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Chung Fu Industries v. CA (G.R. No.

96283 February 25, 1992)


Facts:
Petitioner Chung Fu Industries (Philippines) Inc. (Chung Fu) and private respondent
Roblecor Philippines, Inc. (Roblecor) forged a construction agreement whereby
respondent contractor committed to construct and finish petitioner corporations
industrial/factory complex. It was stipulated in the contract that In the event of
disputes arising from the performance of subject contract, the issue(s) shall be
submitted for resolution before a single arbitrator chosen by both parties. However,
Roblecor failed to complete the work within the period agreed upon despite the
extension of time allowed to it by Chung Fu. Claiming for the unsatisfied amounts
due, Roblecor filed a petition for Compulsory Arbitration with prayer for Temporary
Restraining Order before respondent RTC. Chung Fu moved to dismiss the petition
and further prayed for the quashing of the restraining order. Subsequent
negotiations between the parties eventually led to the formulation of an arbitration
agreement which, among others, provides: The parties mutually agree that the
decision of the arbitrator shall be final and unappealable. Therefore, there shall be
no further judicial recourse if either party disagrees with the whole or any part of
the arbitrators award. Respondent RTC approved the arbitration agreement and
thereafter, Engr. Willardo Asuncion was appointed as the sole arbitrator. Arbitrator
Asuncion ordered Chung Fu to immediately pay Roblecor and further declared the
award as final and unappealable pursuant to the arbitration agreement. Roblecor
then moved for the confirmation of said award which was accordingly confirmed and
a writ of execution granted to it. Meanwhile, Chung Fu moved to remand the case
for further hearing and asked for a reconsideration of the judgment award claiming
that Arbitrator Asuncion committed twelve (12) instances of grave error by
disregarding the provisions of the parties contract. Chung Fus Motion was denied
and similarly its motion for reconsiderationn. Chung Fu elevated the case via a
petition for certiorari to respondent CA. The respondent appellate court concurred
with the findings and conclusions of respondent trial court. A motion for
reconsideration of said resolution was filed by petitioner, but was similarly denied.
Issue:
Whether or not petitioners are estopped from questioning the arbitration award
allegedly in view of the stipulations in the parties arbitration agreement that the
decision of the arbitrator shall be final and unappealable and that there shall be
no further judicial recourse if either party disagrees with the whole or any part of
the arbitrators award.
Ruling:
We rule in the negative. It is stated explicitly under Art. 2044 of the Civil Code that
the finality of the arbitrators award is not absolute and without exceptions. Where
the conditions described in Articles 2038, 2039 and 2040 applicable to both

compromises and arbitrations are obtaining, the arbitrators award may be annulled
or rescinded. Additionally, under Sections 24 and 25 of the Arbitration Law, there
are grounds for vacating, modifying or rescinding an arbitrators award. Thus, if and
when the factual circumstances referred to in the above-cited provisions are
present, judicial review of the award is properly warranted.
This is where the proper remedy is certiorari under Rule 65 of the Revised Rules of
Court. It is to be borne in mind, however, that this action will lie only where a grave
abuse of discretion or an act without or in excess of jurisdiction on the part of the
voluntary arbitrator is clearly shown. It should be stressed, too, that voluntary
arbitrators, by the nature of their functions, act in a quasi-judicial capacity. It stands
to reason, therefore, that their decisions should not be beyond the scope of the
power of judicial review of this Court.
In the case at bar, we find that petitioners have amply made out a case where the
voluntary arbitrator failed to apply the terms and provisions of the Construction
Agreement which forms part of the law applicable as between the parties, thus
committing a grave abuse of discretion. Furthermore, in granting unjustified extra
compensation to respondent for several items, he exceeded his powers all of
which would have constituted ground for vacating the award under Section 24 (d) of
the Arbitration Law.
Wherefore, the petition is granted. The Resolutions of the CA as well as the Orders
of respondent RTC are hereby SET ASIDE. Accordingly, this case is REMANDED to the
court of origin for further hearing on this matter. All incidents arising therefrom are
reverted to thestatus quo ante until such time as the trial court shall have passed
upon the merits of this case.

DEL MONTE CORP. USA vs. CA (G.R. No. 136154. February 7, 2001)
Facts:
In a Distributorship Agreement, Del Monte Corporation-USA (DMC-USA) appointed
Montebueno Marketing, Inc. (MMI) as the sole and exclusive distributor of its Del
Monte products in the Philippines. Said agreement provided for an arbitration
clause, which states that All disputes arising out of or relating to this Agreement or
the parties relationship, including the termination thereof, shall be resolved by
arbitration in the City of San Francisco, State of California, under the Rules of the
American Arbitration Association. The arbitration panel shall consist of three
members, one of whom shall be selected by DMC-USA, one of whom shall be
selected by MMI, and third of whom shall be selected by the other two members

and shall have relevant experience in the industry. Immediately after its
appointment, MMI appointed Sabrosa Foods, Inc. (SFI), with the approval of DMCUSA, as MMIs marketing arm to concentrate on its marketing and selling function as
well as to manage its critical relationship with the trade. For allegedly violating
Articles 20,21 and 23 of the Philippine Civil Code, MMI, SFI and MMIs Managing
Director Liong Liong C. Sy (LILY SY) filed a Complaint against DMC-USA, Managing
Director of Del Monte Corporations Export Sales Department Paul E. Derby, Jr.,
Regional Director of Del Monte Corporations Export Sales Department Daniel
Collins, Head of Credit Services Department of Del Monte Corporation Luis Hidalgo
and Dewey Ltd. before Malabon RTC. According to them, DMC-USA products
continued to be brought into the country by parallel importers despite the
appointment of MMI as the sole and exclusive distributor of Del Monte products
thereby causing them great embarrassment and substantial damage. They alleged
that the products brought into the country by these importers were aged, damaged,
fake or counterfeit, so that they had to cause the publication of a "warning to the
trade" paid advertisement in leading newspapers. DMC-USA, et al. filed a Motion to
Suspend Proceedings, invoking the arbitration clause. Thereafter, the Motion to
Suspend Proceedings was denied by the RTC on the ground that it "will not serve
the ends of justice and to allow said suspension will only delay the determination of
the issues, frustrate the quest of the parties for a judicious determination of their
respective claims, and/or deprive and delay their rights to seek redress. On appeal,
the CA affirmed the RTC decision. Hence, this petition.
Issue:
WON the dispute between the parties warrants an order compelling them to submit
to arbitration.
Held:
No. The Agreement between DMC-USA and MMI is a contract. The provision to
submit to arbitration any dispute arising therefrom and the relationship of the
parties is part of that contract and is itself a contract. As a rule, contracts are
respected as the law between the contracting parties and produce effect as
between them, their assigns and heirs. Clearly, only parties to the Agreement, i.e.,
DMC-USA and its Managing Director for Export Sales Paul E. Derby, Jr., and MMI and
its Managing Director LILY SY are bound by the Agreement and its arbitration clause
as they are the only signatories thereto. Daniel Collins and Luis Hidalgo, and SFI,
not parties to the Agreement and cannot even be considered assigns or heirs of the
parties, are not bound by the Agreement and the arbitration clause
therein. Consequently, referral to arbitration in the State of California pursuant to
the arbitration clause and the suspension of the proceedings in Civil Case No. 2637MN pending the return of the arbitral award could be called for but only as to DMCUSA and Paul E. Derby, Jr., and MMI and LILY SY, and not as to the other parties in
this case, in accordance with the recent case of Heirs of Augusto L. Salas, Jr. v.

Laperal Realty Corporation, which superseded that of Toyota Motor Philippines Corp.
v. Court of Appeals.
In Toyota, the Court ruled that "[t]he contention that the arbitration clause has
become dysfunctional because of the presence of third parties is untenable
ratiocinating that "[c]ontracts are respected as the law between the contracting
parties" and that "[a]s such, the parties are thereby expected to abide with good
faith in their contractual commitments."
However, in Salas, Jr., only parties to the Agreement, their assigns or heirs
have the right to arbitrate or could be compelled to arbitrate. The Court
went further by declaring that in recognizing the right of the contracting parties to
arbitrate or to compel arbitration, the splitting of the proceedings to arbitration as
to some of the parties on one hand and trial for the others on the other hand, or the
suspension of trial pending arbitration between some of the parties, should not be
allowed as it would, in effect, result in multiplicity of suits, duplicitous
procedure and unnecessary delay.
The object of arbitration is to allow the expeditious determination of a dispute.
Clearly, the issue before us could not be speedily and efficiently resolved in its
entirety if we allow simultaneous arbitration proceedings and trial, or suspension of
trial pending arbitration. Accordingly, the interest of justice would only be served if
the trial court hears and adjudicates the case in a single and complete proceeding.
Equitable PCI Banking Corp. et. al. vs. RCBC Capital Corporation
G.R. No. 182248
December 18, 2008
On May 24, 2000, petitioners Equitable PCI Bank, Inc. (EPCIB) and the individual
shareholders of Bankard, Inc., as sellers, and respondent RCBC Capital Corporation
(RCBC), as buyer, executed a Share Purchase Agreement (SPA) for the purchase of
petitioners interests in Bankard, representing 226,460,000 shares, for the price of
PhP 1,786,769,400. To expedite the purchase, RCBC agreed to dispense with the
conduct of a due diligence audit on the financial status of Bankard. Sec. 5(g), 5(h)
and 7 of the SPA provide for the sellers representations and warranties as to the
financial condition of Bankard. Section 7(a) of the same agreement states that xxx
the remedies (for breach of warranties) shall be available to the Non-Defaulting
Party only if the demand therefor is presented in writing to the Defaulting Party
within three (3) years from the Closing Date (June 2, 2000) except that the remedy
for a breach of the SELLERS representation and warranties in Section 5(h) shall be
available only if the demand therefor is presented to the Defaulting Party in writing
together with schedules and to substantiate such demand, within six (6) months
from the Closing Date.
In a letter dated May 5, 2003, RCBC informed petitioners of its having overpaid the
purchase price of the subject shares, claiming that there was an overstatement of

valuation of accounts amounting to PhP 478 million, resulting in the overpayment of


over PhP 616 million. Thus, RCBC claimed that petitioners violated their warranty, as
sellers, embodied in Sec. 5(g) of the SPA.
Following unsuccessful attempts at settlement, RCBC, in accordance with Sec. 10 of
the SPA, filed a Request for Arbitration dated May 12, 2004 with the ICC-ICA. In their
Answer, the petitioners alleged, among others, that the period for filing of the
asserted claim had already lapsed by force of Sec. 7 of the SPA and that RCBC is
guilty of laches.
After drawn out proceedings with each party alleging deviation and non-compliance
by the other with arbitration rules, the tribunal, rendered a Partial Award dated
September 27, 2007 holding that RCBCs claim is not time-barred, the claim
properly falling under the contemplation of Sec. 5(g) and not Sec. 5(h). The tribunal
also exonerated RCBC from laches, the latter having sought relief within the three
(3)-year period prescribed in the SPA.
On October 26, 2007, RCBC filed with the RTC a Motion to Confirm Partial Award. On
January 8, 2008, the RTC issued the first assailed order confirming the Partial Award
and denying the adverted separate motions to vacate and to suspend and inhibit
filed by the petitioners.
Issue: Whether or not the courts may overturn an arbitral award.
Held:
In Asset Privatization Trust v. Court of Appeals, it was held that, the award of an
arbitrator cannot be set aside for mere errors of judgment either as to the law or as
to the facts. Courts are without power to amend or overrule merely because of
disagreement with matters of law or facts determined by the arbitrators. They will
not review the findings of law and fact contained in an award, and will not
undertake to substitute their judgment for that of the arbitrators, since any other
rule would make an award the commencement, not the end, of litigation. Errors of
law and fact, or an erroneous decision of matters submitted to the judgment of the
arbitrators, are insufficient to invalidate an award fairly and honestly made. Judicial
review of an arbitration is, thus, more limited than judicial review of a trial.
Nonetheless, the arbitrators awards is not absolute and without exceptions. The
arbitrators cannot resolve issues beyond the scope of the submission agreement.
The parties to such an agreement are bound by the arbitrators award only to the
extent and in the manner prescribed by the contract and only if the award is
rendered in conformity thereto. Thus, Sections 24 and 25 of the Arbitration Law
provide grounds for vacating, rescinding or modifying an arbitration award. Where
the conditions described in Articles 2038, 2039 and 2040 of the Civil Code
applicable to compromises and arbitration are attendant, the arbitration award may
also be annulled.

Following Asset Privatization Trust, errors in law and fact would not generally justify
the reversal of an arbitral award. A party asking for the vacation of an arbitral award
must show that any of the grounds for vacating, rescinding, or modifying an award
are present or that the arbitral award was made in manifest disregard of the law.
Otherwise, the Court is duty-bound to uphold an arbitral award.
Moreover, to justify the vacation of an arbitral award on account of "manifest
disregard of the law," the arbiters findings must clearly and unequivocally violate
an established legal precedent. Anything less would not suffice. In the present case,
petitioners, in a bid to establish that the arbitral award was issued in manifest
disregard of the law, allege that the Partial Award violated the principles of
prescription, due process, and estoppel. A review of petitioners arguments would,
however, show that their arguments are bereft of merit. Thus, the Partial Award
cannot be vacated.