that such issue be first resolved by the court through an appropriate trial. bearing the arbitration clause.161957). it is their contention that the said contract. Apropos is Gonzales v. etc.. A party cannot rely on the contract and claim rights or obligations under it and at the same time impugn its . since petitioner alleged that the contract between the parties did not exist or was invalid and arbitration is not proper when one of the parties repudiates the existence or validity of the contract. As posited by petitioner. We note that in its Motion to Dismiss/Suspend Proceedings. it is our considered opinion that the case at bench still cannot be brought under the Arbitration Law for the purpose of suspending the proceedings before the trial court. where the Supreme Court held that: The question of validity of the contract containing the agreement to submit to arbitration will affect the applicability of the arbitration clause itself. was never consummated by the parties. The issue involves a question of fact that the trial court should first resolve. said the CA: Notwithstanding our ruling on the validity and enforceability of the assailed arbitration clause providing for foreign arbitration. that the alleged contract between the parties do not legally exist or is invalid. That being the case. The Arbitration Award shall be final and binding on both parties.R. The CA ruled that arbitration cannot be ordered in this case. 452 SCRA 607. petitioner Cargill alleged. as one of the grounds thereof. Thus.New York before the American Arbitration Association.

the arbitration clause is being invoked merely as a fallback position. The petitioner must first adduce evidence in support of its claim that there is no valid contract between them and should the court a quo find the claim to be meritorious. No. No. invokes the arbitration clause provided for under the contract which it alleges to be non-existent or invalid. it should be clarified that the case referred to is the case actually filed by Gonzales before the DENR Panel of Arbitrators. had been modified upon a motion for reconsideration in this wise: x x x The adjudication of the petition in G. litigants are enjoined from taking inconsistent positions. No. That is exactly the situation that the separability doctrine. Indeed. seeks to avoid. Consequently. the Gonzales case. the parties may then be spared the rigors and expenses that arbitration in a foreign land would surely entail. we now hold that the validity of the contract containing the agreement to submit to arbitration does not affect the applicability of the arbitration clause itself. 161957. as well as jurisprudence applying it. the petitioner herein cannot claim that the contract was never consummated and. at the same time. 167994 effectively modifies part of the Decision dated 28 February 2005 in G. Apparently. 161957 that the case should not be brought for arbitration.R.existence or validity..R.. which was for the nullification of the main contract on . We add that when it was declared in G. Hence.R.[25] which the CA relied upon for not ordering arbitration.[24] However. Petitioner claims that private respondent's complaint lacks a cause of action due to the absence of any valid contract between the parties. A contrary ruling would suggest that a party's mere repudiation of the main contract is sufficient to avoid arbitration..

who resisted the move of Climax-Arimco for arbitration. enunciates that an arbitration agreement is independent of the main contract. also referred to as the "container" contract. or severability as other writers call it. while Gonzales. . we then applied the doctrine of separability. Respondent claims that in the case before Us. petitioner who is the party insistent on arbitration also claimed in their Motion to Dismiss/Suspend Proceedings that the contract sought by respondent to be rescinded did not exist or was not consummated. since in the Gonzales case. Climax-Arimco sought to enforce the arbitration clause of its contract with Gonzales and the former's move was premised on the existence of a valid contract. as it had already been determined that the case should have been brought before the regular courts involving as it did judicial issues. thus: The doctrine of separability. did not deny the existence of the contract but merely assailed the validity thereof on the ground of fraud and oppression. the arbitration clause/agreement still remains valid and enforceable. the doctrine denotes that the invalidity of the main contract.[27] Respondent argues that the separability doctrine is not applicable in petitioner's case. The separability of the arbitration agreement is especially significant to the determination of whether the invalidity of the main contract also nullifies the arbitration clause. Irrespective of the fact that the main contract is invalid. Indeed. thus.[26] In so ruling that the validity of the contract containing the arbitration agreement does not affect the applicability of the arbitration clause itself. does not affect the validity of the arbitration agreement.the ground of fraud. The arbitration agreement is to be treated as a separate agreement and the arbitration agreement does not automatically terminate when the contract of which it is a part comes to an end.

an arbitration agreement which forms part of the main contract shall not be regarded as invalid or non-existent just because the main contract is invalid or did not come into existence.there is no room for the application of the separability doctrine. it is entitled to rescind the contract with damages. The arbitration agreement clearly expressed the parties' intention that any dispute between them as buyer and seller should be referred to arbitration. a contrary ruling would suggest that a party's mere repudiation of the main contract is sufficient to avoid arbitration and that is exactly the situation that the separability doctrine sought to avoid. Moreover. since there is no container or main contract or an arbitration clause to speak of. In so doing. It is that contract which provides for an arbitration clause which states that “any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be settled before the City of New York by the American Arbitration Association. since the arbitration agreement shall be treated as a separate agreement independent of the main contract. To reiterate. We are not persuaded. Thus. the CA's decision declining referral of the parties' dispute to arbitration is still correct. respondent alleged that a contract exists between respondent and petitioner. It is for the arbitrator and not the courts to decide whether a contract between the parties exists or is valid. we find that even the party who has repudiated the main contract is not prevented from enforcing its arbitration clause. It claims that its complaint in the RTC presents the issue of whether under the facts alleged. it is worthy to note that respondent filed a complaint for rescission of contract and damages with the RTC. and that issue constitutes a judicial . Respondent contends that assuming that the existence of the contract and the arbitration clause is conceded. Applying the Gonzales ruling.

the Panel. respondent cannot rely on In Gonzales. petitioner Gonzales filed a complaint before the Panel of Arbitrators. Climax-Arimco and Australasian Philippines Mining Inc. wherein we held that a panel of arbitrator is bereft of jurisdiction over the complaint for declaration of nullity/or termination of the subject contracts on the grounds of fraud and oppression attendant to the execution of the addendum contract and the other contracts emanating from it. 876 − the Arbitration Law − as provided under the addendum contract. such as those which raised a question of fact or matter requiring the technical knowledge and experience of mining authorities and not when the complaint alleged fraud and oppression which called for the interpretation and application of laws.A. ruled that it had jurisdiction over the dispute maintaining that it was a mining dispute. since the subject complaint arose from a contract between the parties which involved the exploration and exploitation of minerals over the disputed area.question or one that requires the exercise of judicial function and cannot be the subject of an arbitration proceeding. seeking the declaration of nullity or termination of the addendum contract and the other contracts emanating from it on the grounds of fraud and oppression. Respondent cites our ruling inGonzales. No. of the Department of Environment and Natural Resources (DENR) against respondents ClimaxMining Ltd. Region II. . Such argument is misplaced and the Gonzales case to support its argument. since its jurisdiction was limited to the resolution of mining disputes. Respondents assailed the order of the Panel of Arbitrators via a petition for certiorari before the CA. The Panel dismissed the complaint for lack of jurisdiction. However. Mines and Geosciences Bureau. upon petitioner's motion for reconsideration. The CA further ruled that the petition should have been settled through arbitration under R. and that the complaint should have been filed with the regular courts as it involved issues which are judicial in nature. The CA granted the petition and declared that the Panel of Arbitrators did not have jurisdiction over the complaint.

the complaint filed before the Panel was not a dispute involving rights to mining areas. No. has exclusive and original jurisdiction to hear and decide mining disputes. we affirmed the CA’s finding that the Panel of Arbitrators who. rejecting. but essentially judicial issues.A. this Court observed that the trend has been to make the adjudication of mining cases a purely administrative matter. This distinction is carried on even in Rep. and acting in a fraudulent and oppressive manner against petitioner.On a review on certiorari. permits. such as granting of license. We then said that the Panel of Arbitrators did not have jurisdiction over such issue. or approving. We then said: In Pearson v. occupants and claimholders/concessionaires. Intermediate Appellate Court. or was it a dispute involving claimholders or concessionaires. is bereft of jurisdiction over the complaint for declaration of nullity of the addendum contract. lease and contracts. under R. such as mining areas. 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. 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. the Panels' jurisdiction is limited only to those mining disputes which raised question of facts or matters requiring the technical knowledge and experience of mining authorities. reinstating or canceling applications. since it does not . 7942 of the Philippine Mining Act of 1995. mineral agreements.[28] We found that since the complaint filed before the DENR Panel of Arbitrators charged respondents with disregarding and ignoring the addendum contract. Act No. FTAAs or permits and surface owners. 7942. thus. or deciding conflicting applications.

The Decision dated July 31. The validity of the contract cannot be subject of arbitration proceedings.” We made such clarification in our resolution of the motion for reconsideration after ruling that the parties in that case can proceed to arbitration under the Arbitration Law. as provided under the Arbitration Clause in their Addendum Contract.involve the application of technical knowledge and expertise relating to mining. which needs the interpretation and the application of that particular knowledge and expertise possessed by members of that Panel. it should be clarified that the case referred to is the case actually filed by Gonzales before the DENR Panel of Arbitrators. the petition is GRANTED. The parties are . 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. It is in this context that we said that: 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. Allegations of fraud and duress in the execution of a contract are matters within the jurisdiction of the ordinary courts of law.R. 2006 and the Resolution dated November 13. We even clarified in our resolution on Gonzales’ motion for reconsideration that “when we declared that the case should not be brought for arbitration. These questions are legal in nature and require the application and interpretation of laws and jurisprudence which is necessarily a judicial function. SP No. [29] In fact. as it had already been determined that the case should have been brought before the regular courts involving as it did judicial issues. which was for the nullification of the main contract on the ground of fraud. WHEREFORE. 50304 are REVERSED and SET ASIDE. 2006of the Court of Appeals in CA-G.

- versus – CLIMAX MINING LTD. - G. Chairperson. x-------------------------. OSCAR B. SO ORDERED. SR. 2007 x--------------------------------------------------------------------------------. TINGA. and CLIMAX-ARIMCO MINING CORPORATION.x JORGE GONZALES. 161957 Present: PUNO. C. Promulgated: January 22. 167994 versus – HON. pursuant to their July 11. CALLEJO.--------------------------------------------------. Respondents..R. AUSTRIA-MARTINEZ. No.hereby ORDERED toSUBMIT themselves to the arbitration of their dispute. 148 of the REGIONAL TRIAL COURT of MAKATI CITY. J. in his capacity as PRESIDING JUDGE of BR.. G. Petitioner.x . PIMENTEL...R. and AUSTRALASIAN PHILIPPINES MINING INC. JORGE GONZALES and PANEL OF ARBITRATORS. Respondents. Petitioners. and NAZARIO. No. CLIMAX-ARIMCO MINING CORP. JJ. 1996 agreement..

Respondents Climax Mining Ltd.. citing American jurisprudence[5] and the UNCITRAL Model Law. J. and that a claimed rescission of the main contract does not avoid the duty to arbitrate. 876. No. an action separate from the motion to compel arbitration. the Court in its Decision of 28 February 2005[1] denied the Rule 45 petition of petitioner Jorge Gonzales (Gonzales). that is.: This is a consolidation of two petitions rooted in the same disputed Addendum Contract entered into by the parties.) No. reiterating its argument that the case involves a mining dispute that properly falls within the ambit of the Panel’s authority. also known as the Arbitration Law. Gonzales adds that the Court failed to rule on other issues he raised relating to the sufficiency of his complaint before the DENR Panel of Arbitrators and the timeliness of its filing. In G.R. Respondents add that the holding in the Decision that “the case should not be brought under the ambit of the Arbitration Law” appears to be premised on Gonzales’s having “impugn[ed] the existence or validity” . Respondents add that Gonzales’s argument relating to the alleged invalidity of the Addendum Contract still has to be proven and adjudicated on in a proper proceeding.. Pending judgment in such separate action. (respondents) filed their Motion for Partial Reconsideration and/or Clarification [3]seeking reconsideration of that part of the Decision holding that the case should not be brought for arbitration under Republic Act (R. 161957. It held that the DENR Panel of Arbitrators had no jurisdiction over the complaint for the annulment of the Addendum Contract on grounds of fraud and violation of the Constitution and that the action should have been brought before the regular courts as it involved judicial issues.A. Both parties filed separate motions for reconsideration.[4] Respondents. the Addendum Contract remains valid and binding and so does the arbitration clause therein.[6] argue that the arbitration clause in the Addendum Contract should be treated as an agreement independent of the other terms of the contract. Gonzales avers in his Motion for Reconsideration [2] that the Court erred in holding that the DENR Panel of Arbitrators was bereft of jurisdiction. et al.R E S O L U T I ON TINGA.

1[11] of the Addendum Contract and also in accordance with Sec. No. wherein Gonzales challenged the orders of the Regional Trial Court (RTC) requiring him to proceed with the arbitration proceedings as sought by Climax-Arimco Mining Corporation (Climax-Arimco). Climax-Arimco had sent Gonzales a Demand for Arbitration pursuant to Clause 19.R. 167994 is a Rule 65 petition filed on 6 May 2005. If so.R. 167994. it supposedly conveys the idea that Gonzales’s unilateral repudiation of the contract or mere allegation of its invalidity is all it takes to avoid arbitration. Respondent Climax-Arimco filed on 5 April 2000 a motion to set the application to compel arbitration for hearing. 161957 [10] were pending. The case. Nos.R. No.A. the two cases.of the addendum contract. 132 of the RTC of Makati City. G. On 5 June 2006. No. . 00-444. On 23 March 2000. or while the motions for reconsideration in G. was initially raffled to Br. Benito as Presiding Judge. The petition for arbitration was subsequently filed and Climax-Arimco sought an order to compel the parties to arbitrate pursuant to the said arbitration clause.[8] while Gonzales filed his only on 25 July 2006. [7] Respondents filed their Comment on 17 August 2005. We first tackle the more recent case which is G. G. docketed as Civil Case No. with Judge Herminio I. 161957 and 167994. Hence.[9] On the other hand. 5 of R. 876. Both parties were required to file their respective comments to the other party’s motion for reconsideration/clarification. It stemmed from the petition to compel arbitration filed by respondent ClimaxArimco before the RTC of Makati City on 31 March 2000 while the complaint for the nullification of the Addendum Contract was pending before the DENR Panel of Arbitrators.R. were consolidated upon the recommendation of the Assistant Division Clerk of Court since the cases are rooted in the same Addendum Contract. No. respondents submit that the court’s holding that “the case should not be brought under the ambit of the Arbitration Law” be understood or clarified as operative only where the challenge to the arbitration agreement has been sustained by final judgment.

A. holding that the petition for arbitration is a special proceeding that is summary in nature. Gonzales filed a motion to dismiss which he however failed to set for hearing. On 23 August 2000. Clause 19. Climax-Arimco filed a motion for reconsideration of the 24 July 2000 Order. The RTC denied the same in its 24 July 2000 order. Benito for “not possessing the cold neutrality of an impartial judge. On 15 May 2000.[19] Climax-Arimco argued that R. No.On 14 April 2000. on 7 July 2000.[12] questioning the validity of the Addendum Contract containing the arbitration clause.1. Judge Benito issued an Order granting the Motion to Inhibit and ordered the re-raffling of the petition for arbitration.[13] On 31 May 2000.[16] Climax-Arimco then filed a motion to resolve its pending motion to compel arbitration. Gonzales asked the RTC to set the case for pre-trial. the arbitration clause. contained in the Addendum Contract is also null and void ab initio and legally inexistent. oppression and violation of the Constitution. 876 does . Climax-Arimco filed a Motion to Inhibit Judge Herminio I. On 28 July 2000. [15] However. the RTC granted Gonzales’s motion for reconsideration of the 16 June 2000 Order and set the case for pre-trial on 10 August 2000. the RTC issued an order declaring Gonzales’s motion to dismiss moot and academic in view of the filing of his Answer with Counterclaim. [14] This the RTC denied on 16 June 2000. [18] The case was raffled to the sala of public respondent Judge Oscar B. Thus. he filed an Answer with Counterclaim. Pimentel of Branch 148. On 18 May 2000.”[17] On 5 August 2000. it being of the view that Gonzales had raised in his answer the issue of the making of the arbitration agreement. Gonzales alleged that the Addendum Contract containing the arbitration clause is void in view of Climax-Arimco’s acts of fraud.

shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.not authorize a pre-trial or trial for a motion to compel arbitration but directs the court to hear the motion summarily and resolve it within ten days from hearing. and upon being satisfied that the making of the agreement or such failure to comply therewith is not in issue. The court shall hear the parties. Judge Pimentel issued the first assailed order requiring Gonzales to proceed with arbitration proceedings and appointing retired CA Justice Jorge Coquia as sole arbitrator. the proceeding shall be dismissed. containing the arbitration clause. 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. and timely raised argument in his Answer with Counterclaim that the Addendum Contract. Gonzales contends that public respondent Judge Pimentel acted with grave abuse of discretion in immediately ordering the parties to proceed with arbitration despite the proper. If the making of the agreement or default be in issue the court shall proceed to summarily hear such issue.—A party aggrieved by the failure. 876: SEC. 6. If the finding be that no agreement in writing providing for arbitration was made. valid. Judge Pimentel granted the motion and directed the parties to arbitration. Hearing by court. 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. is null and void. Gonzales has also sought a temporary restraining order to prevent the enforcement of the assailed orders directing the parties to arbitrate. and to direct Judge Pimentel to hold a pre-trial conference and the necessary hearings on the determination of the nullity of the Addendum Contract.[21] Gonzales thus filed the Rule 65 petition assailing the Orders dated 13 February 2001 and 7 March 2005 of Judge Pimentel. In support of his argument.A. If . Gonzales invokes Sec. [20] Gonzales moved for reconsideration on 20 March 2001 but this was denied in the Order dated 7 March 2005. On13 February 2001. or that there is no default in the proceeding thereunder. 6 of R. No.

and there is no other venue for this determination other than a pre-trial and hearing on the issue by the trial court which has jurisdiction over the case. No. Both R. Referral to Arbitration.A.A. . inoperativeness. 876 and R. No. the above-quoted provisions of law outline the procedure to be followed in petitions to compel arbitration. They require that the trial court first determine or resolve the issue of nullity.—A court before which an action is brought in a matter which is the subject matter of an arbitration agreement shall. referral of the parties to arbitration by Judge Pimentel despite the timely and properly raised issue of nullity of the Addendum Contract was misplaced and without legal basis. refer the parties to arbitration unless it finds that the arbitration agreement is null and void. or applications have been heard by it. an order shall be made summarily directing the parties to proceed with the arbitration in accordance with the terms thereof. petitions. inoperative or incapable of being performed. or incapability of performance of the arbitration clause/agreement raised by one of the parties to the alleged arbitration agreement must be determined by the court prior to referring them to arbitration. 24 of R. 9285 or the “Alternative Dispute Resolution Act of 2004:” SEC. if at least one party so requests not later than the pre-trial conference. or upon the request of both parties thereafter.A. Gonzales also cites Sec. Gonzales adds that the assailed 13 February 2001 Order also violated his right to procedural due process when the trial court erroneously ruled on the existence of the arbitration agreement despite the absence of a hearing for the presentation of evidence on the nullity of the Addendum Contract. Thus. The court shall decide all motions. 9285 mandate that any issue as to the nullity. which the RTC did not follow.the finding be that a written provision for arbitration was made and there is a default in proceeding thereunder. 24. petitions or applications filed under the provisions of this Act. No. within ten (10) days after such motions. According to Gonzales.

876 confers on the trial court only a limited and special jurisdiction. Climax-Arimco adds that an application to compel arbitration under Sec. He cannot use the special civil action of certiorari as a remedy for a lost appeal. “[t]he 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. Gonzales has not denied that the relevant 15-day period for an appeal had elapsed long before he filed this petition for certiorari. must be filed within 15 days from notice of the final order or resolution appealed from or of the denial of the motion for reconsideration filed in due time. under the Rules of Court.A. No. 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.A. i.Respondent Climax-Arimco. 876 provides for an appeal from such orders. No. and adequate remedy in the ordinary course of law against the challenged orders or acts. or from a judgment entered upon an award through certiorari proceedings. Climax-Arimco then points out that R. and that the court presented with an application to compel arbitration may order arbitration or . No.” and “[i]n the affirmative. The proceedings upon such an appeal. but such appeals shall be limited to questions of law. a jurisdiction solely to determine (a) whether or not the parties have a written contract to arbitrate. 876 gives no room for any other issue to be dealt with in such a proceeding. Climax-Arimco mentions that the special civil action for certiorari employed by Gonzales is available only where there is no appeal or any plain. 29.e. Court of Appeals. speedy. 29 of R.[22] which holds that in a proceeding to compel arbitration. Appeals.—An appeal may be taken from an order made in a proceeding under this Act.’”[23] Climax-Arimco argues that R. and (b) if the defendant has failed to comply with that contract. which. 876: SEC. Respondent cites La Naval Drug Corporation v.A. on the other hand. No. assails the mode of review availed of by Gonzales. including the judgment thereon shall be governed by the Rules of Court in so far as they are applicable.A. Climax-Arimco cites Sec. 6 of R..

depending solely on its finding as to those two limited issues. enforceable and irrevocable. economic or other transaction to be arbitrated. in particular paragraph 1 of Sec. Such grounds may only be raised by way of defense in the arbitration itself and cannot be used to frustrate or delay the conduct of . thus: SEC.dismiss the same. xxxx The grounds Gonzales invokes for the revocation of the Addendum Contract—fraud and oppression in the execution thereof—are also not grounds for the revocation of the arbitration clause in the Contract. If either of these matters is disputed.A. Even the party who has repudiated the main contract is not prevented from enforcing its arbitration provision. between them at the time of the submission and which may be the subject of an action. The statute. the alleged defect or failure of the main contract is not a ground to deny enforcement of the parties’ arbitration agreement. 2 thereof. or the parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between them. Gonzales’s proposition contradicts both the trial court’s limited jurisdiction and the summary nature of the proceeding itself. ClimaxArimco notes. The arbitration agreement is separate and severable from the contract evidencing the parties’ commercial or economic transaction. 2. 876 itself treats the arbitration clause or agreement as a contract separate from the commercial. considers the arbitration stipulation an independent contract in its own right whose enforcement may be prevented only on grounds which legally make the arbitration agreement itself revocable. No.—Two or more persons or parties may submit to the arbitration of one or more arbitrators any controversy existing. Climax-Arimco further notes that Gonzales’s attack on or repudiation of the Addendum Contract also is not a ground to deny effect to the arbitration clause in the Contract. save upon such grounds as exist at law for the revocation of any contract. Such submission or contract shall be valid. Hence. Persons and matters subject to arbitration. R. the court is required to conduct a summary hearing on it. it stresses.

24 of R.A. to order the parties to arbitrate even though the defendant therein has raised the twin issues of validity and nullity of the Addendum Contract and.arbitration proceedings.R. We address the Rule 65 petition in G. instead of trying the case.A. unless it finds that the arbitration agreement is null and void. Climax-Arimco emphasizes that the summary proceeding to compel arbitration under Sec. Instead. 9285 refers to an ordinary action which covers a matter that appears to be arbitrable or subject to arbitration under the arbitration agreement. No.R. 6 of R. 876. It deserves to be dismissed on procedural grounds. 161957 and Gonzales’s Petition for Certiorari in G. 6 of R. Art. consequently. No. 24 of R. No. on request of either or both parties. Thus. refer the parties to arbitration. these should be raised in a separate action for rescission. 167994 essentially turns on whether the question of validity of the Addendum Contract bears upon the applicability or enforceability of the arbitration clause contained therein. Arbitration may even be ordered in the same suit brought upon a matter covered by an arbitration agreement even without waiting for the outcome of the issue of the validity of the arbitration agreement. In the latter case. may. of the arbitration clause therein as well. Sec. 8 of the UNCITRAL Model Law[24] states that where a court before which an action is brought in a matter which is subject of an arbitration agreement refers the parties to arbitration. while Sec. the statute is clear that the court. the arbitral proceedings may proceed even while the action is pending. 876 should not be confused with the procedure in Sec. the main issue raised in the Petition for Certiorari is whether it was proper for the RTC. . 9285. No. it continues. No. No. No. in the proceeding to compel arbitration under R. inoperative or incapable of being performed.R.A. The resolution of both Climax-Arimco’s Motion for Partial Reconsideration and/or Clarification in G. 876 refers to an application to compel arbitration where the court’s authority is limited to resolving the issue of whether there is or there is no agreement in writing providing for arbitration. No. The two pending matters shall thus be jointly resolved.A. 167994 first from the remedial law perspective.A.

Still.e. the use of “may” merely reiterates the principle that the right to appeal is not part of due process of law but is a mere statutory privilege to be exercised only in the manner and in accordance with law.”[25] The Arbitration Law specifically provides for an appeal by certiorari. i. As its nature.A. Inc. R. Instead of filing an answer. Court of Appeals [28] cited by Gonzales support his theory. a petition for certiorari lies only where there is “no appeal. The trial court also found that SPI had failed to file any written notice of demand for arbitration within the period specified in the arbitration clause. [27] Proper interpretation of the aforesaid provision of law shows that the term “may” refers only to the filing of an appeal. the trial court denied the motion to suspend proceedings upon a finding that the Conditions of Contract were not duly executed and signed by the parties. SPI moved to suspend the proceedings alleging that the construction agreement or the Articles of Agreement between the parties contained a clause requiring prior resort to arbitration before judicial intervention.. 876 in the filing of appeals does not prohibit nor discount the filing of a petition for certiorari under Rule 65. Gonzales argues that said case recognized and allowed a petition for certiorari under Rule 65 “appealing the order of the Regional Trial Court disregarding the arbitration agreement as an acceptable remedy. [26] There is no merit to Gonzales’s argument that the use of the permissive term “may” in Sec. Neither can BF Corporation v. (SPI). a petition for review under certiorari under Rule 45 of the Rules of Court that raises pure questions of law. SPI filed a petition for certiorari under . 29. No.”[29] The BF Corporation case had its origins in a complaint for collection of sum of money filed by therein petitioner BF Corporation against Shangri-la Properties. Indeed. It is elementary in remedial law that the use of an erroneous mode of appeal is cause for dismissal of the petition for certiorari and it has been repeatedly stressed that a petition for certiorari is not a substitute for a lost appeal.” and “no plain. The trial court denied SPI's motion for reconsideration and ordered it to file its responsive pleading. speedy and adequate remedy in the ordinary course of law. not to the mode of review to be employed. The trial court found that an arbitration clause was incorporated in the Conditions of Contract appended to and deemed an integral part of the Articles of Agreement.as it was filed in lieu of appeal which is the prescribed remedy and at that far beyond the reglementary period.

among others. which decision could then be elevated to a higher court “in an ordinary appeal. While on its face the question of existence of the arbitration clause is a question of fact that is not proper in a petition for certiorari. which the Court of Appeals. Judge Pimentel acted in accordance with the procedure prescribed in R.Rule 65. Corporation is not availing in the present petition.A. In the present case. The issue raised before the Court was whether SPI had taken the proper mode of appeal before the Court of Appeals. No. BF Corporation alleged. The disquisition in B. any supposed error committed by it will amount to nothing more than an error of judgment reviewable by a timely appeal and not assailable by a special civil action of certiorari. favorably acted upon. the trial court would eventually render a decision on the merits.[31] The situation in B. It has been held that as long as a court acts within its jurisdiction and does not gravely abuse its discretion in the exercise thereof.F. so the Court held. 876 when he ordered Gonzales to proceed with arbitration and appointed a sole arbitrator after making the determination that there was indeed an arbitration agreement. the appellate court had to deal first with a question of law which could be addressed in a certiorari proceeding. The question of jurisdiction in turn depended on the question of existence of the arbitration clause which is one of fact. 876 and existing jurisprudence. yet since the determination of the question obliged the Court of Appeals as it did to interpret the contract documents in accordance with R. In a petition for review before this Court. that the Court of Appeals should have dismissed the petition for certiorari since the order of the trial court denying the motion to suspend proceedings “is a resolution of an incident on the merits” and upon the continuation of the proceedings.[32] Even if we overlook the employment of .F. but not a question of jurisdiction. the question is likewise a question of law which may be properly taken cognizance of in a petition for certiorari under Rule 65.”[30] The Court did not uphold BF Corporation’s argument. Gonzales’s petition raises a question of law. No.A. The question before the Court of Appeals was whether the trial court had prematurely assumed jurisdiction over the controversy. Corporation led to the conclusion that in order that the question of jurisdiction may be resolved.

the wrong remedy in the broader interests of justice.A. Necessarily. was likewise recognized when the Philippines adhered to the United Nations "Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of 1958. Such submission or contract may include question arising out of valuations. or the parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between them. The Civil Code is explicit on the matter. enforceable and irrevocable. Persons and matters subject to arbitration. 876 also expressly authorizes arbitration of domestic disputes. 2.A. No. Such submission or contract shall be valid. a contract is required for arbitration to take place and to be binding. Foreign arbitration. precedent or subsequent to any issue between the parties. Disputes do not go to arbitration unless and until the parties have agreed to abide by the arbitrator’s decision. save upon such grounds as exist at law for the revocation of any contract. R. as a system of settling commercial disputes of an international character.—Two or more persons or parties may submit to the arbitration of one or more arbitrators any controversy existing. 9285 on 2 April 2004further institutionalized the use of alternative dispute resolution systems.[34] The enactment of R. as an alternative mode of settling disputes. including arbitration. appraisals or other controversies which may be collateral.A. . has long been recognized and accepted in our jurisdiction. 71 of the Philippine Senate. giving reciprocal recognition and allowing enforcement of international arbitration agreements between parties of different nationalities within a contracting state. incidental. between them at the time of the submission and which may be the subject of an action. No." under the 10 May 1965 Resolution No. the petition would nevertheless be dismissed for failure of Gonzalez to show grave abuse of discretion. in the settlement of disputes. thus: SEC. 876 recognizes the contractual nature of the arbitration agreement.[33] R. Arbitration. No.

v. 6. shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.A. [35] that a submission to arbitration is a contract. If the making of the agreement or default be in issue the court shall proceed to summarily hear such issue. their assigns and heirs.”[38] The special proceeding under Sec.] Thus.A controversy cannot be arbitrated where one of the parties to the controversy is an infant. an order shall be made . A clause in a contract providing that all matters in dispute between the parties shall be referred to arbitration is a contract. 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. If the finding be that no agreement in writing providing for arbitrationwas made. Pasay Transportation Co. 6 of R.—A party aggrieved by the failure. contracts are respected as the law between the contracting parties and produce effect as between them. the proceeding shall be dismissed. Hearing by court. As a rule. It provides: SEC.[36] and in Del Monte Corporation-USA v. No. 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. Court of Appeals[37] 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. or that there is no default in the proceeding thereunder. unless the appropriate court having jurisdiction approve a petition for permission to submit such controversy to arbitration made by the general guardian or guardian ad litem of the infant or of the incompetent. If the finding be that a written provision for arbitration was made and there is a default in proceeding thereunder. [Emphasis added. and upon being satisfied that the making of the agreement or such failure to comply therewith is not in issue. 876 recognizes the contractual nature of arbitration clauses or agreements. The court shall hear the parties. we held in Manila Electric Co. or a person judicially declared to be incompetent.

This proceeding is merely a summary remedy to enforce the agreement to arbitrate. Court of Appeals. Republic Act 876). v. In the affirmative.[41] The same thrust was made in the earlier case of Mindanao Portland Cement Corp. within ten days after such motions.] This special proceeding is the procedural mechanism for the enforcement of the contract to arbitrate. The jurisdiction of the courts in relation to Sec. The duty of the court in this case is not to resolve the merits of the parties' claims but only to determine if they should proceed to arbitration or not. 6. 876 explicitly confines the court's authority only to the determination of whether or not there is an agreement in writing providing for arbitration. 876 as well as the nature of the proceedings therein was expounded upon in La Naval Drug Corporation v. thus: Since there obtains herein a written provision for arbitration as well as failure on respondent's part to comply therewith. or applications have been heard by it. petitions or applications filed under the provisions of this Act."[40] The cited case also stressed that the proceedings are summary in nature.A. of Florida[42] which held.[39] There it was held that R. finds that no such agreement exists. x x x x[43] Implicit in the summary nature of the judicial proceedings is the separable or independent character of the arbitration clause or .A. No. Respondent's arguments touching upon the merits of the dispute are improperly raised herein. 6 of R. No. 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. the court a quorightly ordered the parties to proceed to arbitration in accordance with the terms of their agreement (Sec. The court shall decide all motions.summarily directing the parties to proceed with the arbitration in accordance with the terms thereof." If the court. upon the other hand. McDonough Construction Co. petitions. "the proceeding shall be dismissed. [Emphasis added. They should be addressed to the arbitrators.

[49] In that case. contending that F & C had fraudulently misrepresented that it was solvent and able for perform its contract when in fact it was not and had even intended to file for bankruptcy after executing the consultancy agreement. F & C served Prima Paint with a notice of intention to arbitrate. 16(1) of the UNCITRAL Model Law and Art. or severability as other writers call it. Irrespective of the fact that the main contract is invalid.[44] and Del Monte Corporation-USA v. Flood & Conklin Manufacturing Co. The consulting agreement contained an arbitration clause. Indeed.[48] The separability doctrine was dwelt upon at length in the U. Pasay Trans. the arbitration clause/agreement still remains valid and enforceable. F & C moved to stay the suit pending . Thus. Co. v. Court of Appeals. Prima Paint and Flood and Conklin (F & C) entered into a consulting agreement whereby F & C undertook to act as consultant to Prima Paint for six years. Prima Paint did not make payments as provided in the consulting agreement. enunciates that an arbitration agreement is independent of the main contract. case of Prima Paint Corp.[46] The separability of the arbitration agreement is especially significant to the determination of whether the invalidity of the main contract also nullifies the arbitration clause. v.[47] The separability of the arbitration clause is confirmed in Art. also referred to as the “container” contract.[45] The doctrine of separability.S. does not affect the validity of the arbitration agreement. 21(2) of the UNCITRAL Arbitration Rules. This was highlighted in the cases of Manila Electric Co. the doctrine denotes that the invalidity of the main contract. Prima Paint sued in court for rescission of the consulting agreement on the ground of fraudulent misrepresentation and asked for the issuance of an order enjoining F & C from proceeding with arbitration. The arbitration agreement is to be treated as a separate agreement and the arbitration agreement does not automatically terminate when the contract of which it is part comes to an end.agreement. sold to Prima Paint a list of its customers and promised not to sell paint to these customers during the same period.

and that where no claim is made that fraud was directed to the arbitration clause itself. High Court held that the court should not order the parties to arbitrate if the making of the arbitration agreement is in issue. but only to the consulting agreement which contained the arbitration agreement. to rule against Gonzales when he alleges that Judge Pimentel acted with grave abuse of discretion in ordering the parties to proceed with arbitration. 4 of the Federal Arbitration Act—which provides that “if a party [claims to be] aggrieved by the alleged failure x x x of another to arbitrate x x x. and only if. a broad arbitration clause will be held to encompass arbitration of the claim that the contract itself was induced by fraud. the proceeding in a petition for arbitration under R. If the making of the arbitration agreement or the failure. therefore the arbitration clause therein is void as well. they have contracted to submit to arbitration.S. the separability of the arbitration clause from the Addendum Contract means that validity or invalidity of the .arbitration. Gonzales’s argument that the Addendum Contract is null and void and.”[51] There is reason. The U. neglect. Supreme Court affirmed. [t]he court shall hear the parties. Second. First. Supreme Court did not address Prima Paint’s argument that it had been fraudulently induced by F & C to sign the consulting agreement and held that no court should address this argument. is not tenable. or refusal to perform the same be in issue. 876 is limited only to the resolution of the question of whether the arbitration agreement exists.S. and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue. No. and the U. Prima Paint was not entitled to trial on the question of whether an arbitration agreement was made because its allegations of fraudulent inducement were not directed to the arbitration clause itself.A. The parties should be ordered to arbitration if. The trial court granted F & C’s motion. therefore. [50] Prima Paint held that “arbitration clauses are ‘separable’ from the contracts in which they are embedded. the court shall make an order directing the parties to proceed to arbitration x x x. Relying on Sec.S. the court shall proceed summarily to the trial thereof”—the U.

the Financial and Technical Assistance Agreement (FTAA) between the parties. Hence.R. not the regular courts.R.R. which was for the nullification of the main contract on the ground of fraud. more particularly that the complaint for nullification of the Addendum Contract pertained to the DENR Panel of Arbitrators. Gonzales raises the same question of jurisdiction.R. and whether the action to declare the nullity of the Addendum Contract on the ground of fraud has prescribed. 161957 that the case should not be brought for arbitration. We add that when it was declared in G. . 161957. seeks to avoid. No. Thus. No. we now hold that the validity of the contract containing the agreement to submit to arbitration does not affect the applicability of the arbitration clause itself. 167994 effectively modifies part of the Decision dated 28 February 2005 in G. 161957 should also be denied. as it had already been determined that the case should have been brought before the regular courts involving as it did judicial issues. The Motion for Reconsideration of Gonzales in G. This brings us back to G.R. 161957. Gonzales’s petition for certiorari should be dismissed. whether the complaint filed before the DENR Panel of Arbitrators alleged ultimate facts of fraud. as well as jurisprudence applying it.Addendum Contract will not affect the enforceability of the agreement to arbitrate. No. such as whether he had ceded his claims over the mineral deposits located within the Addendum Area of Influence. No. In the motion. That is exactly the situation that the separability doctrine. No. it should be clarified that the case referred to is the case actually filed by Gonzales before the DENR Panel of Arbitrators. A contrary ruling would suggest that a party’s mere repudiation of the main contract is sufficient to avoid arbitration. He insists that the subject of his complaint is a mining dispute since it involves a dispute concerning rights to mining areas. and it also involves claimowners. He adds that the Court failed to rule on other issues he raised. The adjudication of the petition in G.

The question of whether Gonzales had ceded his claims over the mineral deposits in the Addendum Area of Influence is a factual question which is not proper for determination before this Court. assigned his interest over the mineral claims all in favor of [Climax-Arimco]” as well as that without the complainant [Gonzales] assigning his interest over the mineral claims in favor of [Climax-Arimco]. oppression. This is to enable the opposing party to controvert the particular facts allegedly constituting the same. which it reiterated in its Order dated 25 June 2002.” [52] This finding was affirmed by the Court of Appeals in its Decision dated 30 July 2003 resolving the petition for certiorari filed by Climax-Arimco in regard to the 18 October 2001 Order of the DENR Panel.[54] Sec. Gonzales does not raise any new argument that would sway the Court even a bit to alter its holding that the complaint filed before the DENR Panel of Arbitrators involves judicial issues which should properly be resolved by the regular courts.R. At all events. the circumstances constituting fraud must be stated with particularity. moreover. Rule 8 of the Rules of Court specifically provides that in all averments of fraud. the question is irrelevant to the issue of jurisdiction of the DENR Panel of Arbitrators. violation of the Constitution and similar conclusions but nowhere did it give any ultimate facts or particulars relative to the allegations. It should be pointed out that the DENR Panel of Arbitrators made a factual finding in its Order dated 18 October 2001. there would be no FTAA to speak of. such allegations entail legal questions which are within the jurisdiction of the courts. The complaint repeatedly mentioned fraud. He alleged fraud or misrepresentation in the execution of the Addendum Contract which is a ground for the annulment of a voidable contract. “through the various agreements. that Gonzales had. No. 5. 161957 which were resolved against him in the Decision of 28 February 2005.These are the same issues that Gonzales raised in his Rule 45 petition in G. Clearly. Perusal of the complaint indeed shows that it failed to state with particularity the ultimate facts and .[53] The Court of Appeals likewise found that Gonzales’s complaint alleged fraud but did not provide any particulars to substantiate it.

WHEREFORE. [55] Under Art. 161957.. or how the misrepresentation was done. It does not state what particulars about Climax-Arimco’s financial or technical capability were misrepresented. 161957 is DENIED WITH FINALITY. C. evidentiary matters that should not be included in the pleading. No. any ruling on the issue of prescription would be uncalled for or even unnecessary.R.R. at best. Such dismissal effectively renders superfluous formal action on the Motion for Partial Reconsideration and/or Clarification filed by Climax Mining Ltd. ABS-CBN BROADCASTING CORPORATION. Gonzales’s claims of fraud and misrepresentation attending the execution of the Addendum Contract are grounds for the annulment of a voidable contract under the Civil Code. SO ORDERED. That being the situation coupled with the fact that this Court is not a trier of facts. The Motion for Reconsideration filed by Jorge Gonzales in G. correspondence and government issuances that reportedly explain the allegations of fraud and misrepresentation. No. CORONA. in the case of fraud. but these are. beginning from the time of the discovery of the same. et al. the Petition for Certiorari in G. in G. Chairperson. No. AZCUNA and LEONARDO-DE CASTRO. No. 169332 Present: PUNO.. However. the time of the discovery of the alleged fraud is not clear from the allegations of Gonzales’s complaint. -versus- G.circumstances constituting the alleged fraud. Petitioner.R.J. 1391 of the Code. . JJ.R. As to the issue of prescription. 167994 is DISMISSED. an action for annulment shall be brought within four years. Incorporated in the body of the complaint are verbatim reproductions of the contracts. SANDOVAL-GUTIERREZ.

81940.: This petition for review on certiorari under Rule 45 of the Rules of Court seeks to set aside the February 16. 2008 x-------------------------------------------------x DECISION CORONA. Promulgated: February 11.. .. 1999. On September 27. a weekly 35-minute community news program for Filipinos in Japan. petitioner ABS-CBN Broadcasting Corporation entered into a licensing agreement with respondent World Interactive Network Systems (WINS) Japan Co. petitioner undertook to transmit the TFC programming signals to respondent which the latter received through its decoders and distributed to its subscribers.. By virtue thereof. J. Respondent. respondent was granted the exclusive license to distribute and sublicense the distribution of the television service known as “The Filipino Channel” (TFC) in Japan. Under the agreement. 2005 decision [1]and August 16. SP No.R.WORLD INTERACTIVE NETWORK SYSTEMS (WINS) JAPAN CO. Consequently. a foreign corporation licensed under the laws of Japan. 2005 resolution[2] of the Court of Appeals (CA) in CA-G. LTD. Ltd. into the TFC programming from March to May 2002..[3]Petitioner claimed that these were “unauthorized insertions” constituting a material breach of their agreement. A dispute arose between the parties when petitioner accused respondent of inserting nine episodes of WINS WEEKLY.

They stipulated on the following issues in their terms of reference (TOR)[6]: 1. Respondent also prayed for damages for petitioner's alleged grant of an exclusive distribution license to another entity. [7] He held that petitioner gave its approval to respondent for the airing of WINS WEEKLY as shown by a . Which party is entitled to the payment of damages they claim and to the other reliefs prayed for? xxx xxx xxx The arbitrator found in favor of respondent. If so. Did such broadcast constitute a material breach of the agreement that is a ground for termination of the agreement in accordance with Section 13 (a) thereof? 3. Thereafter. was the breach seasonably cured under the same contractual provision of Section 13 (a)? 4.[5] The parties appointed Professor Alfredo F. 2002. It contended that the airing of WINS WEEKLY was made with petitioner's prior approval.on May 9. 2002. NHK (Japan Broadcasting Corporation).[4] petitioner notified respondent of its intention to terminate the agreement effective June 10. respondent filed an arbitration suit pursuant to the arbitration clause of its agreement with petitioner. Tadiar to act as sole arbitrator. It also alleged that petitioner only threatened to terminate their agreement because it wanted to renegotiate the terms thereof to allow it to demand higher fees. Was the broadcast of WINS WEEKLY by the claimant duly authorized by the respondent [herein petitioner]? 2.

series of written exchanges between the parties. He also ruled that, had
there really been a material breach of the agreement, petitioner should have
terminated the same instead of sending a mere notice to terminate said
agreement. The arbitrator found that petitioner threatened to terminate the
agreement due to its desire to compel respondent to re-negotiate the terms
thereof for higher fees. He further stated that even if respondent committed
a breach of the agreement, the same was seasonably cured. He then allowed
respondent to recover temperate damages, attorney's fees and one-half of
the amount it paid as arbitrator's fee.
Petitioner filed in the CA a petition for review under Rule 43 of the
Rules of Court or, in the alternative, a petition for certiorari under Rule 65 of
the same Rules, with application for temporary restraining order and writ of
preliminary injunction. It was docketed as CA-G.R. SP No. 81940. It alleged
serious errors of fact and law and/or grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the arbitrator.
Respondent, on the other hand, filed a petition for confirmation of
arbitral award before the Regional Trial Court (RTC) of Quezon City, Branch
93, docketed as Civil Case No. Q-04-51822.
Consequently, petitioner filed a supplemental petition in the CA
seeking to enjoin the RTC of Quezon City from further proceeding with the
hearing of respondent's petition for confirmation of arbitral award. After the
petition was admitted by the appellate court, the RTC of Quezon City issued
an order holding in abeyance any further action on respondent's petition as
the assailed decision of the arbitrator had already become the subject of an

appeal in the CA. Respondent filed a motion for reconsideration but no
resolution has been issued by the lower court to date.[8]
On February 16, 2005, the CA rendered the assailed decision
dismissing ABS-CBN’s petition for lack of jurisdiction. It stated that as the
TOR itself provided that the arbitrator's decision shall be final and
unappealable and that no motion for reconsideration shall be filed, then the
petition for review must fail. It ruled that it is the RTC which has jurisdiction
over questions relating to arbitration. It held that the only instance it can
exercise jurisdiction over an arbitral award is an appeal from the trial court's
decision confirming, vacating or modifying the arbitral award. It further
stated that a petition for certiorari under Rule 65 of the Rules of Court is
proper in arbitration cases only if the courts refuse or neglect to inquire into
the facts of an arbitrator's award. The dispositive portion of the CA decision
read:
WHEREFORE, the instant petition is hereby DISMISSED for
lack of jurisdiction. The application for a writ of injunction and
temporary restraining order is likewise DENIED. The Regional
Trial Court of Quezon City Branch 93 is directed to proceed with
the trial for the Petition for Confirmation of Arbitral Award.
SO ORDERED.

Petitioner moved for reconsideration. The same was denied. Hence,
this petition.
Petitioner contends that the CA, in effect, ruled that: (a) it should have
first filed a petition to vacate the award in the RTC and only in case of denial
could it elevate the matter to the CA via a petition for review under Rule 43

and (b) the assailed decision implied that an aggrieved party to an arbitral
award does not have the option of directly filing a petition for review under
Rule 43 or a petition for certiorari under Rule 65 with the CA even if the
issues raised pertain to errors of fact and law or grave abuse of discretion,
as the case may be, and not dependent upon such grounds as enumerated
under Section 24 (petition to vacate an arbitral award) of RA 876 (the
Arbitration Law). Petitioner alleged serious error on the part of the CA.
The issue before us is whether or not an aggrieved party in a voluntary
arbitration dispute may avail of, directly in the CA, a petition for review
under Rule 43 or a petition for certiorari under Rule 65 of the Rules of Court,
instead of filing a petition to vacate the award in the RTC when the grounds
invoked to overturn the arbitrator’s decision are other than those for a
petition to vacate an arbitral award enumerated under RA 876.
RA 876 itself mandates that it is the Court of First Instance, now the
RTC, which has jurisdiction over questions relating to arbitration, [9] such as a
petition to vacate an arbitral award.
Section 24 of RA 876 provides for the specific grounds for a petition to
vacate an award made by an arbitrator:
Sec. 24. Grounds for vacating award. - In any one of the
following cases, the court must make an order vacating
the award upon the petition of any party to the controversy
when such party proves affirmatively that in the arbitration
proceedings:
(a) The award was procured by corruption, fraud, or other
undue means; or
(b) That there was evident partiality or corruption in the
arbitrators or any of them; or

Court of Appeals[10] gave ample warning that a petition to vacate filed in the RTC which is not based on the grounds enumerated in Section 24 of RA 876 should be dismissed. or (d) That the arbitrators exceeded their powers. that a mutual. the trial court vacated the arbitral award seemingly based on grounds included in Section . or in refusing to hear evidence pertinent and material to the controversy. As RA 876 did not expressly provide for errors of fact and/or law and grave abuse of discretion (proper grounds for a petition for review under Rule 43 and a petition for certiorari under Rule 65. or so imperfectly executed them. Based on the foregoing provisions. the explicit mention of one thing in a statute means the elimination of others not specifically mentioned. and willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights of any party have been materially prejudiced.(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown. that one or more of the arbitrators was disqualified to act as such under section nine hereof. . In that case. final and definite award upon the subject matter submitted to them was not made. Under the legal maxim in statutory construction expressio unius est exclusio alterius. cases” enumerated therein. it necessarily follows that a party may not avail of the latter remedy on the grounds of errors of fact and/or law or grave abuse of discretion to overturn an arbitral award. Adamson v. respectively) as grounds for maintaining a petition to vacate an arbitral award in the RTC. . the law itself clearly provides that the RTC must issue an order vacating an arbitral award only “in any one of the .

xxx xxx xxx It is clear. In affirming the CA. In cases not falling under any of the aforementioned grounds to vacate an award. we held: The Court of Appeals. Evidently. that the award was vacated not because of evident partiality of the arbitrators but because the latter interpreted the contract in a way which was not favorable to herein petitioners and because it considered that herein private respondents. he could not find fault with their impartiality and integrity. the nullification of the award rendered at the case at bar was not made on the basis of any of the grounds provided by law. in reversing the trial court's decision held that the nullification of the decision of the Arbitration Committee was not based on the grounds provided by the Arbitration Law and that xxx private respondents (petitioners herein) have failed to substantiate with any evidence their claim of partiality. Significantly. Which one would depend on the grounds relied upon by petitioner. the CA reversed the decision of the trial court and affirmed the arbitral award. butbecause the respondent appellate court found that the trial court had no legal basis for vacating the award. even as respondent judge ruled against the arbitrator's award. . the Court has already made several pronouncements that a petition for review under Rule 43 or a petition for certiorari under Rule 65 may be availed of in the CA. (Emphasis supplied). by submitting the controversy to arbitration.24 of RA 876 but a closer reading thereof revealed otherwise. xxx xxx xxx It is clear then that the Court of Appeals reversed the trial court not because the latter reviewed the arbitration award involved herein. On appeal. therefore. was seeking to renege on its obligations under the contract.

[12] Thus: SECTION 1. Energy Regulatory Board. Association of Luzon Development Bank Employees. the provisions of this Act and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948. Securities and Exchange Commission.[11] the Court held that a voluntary arbitrator is properly classified as a “quasi-judicial instrumentality” and is.In Luzon Development Bank v. orders or awards of Regional Trial Courts and quasi-judicial agencies. Land Registration Authority. Trademarks and Technology Transfer. This decision was taken into consideration in approving Section 1 of Rule 43 of the Rules of Court. decisions. within the ambit of Section 9 (3) of the Judiciary Reorganization Act. decisions handed down by voluntary arbitrators fall within the exclusive appellate jurisdiction of the CA. Scope. Among these agencies are the Civil Service Commission. final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Office of the President. National Electrification Administration. Under this section. Department of Agrarian Reform under Republic Act . National Telecommunications Commission. boards or commissions. thus. Bureau of Patents.This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from awards. the Employees’ Compensation Commission and the Civil Service Commission. the Labor Code of the Philippines under Presidential Decree No. except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution. as amended. . as amended. (Emphasis supplied) As such. Social Security Commission. Central Board of Assessment Appeals. judgments. including the Securities and Exchange Commission. instrumentalities. 442. resolutions. the Court of Appeals shall exercise: xxx xxx xxx (3) Exclusive appellate jurisdiction over all final judgments. Civil Aeronautics Board.

petitioner's contention that it may avail of a petition for review under Rule 43 under the circumstances of this case is correct. if errors of fact and/or law are raised. Government Service Insurance System. Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable.Number 6657. Construction Industry Arbitration Commission. Semana.[15] These cases held that the proper remedy from the adverse decision of a voluntary arbitrator. As to petitioner's arguments that a petition for certiorari under Rule 65 may also be resorted to. is a petition for review under Rule 43 of the Rules of Court. Employees Compensation Commission.[13] Manila Midtown Hotel v. Borromeo. Thus. Agricultural Inventions Board. we hold the same to be in accordance with the Constitution and jurisprudence. and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. Section 1 of Article VIII of the 1987 Constitution provides that: SECTION 1. Court of Appeals. (Emphasis supplied) . Insurance Commission. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by law.[14] and Nippon Paint Employees Union-Olalia v. Philippine Atomic Energy Commission. (Emphasis supplied) This rule was cited in Sevilla Trading Company v. Board of Investments. and voluntary arbitrators authorized by law.

such as a voluntary arbitrator. Far East Bank and Trust Company[19] definitively outlined several judicial remedies an aggrieved party to an arbitral award may undertake: (1) (2) (3) a petition in the proper RTC to issue an order to vacate the award on the grounds provided for in Section 24 of RA 876. or mixed questions of fact and law. Any agreement stipulating that “the decision of the arbitrator shall be final and unappealable” and “that no further judicial recourse if either party disagrees with the whole or any part of the arbitrator's award may be availed of” cannot be held to preclude in proper cases the power of judicial review which is inherent in courts. Insular Savings Bank v. nor any plain. has gravely abused its discretion in the exercise of its functions and prerogatives.[16] We will not hesitate to review a voluntary arbitrator's award where there is a showing of grave abuse of authority or discretion and such is properly raised in a petition for certiorari[17] and there is no appeal.[18] Significantly. . a petition for review in the CA under Rule 43 of the Rules of Court on questions of fact. of law. and a petition for certiorari under Rule 65 of the Rules of Court should the arbitrator have acted without or in excess of his jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction. although petitioner’s position on the judicial remedies available to it was correct. it is well within the power and jurisdiction of the Court to inquire whether any instrumentality of the Government. Nevertheless. we sustain the dismissal of its petition by the CA. speedy remedy in the course of law.As may be gleaned from the above stated provision.

the questions raised by petitioner in its alternative petition before the CA were the following: A.” was wrong. E. B. [21] While a petition for certiorari under Rule 65 should only limit itself to errors of jurisdiction.[22] Moreover.955.166. that is. law or mixed questions of fact and law. C. Time and again. [20] Proper issues that may be raised in a petition for review under Rule 43 pertain to errors of fact. we have ruled that the remedies of appeal and certiorari are mutually exclusive and not alternative or successive. it cannot be availed of where appeal is the proper remedy or as a substitute for a lapsed appeal.The remedy petitioner availed of. grave abuse of discretion amounting to a lack or excess of jurisdiction. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT THE UNAUTHORIZED BROADCAST DID NOT CONSTITUTE MATERIAL BREACH OF THE AGREEMENT.00 MAY BE AWARDED TO WINS. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT WINS SEASONABLY CURED THE BREACH. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT TEMPERATE DAMAGES IN THE AMOUNT OF P1. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT THE BROADCAST OF “WINS WEEKLY” WAS DULY AUTHORIZED BY ABS-CBN. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN AWARDING .[23] In the case at bar. D. entitled “alternative petition for review under Rule 43 or petition for certiorari under Rule 65.

being an inappropriate mode of appeal. Petitioner cleverly crafted its assignment of errors in such a way as to straddle both judicial remedies. Therefore. [25] Thus. that is. the issues clearly fall under the classification of errors of fact and law — questions which may be passed upon by the CA via a petition for review under Rule 43. Petitioner's ploy was fatal to its cause.00. It must be emphasized that every lawyer should be familiar with the distinctions between the two remedies for it is not the duty of the courts to determine [24] under which rule the petition should fall. should have been dismissed outright by the CA. AMOUNT AND F. An appeal taken either to this Court or the CA by the wrong or inappropriate mode shall be dismissed.ATTORNEY'S FEES IN THE UNREASONABLE UNCONSCIONABLE AMOUNT OF P850. the alternative petition filed in the CA. . A careful reading of the assigned errors reveals that the real issues calling for the CA's resolution were less the alleged grave abuse of discretion exercised by the arbitrator and more about the arbitrator’s appreciation of the issues and evidence presented by the parties. IT IS GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION. THE ERROR COMMITTED BY THE SOLE ARBITRATOR IS NOT A SIMPLE ERROR OF JUDGMENT OR ABUSE OF DISCRETION.000. by alleging serious errors of fact and law (in which case a petition for review under Rule 43 would be proper) and grave abuse of discretion (because of which a petition for certiorari under Rule 65 would be permissible).

R. the petition is hereby DENIED. No. 146717 Present: .: The adjudication of this case proved to be a two-stage process as its constituent parts involve two segregate but equally important issues. G. The first stage relating to the merits of the case. INC.. Chairman. 2006 x---------------------------------------------------------------------------------x RESOLUTION TINGA.. 81940 directing the Regional Trial Court of Quezon City. The February 16. Costs against petitioner. TINGA.R. 2005 decision and August 16. J.. AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED and SECURITY BANK CORPORATION.WHEREFORE. JJ. was resolved in favor of Luzon Hydro Corporation (LHC) with the Court’s Decision[1] of 22 November 2004. specifically the question of the propriety of calling on the securities during the pendency of the arbitral proceedings. Petitioner. SR. Promulgated: May 19. PUNO.versus - LUZON HYDRO CORPORATION. The second stage involving the . J. SP No. and CHICO-NAZARIO. Respondents. Branch 93 to proceed with the trial of the petition for confirmation of arbitral award is AFFIRMED. TRANSFIELD PHILIPPINES. CALLEJO. 2005 resolution of the Court of Appeals in CA-G. AUSTRIA-MARTINEZ. SO ORDERED.

Civil Case No. SP No. (TPI) is guilty of forumshopping when it filed the following suits: 1. 00-1312. CA-G. the petition was however denied by the Court of Appeals.R. Civil Case No. b. which was an appeal by certiorari with prayer for TRO/preliminary prohibitory and mandatory injunction.R. v.[4] 2. The disposal of the forum-shopping charge is crucial to the parties to this case on account of its profound effect on the final outcome of the international arbitral proceedings which they have chosen as their principal dispute resolution mechanism.R. Luzon Hydro Corporation. v. Luzon Hydro Corporation filed before the International Court of Arbitration. entitled Transfield Philippines. 11264/TE/MW. ICC International Court of Arbitration. v. 61901. a.[3] LHC claims that Transfield Philippines. of the Court of Appeals Decision dated 31 January 2001 in CA-G.issue of forum-shopping on which the Court required the parties to submit their respective memoranda[2] is disposed of in this Resolution. Transfield Philippines. filed on 5 February 2001. International Chamber of Commerce (ICC) a request for arbitration dated 3 November 2000 pursuant to the Turnkey Contract between LHC and TPI. ICC Case No. G. 00-1312 was a complaint for injunction with prayer for temporary restraining order and/or writ of preliminary injunction dated 5 November 2000. Luzon Hydro Corporation. recognition and enforcement of the Third Partial Award in case 11264 TE/MW. No. 61901 was a petition for review of the Decision in Civil Case No. Australia and New Zealand Banking Group Limited and Security Bank Corp. Transfield Philippines. Inc. Inc. Inc. SP No. 04-332 filed on 19 March 2004. Inc. which sought to restrain LHC from calling on the securities and . 3. Branch 56 for confirmation. pending before the Regional Trial Court (RTC) of Makati. wherein TPI claimed thatLHC’s call on the securities was premature considering that the issue of default has not yet been resolved with finality. 146717.

as well as the viability of international commercial arbitration as an alternative mode of dispute resolution in the country. [7] Said motion was opposed by LHC in its opposition filed on 2 September 2005.respondent banks from transferring or paying of the securities. On the other hand.815. 04-332. positing that the resolution of the Court on the issue of forum-shopping may have significant implications on the interpretation of the Alternative Dispute Resolution Act of 2004. [8] On 28 October 2005.[6] The Court granted their respective motions. TPI claims that it is LHC which is guilty of forumshopping when it raised the issue of forum-shopping not only in this case. and even manifesting therein that it will present evidence earlier presented before the arbitral tribunal. On 1 August 2005. but also in Civil Case No. They claim that with the finality of the Court’s Decision dated 22 November 2004. 11264/TE/MW. TPI filed its Manifestation and Reiterative Motion [9] to set the case for oral argument. the complaint was denied by the RTC. with LHC arguing that the respective memoranda of the parties are sufficient for the Court to resolve the issue of forum-shopping.00 (including the US$17. 04-332 the very same causes of action in ICC Case No.977. any resolution by the Court on the issue of forum-shopping will not materially affect their role as the banking entities involved are concerned. TPI moved to set the case for oral argument.730.533. seeking recognition and enforcement of the said award.[11] . ANZ Bank and Security Bank moved to be excused from filing a memorandum.00 proceeds of the two standby letters of credit). TPI also submitted a copy thereof with a Supplemental Petition[10] to the Regional Trial Court (RTC). and even asked for the dismissal of the other case based on this ground. TPI argues that LHC is relitigating in Civil Case No. Moreover. where it manifested that the International Chamber of Commerce (ICC) arbitral tribunal had issued its Final Award ordering LHC to pay TPI US$24.[5] Meanwhile.

Together with the primary issue to be settled in the arbitration case is the equally important question of monetary awards to the aggrieved party. (b) identity of rights asserted and relief prayed for. is an arbitral proceeding commenced pursuant to the Turnkey Contract between TPI and LHC. amount to res judicata in the action under consideration. to determine the primary issue of whether the delays in the construction of the project were excused delays. On the other hand. was filed to enjoin LHC from calling on the securities and respondent banks from transferring or paying the securities in case LHC calls on them. However. the precursor of the instant petition. seeking and possibly getting a favorable opinion in another forum. in view of the fact that LHC collected the proceeds.The essence of forum-shopping is the filing of multiple suits involving the same parties for the same cause of action. other than by appeal or the special civil action of certiorari. The arbitration case. and (c) the identity of the two preceding particulars is such that any judgment rendered in the other action will. there must be (a) identity of parties. and Civil Case No. TPI. for forum-shopping to exist. or the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. regardless of which party is successful. or at least such parties as represent the same interests in both actions. 04-332. which would consequently render valid TPI’s claims for extension of time to finish the project. in its appeal and petition for review asked that the same be returned and . Civil Case No. either simultaneously or successively. for the purpose of obtaining a favorable judgment. the relief being founded on the same facts. ICC Case No. the instant petition. 11264 TE/MW. [12] Forumshopping has likewise been defined as the act of a party against whom an adverse judgment has been rendered in one forum.[13] Thus.[14] There is no identity of causes of action between and among the arbitration case. 00-1312.

the banks sought to be enjoined from releasing the funds of the letters of credit. 04-332.A. and of course. allows the application of a party to a judicial authority for interim or conservatory measures. logically involves TPI and LHC only. the instant petition includes Security Bank and ANZ Bank. which governs the parties’ arbitral dispute. in Civil Case No. . absent a final determination by the ICC Arbitral tribunal. 876 (The Arbitration Law)[18] 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. as pointed out by TPI. Meanwhile. it did not pray for the return of the proceeds of the letters of credit. The Rules of the ICC. in contrast. they being the parties to the arbitration agreement whose partial award is sought to be enforced. The Court agrees with TPI that it would be ineffectual to ask the ICC to issue writs of preliminary injunction against Security Bank and ANZ Bank since these banks are not parties to the arbitration case. [17] Likewise. TPI no longer seeks the issuance of a provisional relief.placed in escrow pending the resolution of the disputes before the ICC arbitral tribunal. as well as the attendant responsibilities of the parties therein. What it asked instead is that the said moneys be placed in escrow until the final resolution of the arbitral case. and that the ICC Arbitral tribunal would not even be able to compel LHC to obey any writ of preliminary injunction issued from its end. the pendency of arbitral proceedings does not foreclose resort to the courts for provisional reliefs. on the other hand. As a fundamental point. but rather the issuance of a writ of execution to enforce the Third Partial Award. In comparison.) No. the present petition puts in issue the propriety of drawing on the letters of credit during the pendency of the arbitral case. 04-322. [16] Civil Case No. Moreover. The ICC case only involves TPI and LHC logically since they are the parties to the Turnkey Contract. Neither is there an identity of parties between and among the three (3) cases. Section 14 of Republic Act (R.[15] While the ICC case thus calls for a thorough review of the facts which led to the delay in the construction of the project.

[21] The pertinent portion of the Third Partial Award [22] relied upon by TPI were the answers to Questions 10 to 26.A. also in accordance with law. R. Recognition and Enforcement of Foreign Arbitral Award in Case 11264 TE/MW. v. TPI prayed: 1. That the corresponding writ of execution to enforce Question 31 of the said Third Partial Award. recognized and enforced in accordance with law. and allowed. otherwise known as the “Alternative Dispute Resolution Act of 2004. the signed original copy of which is hereto attached as Annex “H” hereof. be confirmed.” 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. be issued. 9285.In addition. ‘TransfieldPhilippines. Inc. filed on 19 March 2004. 2.[19] TPI’s verified petition in Civil Case No. That TPI be granted such other relief as may be deemed just and equitable. 2004 in Case No. was captioned as one “For: Confirmation.”[20] In the said petition. 04-332. That the THIRD PARTIAL AWARD dated February 18. 3. ICC International Court of Arbitration. Luzon Hydro Corporation (Place of arbitration: Singapore). in accordance with law. to wit: “Question 30 Did TPI [LHC] wrongfully draw upon the security? Yes “Question 31 Is TPI entitled to have returned to it any sum wrongfully taken by LHC for liquidated damages? Yes “Question 32 Is TPI entitled to any acceleration costs? TPI is entitled to the reasonable costs TPI incurred after Typhoon Zeb as a result . 11264/TE/MW made by the ICC International Court of Arbitration.

[26] The UNCITRAL Model Law provides: ARTICLE 35. 9825 provides that international commercial arbitrations shall be governed shall be governed by the Model Law on International Commercial Arbitration (“Model Law”) adopted by the United Nations Commission on International Trade Law (UNCITRAL).A. LHC insists that the declarations or the partial awards issued by the ICC Arbitral Tribunal do not constitute orders for the payment of money and are not intended to be enforceable as such. but merely constitute amounts which will be included in the Final Award and will be taken into account in determining the actual amount payable to the prevailing party. irrespective of the country in which it was made. does not contain such orders. Recognition and enforcement (1) An arbitral award. shall be enforced subject to the provisions of this article and of article 36. Said award does not even contain an order for the payment of money.[24] dated 30 March 2005. 04-332 is styled as an action for money.9 Million which TPI made before the ICC Arbitral Tribunal and before this Court. even the Fifth Partial Award. No. In fact. LHC argues. [23] According to LHC.[25] R. but instead has reserved the quantification of the amounts for a subsequent determination. shall be recognized as binding and. (2) The party relying on an enforcement shall supply the duly or a duly certified copy thereof. the filing of the above case constitutes forumshopping since it is the same claim for the return of US$17. LHC adds that while Civil Case No. the Third Partial Award used as basis of the suit does not authorize TPI to seek a writ of execution for the sums drawn on the letters of credit.of LHC’s 5 February 1999Notice to Correct. upon application in writing to the competent court. agreement referred to in article award or applying for its authenticated original award and the original arbitration 7 or a duly certified copy .

yet there is no order for the payment or return of the proceeds of the said securities. 9285. the drawing was made in good faith. are reserved to a future award. was in default.[28] Meanwhile.thereof. 6. the tribunal issued its Fifth Partial Award[29] on 30 March 2005. Moreover. Order General This Fifth Partial Award deals with many issues of quantum. The outstanding quantum issues will be determined in a future award. TPI is not entitled to any damages or interests due to LHC’s drawing on the securities. was premature. including any issues as to quantum and costs. It contains. which is the final paragraph of the Third Partial Award. reads: 2142. governs the recognition and enforcement of foreign arbitral awards. the tribunal ordered: 6. Said law also provides that the application for the recognition and enforcement of such awards shall be filed with the proper RTC. However. it does not resolve them all.A. among others. It will contain a reconciliation of the amounts awarded to each party and a determination of the . the ICC Arbitral Tribunal had indeed ruled that LHC wrongfully drew upon the securities. to say the least. a declaration that while LHC wrongfully drew on the securities. its application for enforcement. Paragraph 2142. TPI. the party shall supply a duly certified translation thereof into such language. 9285.[27] to which the Philippines is a signatory. True. however. All other issues. Thus. under the mistaken assumption that the contractor.A. [30] In the Fifth Partial Award. the tribunal ruled that while the amount drawn must be returned. The applicability of the New York Convention in the Philippines was confirmed in Section 42 of R. the New York Convention. If the award or agreement is not made in an official language of this State.1 166. While TPI’s resort to the RTC for recognition and enforcement of the Third Partial Award is sanctioned by both the New York Convention and R. In fact.

2 168. namely. the ICC Arbitral tribunal issued its Final Award. the tribunal held: 6. TPI was not yet authorized to seek the issuance of a writ of execution since the quantification of the . This supports LHC’sposition that when the Third Partial Award was released and Civil Case No. in the Declarations part of the award. x x x. $17. The declarations do not constitute orders for the payment of money and are not intended to be enforceable as such.977.977.815. LHC is liable to repay TPI the face value of the securities drawn down by it. The Tribunal will make a number of declarations concerning the quantum issues it has resolved in this Award together with the outstanding liability issues.00 for the return of the securities from LHC.815. In view of this the Tribunal will make no orders for payment in this Fifth Partial Award. It is not liable for any further damages claimed by TPI in respect of the drawdown of the securities. They merely constitute amounts which will be included in the Final Award and will be taken into account in determining the actual amount payable.[33] The fact that the ICC Arbitral tribunal included the proceeds of the securities shows that it intended to make a final determination/award as to the said issue only in the Final Award and not in the previous partial awards.730.) Further.533. as the case may be. Declarations The Tribunal makes the following declarations: xxx 3.net amount payable to Claimant or Respondent. on 9 August 2005.[31] (Emphasis Supplied. which included TPI’s claim of U$17.[32] Finally.00. 167. in essence awarding US$24. 04-332 was filed.

the declarations made in the Third Partial Award do not constitute orders for the payment of money. WHEREFORE. No pronouncement as to costs. SO ORDERED. Notwithstanding the fact that the amount of proceeds drawn on the securities was not disputed the application for the enforcement of the Third Partial Award was precipitately filed. Anent the claim of TPI that it was LHC which committed forumshopping. To repeat. the Court RESOLVES to DISMISS the charges of forumshopping filed by both parties against each other. suffice it to say that its bare allegations are not sufficient to sustain the charge. .amounts due to TPI had not yet been settled by the ICC Arbitral tribunal.