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SUCCESSION

1) TESTATE ESTATE OF BOHANAN V. BOHANAN, 106 PHIL. 997 [I960].


FACTS:
On April 24, 1950, the Court of First Instance of Manila, Hon. Rafael Amparo,
presiding, admitted to probate a last will and testament of C. O. Bohanan, executed
by him on April 23, 1944 in Manila. In the said order, the court decided that the
testator was a citizen of the State of Nevada because he had selected this as his
domicile and his permanent residence.

The executor filed a project of partition dated January 24, 1956, making, in
accordance with the provisions of the will, the following adjudications: (1) one-half
of the residuary estate, to the Farmers and Merchants National Bank of Los Angeles,
California, U.S.A. in trust only for the benefit of testator's grandson Edward George
Bohanan, which consists of several mining companies; (2) the other half of the
residuary estate to the testator's brother, F.L. Bohanan, and his sister, Mrs. M. B.
Galbraith, share and share alike. This consist in the same amount of cash and of
shares of mining stock similar to those given to testator's grandson; (3) legacies of
P6,000 each to his (testator) son, Edward Gilbert Bohana, and his daughter, Mary
Lydia Bohanan, to be paid in three yearly installments; (4) legacies to Clara Daen, in
the amount of P10,000.00; Katherine Woodward, P2,000; Beulah Fox, P4,000; and
Elizabeth Hastings, P2,000;

The wife Magadalena C. Bohanan and her two children question the validity of the
testamentary provisions disposing of the estate in the manner above indicated,
claiming that they have been deprived of the legitimate that the laws of the form
concede to them.

ISSUE:

Whether the testamentary dispositions, especially those for the children which are
short of the legitime given them by the Civil Code of the Philippines, are valid.

RULING:

It is not disputed that the laws of Nevada allow a testator to dispose of all his
properties by will (Sec. 9905, Complied Nevada Laws of 1925, supra). It does not
appear that at time of the hearing of the project of partition, the above-quoted
provision was introduced in evidence, as it was the executor's duly to do. The law of
Nevada, being a foreign law can only be proved in our courts in the form and
manner provided for by our Rules. x x x We have, however, consulted the records of
the case in the court below and we have found that during the hearing on October
4, 1954 x x x the foreign law, especially Section 9905, Compiled Nevada Laws. was
introduced in evidence by appellant's (herein) counsel as Exhibits "2". x x x Again
said laws presented by the counsel for the executor and admitted by the Court as
Exhibit "B" during the hearing of the case on January 23, 1950 before Judge Rafael
Amparo. x x x In addition, the other appellants, children of the testator, do not
dispute the above-quoted provision of the laws of the State of Nevada. Under all the
above circumstances, we are constrained to hold that the pertinent law of Nevada,
especially Section 9905 of the Compiled Nevada Laws of 1925, can be taken judicial
notice of by us, without proof of such law having been offered at the hearing of the
project of partition.

2. MICIANO V. BRIMO, 50 PHIL. 867.

FACTS:
Juan Miciano, judicial administrator of the estate in question, filed a scheme of
partition. Andre Brimo, one of the brothers of the deceased (Joseph Brimo) opposed
Micianos participation in the inheritance. Joseph Brimo is a Turkish citizen.

ISSUE:

Whether Turkish law or Philippine law will be the basis on the distribution of Joseph
Brimos estates.

HELD:

Though the last part of the second clause of the will expressly said that it be made
and disposed of in accordance with the laws in force in the Philippine Island, this
condition, described as impossible conditions, shall be considered as not imposed
and shall not prejudice the heir or legatee in any manner whatsoever, even should
the testator otherwise provide. Impossible conditions are further defined as those
contrary to law or good morals. Thus, national law of the testator shall govern in his
testamentary dispositions.

The court approved the scheme of partition submitted by the judicial administrator,
in such manner as to include Andre Brimo, as one of the legatees.

ARBITRATION

1. CHUNG FU INDUSTRIES V. CA (G.R.


NO. 96283)
FACTS:

Petitioner Chung Fu Industries (Philippines) and private respondent Roblecor Philippines, Inc.
forged a construction agreement whereby respondent contractor committed to construct and
finish petitioner corporations industrial/factory complex. In the event of disputes arising from
the performance of subject contract, it was stipulated therein that the issue(s) shall be submitted
for resolution before a single arbitrator chosen by both parties. Roblecor filed a petition for
Compulsory Arbitration with prayer for Temporary Restraining Order before respondent RTC to
claim the unsatisfied account and unpaid progress billings. 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 petitioner to immediately pay respondent contractor and further
declared the award as final and unappealable. 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, petitioners assailed the arbitral award on the following grounds, most of which
allege error on the part of the arbitrator in granting compensation for various items which
apparently are disputed by said petitioners. After closely studying the list of errors, as well as
petitioners discussion of the same in their Motion to Remand Case For Further Hearing and
Reconsideration and Opposition to Motion for Confirmation of Award, we find that petitioners
have amply made out a case where the voluntary arbitrator failed to apply the terms and
provisions of the Construction Agreement which forms part of the law applicable as between the
parties, thus committing a grave abuse of discretion. Furthermore, in granting unjustified extra
compensation to respondent for several items, he exceeded his powers all of which would
have constituted ground for vacating the award under Section 24 (d) of the Arbitration Law.

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 the status quo
ante until such time as the trial court shall have passed upon the merits of this case.

2. PAL v. NLRC, 189 SCRA 555 [1990]

FACTS:

Private respondent Dr. Fabros was employed as flight surgeon at petitioner company. He was
assigned at the PAL Medical Clinic and was on duty from 4:00 in the afternoon until 12:00
midnight.

On Feb.17, 1994, at around 7:00 in the evening, Dr. FAbros left the clinic to have his dinner at
his residence, which was abou t5-minute drive away. A few minutes later, the clinic received an
emergency call from the PAL Cargo Services. One of its employeeshad suffered a heart attack.
The nurse on duty, Mr. Eusebio, called private respondent at home to inform him of the
emergency. The patient arrived at the clinic at 7:50 in the evening and Mr. Eusebio immediately
rushed him to the hospital. When Dr. Fabros reached the clinic at around 7:51 in the evening, Mr.
Eusebio had already left with the patient to the hospital. The patient died the following day.

Upon learning about the incident, PAL Medical Director ordered the Chief Flight Surgeon to
conduct an investigation. In his explanation, Dr. Fabros asserted that he was entitled to a thirty-
minute meal break; that he immediately left his residence upon being informed by Mr. Eusebio
about the emergency and he arrived at the clinic a few minutes later; that Mr. Eusebio panicked
and brought the patient to the hospital without waiting for him.

Finding private respondents explanation unacceptable, the management charged private


respondent with abandonment of post while on duty. He denied that he abandoned his post on
February 17, 1994. He said that he only left the clinic to have his dinner at home. In fact, he
returned to the clinic at 7:51 in the evening upon being informed of the emergency.

After evaluating the charge as well as the answer of private respondent, he was given a
suspension for three months effective December 16, 1994.

Private respondent filed a complaint for illegal suspension against petitioner.

On July 16, 1996, the Labor Arbiter rendered a decision declaring the suspension of private
respondent illegal. It also ordered petitioner to pay private respondent the amount equivalent to
all the benefits he should have received during his period of suspension plus P500,000.00 moral
damages.

Petitioner appealed to the NLRC.

The NLRC, however, dismissed the appeal after finding that the decision of the Labor Arbiter is
supported by the facts on record and the law on the matter. The NLRC likewise denied
petitioners motion for reconsideration.

Hence, this petition.

ISSUE:

1. WON the nullifying of the 3-month suspension by the NLRC erroneous.

2. WON the awarding of moral damages is proper.

HELD:
The petition is PARTIALLY GRANTED. The portion of the assailed decision awarding moral
damages to private respondent is DELETED. All other aspects of the decision are AFFIRMED

1. The legality of private respondents suspension: Dr. Fabros left the clinic that night only to
have his dinner at his house, which was only a few minutes drive away from the clinic. His
whereabouts were known to the nurse on duty so that he could be easily reached in case of
emergency. Upon being informed of Mr. Acostas condition, private respondent immediately
left his home and returned to the clinic. These facts belie petitioners claim of abandonment.
Petitioner argues that being a full-time employee, private respondent is obliged to stay in the
company premises for not less than eight (8) hours. Hence, he may not leave the company
premises during such time, even to take his meals. We are not impressed. Art. 83 and 85 of the
Labor Code read: Art. 83. Normal hours of work. The normal hours of work of any employee
shall not exceed eight (8) hours a day. Health personnel in cities and municipalities with a
population of at least one million (1,000,000) or in hospitals and clinics with a bed capacity of at
least one hundred (100) shall hold regular office hours for eight (8) hours a day, for five (5) days
a week, exclusive of time for meals, except where the exigencies of the service require that such
personnel work for six (6) days or forty-eight (48) hours, in which case they shall be entitled to
an additional compensation of at least thirty per cent (30%) of their regular wage for work on the
sixth day. For purposes of this Article, health personnel shall include: resident physicians,
nurses, nutritionists, dieticians, pharmacists, social workers, laboratory technicians, paramedical
technicians, psychologists, midwives, attendants and all other hospital or clinic personnel.
(emphasis supplied) Art. 85. Meal periods. Subject to such regulations as the Secretary of
Labor may prescribe, it shall be the duty of every employer to give his employees not less than
sixty (60) minutes time-off for their regular meals. Sec. 7, Rule I, Book III of the Omnibus Rules
Implementing the Labor Code further states: Sec. 7. Meal and Rest Periods. Every employer
shall give his employees, regardless of sex, not less than one (1) hour time-off for regular meals,
except in the following cases when a meal period of not less than twenty (20) minutes may be
given by the employer provided that such shorter meal period is credited as compensable hours
worked of the employee; (a) Where the work is non-manual work in nature or does not involve
strenuous physical exertion; (b) Where the establishment regularly operates not less than sixteen
hours a day; (c) In cases of actual or impending emergencies or there is urgent work to be
performed on machineries, equipment or installations to avoid serious loss which the employer
would otherwise suffer; and (d) Where the work is necessary to prevent serious loss of perishable
goods. Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be
considered as compensable working time. Thus, the eight-hour work period does not include the
meal break. Nowhere in the law may it be inferred that employees must take their meals within
the company premises. Employees are not prohibited from going out of the premises as long as
they return to their posts on time. Private respondents act, therefore, of going home to take his
dinner does not constitute abandonment. 2. The award of moral damages: Not every employee
who is illegally dismissed or suspended is entitled to damages. As a rule, moral damages are
recoverable only where the dismissal or suspension of the employee was attended by bad faith or
fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good
customs or public policy In the case at bar, there is no showing that the management of petitioner
company was moved by some evil motive in suspending private respondent. It suspended private
respondent on an honest, albeit erroneous, belief that private respondents act of leaving the
company premises to take his meal at home constituted abandonment of post which warrants the
penalty of suspension. Under the circumstances, we hold that private respondent is not entitled to
moral damages.

3. BF CORPORATION V. CA, 288 SCRA 267 (1998)

FACTS:

Petitioner and respondent Shangri-la Properties, Inc. entered into an agreement


whereby the latter engaged the former to construct the main structure of the "EDSA
Plaza Project," a shopping mall complex in Mandaluyong. Petitioner incurred delay in
the construction work that SPI considered as "serious and substantial." On the other
hand, according to petitioner, the construction works "progressed in faithful
compliance with the First Agreement until a fire broke out damaging Phase I" of the
Project. Hence, SPI proposed the re-negotiation of the agreement between them.

Petitioner and SPI entered into a written agreement denominated as "Agreement for
the Execution of Builder's Work for the EDSA Plaza Project." Said agreement would
cover the construction work on said project as of May 1, 1991 until its eventual
completion. According to SPI, petitioner "failed to complete the construction works
and abandoned the project." This resulted in disagreements between the parties as
regards their respective liabilities under the contract.

Petitioner filed with the RTC of Pasig a complaint for collection of the balance due
under the construction agreement. SPI and its co-defendants filed a motion to
suspend proceedings instead of filing an answer. The motion was anchored on
defendants' allegation that the formal trade contract for the construction of the
project provided for a clause requiring prior resort to arbitration before judicial
intervention could be invoked in any dispute arising from the contract. Petitioner
opposed said motion claiming that there was no formal contract between the
parties although they entered into an agreement defining their rights and
obligations in undertaking the project.

Thereafter, upon a finding that an arbitration clause indeed exists, the lower court
denied the motion to suspend proceedings as the Conditions of Contract was not
duly executed or signed by the parties, and the failure of the defendants to submit
any signed copy of the said document,.

The lower court then ruled that, assuming that the arbitration clause was valid and
binding, still, it was "too late in the day for defendants to invoke arbitration.
Considering the fact that under the supposed Arbitration Clause invoked by
defendants, it is required that "Notice of the demand for arbitration of a dispute
shall be filed in writing with the other party . . . . in no case . . . . later than the time
of final payment . . . "which apparently, had elapsed because defendants have
failed to file any written notice of any demand for arbitration during the said long
period of one year and eight months. The CA annulled the orders of the RTC.

ISSUE:

Wether or not a petition for certiorari is proper

HELD:

Yes. The rule that the special civil action of certiorari may not be invoked as a
substitute for the remedy of appeal. The Court has likewise ruled that "certiorari will
not be issued to cure errors in proceedings or correct erroneous conclusions of law
or fact. As long as a court acts within its jurisdiction, any alleged errors committed
in the exercise of its jurisdiction will amount to nothing more than errors of
judgment which are reviewable by timely appeal and not by a special civil action of
certiorari."

The question of jurisdiction, which is a question of law depends on the


determination of the existence of the arbitration clause, which is a question of fact.
In the instant case, the lower court found that there exists an arbitration clause.
However, it ruled that in contemplation of law, said arbitration clause does not exist.
It is that mode of appeal taken by private respondents before the CA that is being
questioned by the petitioners before this Court. But at the heart of said issue is the
question of whether there exists an Arbitration Clause because if an Arbitration
Clause does not exist, then private respondents took the wrong mode of appeal
before the CA.

For this Court to be able to resolve the question of whether private respondents
took the proper mode of appeal, which, incidentally, is a question of law, then it has
to answer the core issue of whether there exists an Arbitration Clause which,
admittedly, is a question of fact.

Moreover, where a rigid application of the rule that certiorari cannot be a substitute
for appeal will result in a manifest failure or miscarriage of justice, the provisions of
the Rules of Court which are technical rules may be relaxed. As we shall show
hereunder, had the CA dismissed the petition for certiorari, the issue of whether or
not an arbitration clause exists in the contract would not have been resolved in
accordance with evidence extant in the record of the case. Consequently, this would
have resulted in a judicial rejection of a contractual provision agreed by the parties
to the contract.

In the same vein, this Court holds that the question of the existence of the
arbitration clause in the contract between petitioner and private respondents is a
legal issue that must be determined in this petition for review on certiorari.

4. EASTBOARD NAVIGATION, LTD. V. JUAN YSMAEL & CO., INC., 102 PHIL. 1
[1957].

FACTS:

"On July 25, 1949, Atkins, Kroll & Co., Inc., Manila, wrote defendant Juan Ysmael & Co., Inc.,
(letter of Toronto, Canada, owners of the S/S Eastwater, 'have accepted your terms of payment
and are agreed to charter the S/S Eastwater to Juan Ysmael & Co., Inc., Manila, (to load cargo of
scrap iron in the Philippines for Buenos Aires)

On September 8, 1949, Atkins, Kroll & Co., Inc., Manila again wrote defendant
company. On October 1, 1949, the Bank of America, Manila Office wrote defendant
company. On December 3, 1949, defendant Company wrote the Bank of America
(Manila).

On December 3, 1949, defendant Company wrote the Bank of America (Manila)(letter Exhibit 3-
B) as follows:

"Please transmit by telegraphic transfer to Irving Trust Company, New York, the amount of Ten
Thousand Dollars ($10,000), for the account of Eastboard Navigation Ltd., Toronto, Canada, to
be held as deposit for demurrage due the SS Eastwater, together with the $15,000 previously
remitted to them. The amount shall be held pending result of the arbitration of the dispute
between this Company and Eastboard Navigation."

The dispute mentioned in its preceding letter having arisen, under date of April 5, 1950, the
defendant cabled Attys. Manning, Harnish and Holinger of New York City as follows: 'Through
recommendation of Mr. Morris Lipsett we request you kindly present our case before Arbitration
Board re charter vessel S/S Eastwater Writing" (Exhibit 2). And in its letter Exhibit 2-B of the
same date to said attorneys, defendant confirmed its request.
Pursuant to said arbitration agreement, the three arbitrators in New York City
passed upon the difference between the plaintiff and the defendant after having
heard and received evidence submitted by both sides,' ands rendered their
arbitration decision (Exhibit C). This arbitration decision was presented by plaintiff
to the U.S District Court, Southern District of New York, for confirmation, (Admiralty
No. A165-362) and said Court confirmed the said arbitration decision in its Order
and Final Decree of August 15, 1950, (Exhibit D) ordering that the aforesaid award
of arbitrators be and the same hereby is in all respects confirmed', and "that the
said movant, Eastboard Navigation, Ltd., recover of and from the said respondent
Juan Ysmael & Company, Inc., the sum of $53,037.89, with interest thereon from the
20th day of June, 1950, amounting to $488.24, together the movant's cost taxed in
the sum of $40.00 and amounting in all to the sum of $53,566.13 with interest
thereon until paid.'

Plaintiff brought this action to enforce the aforesaid "Order and Final Decree"
pursuant to Section 48, Rule 39 of the Rules of Court which, among others, provides
"In case of a judgment is presumptive evidence of a right as between the parties
and their successors in interest by a subsequent title; but the judgment may be
repelled by evidence of a want of jurisdiction, want of notice to the party, collusion,
fraud or clear mistake of law or fact."

ISSUE:

Whether or not plaintiff has the capacity to bring the present action.

RULING:

While plaintiff is a foreign corporation without license to transact business in the Philippines, it
does not follow that it has no capacity to bring the present action. Such license is not necessary
because it is not engaged in business in the Philippines. In fact, the transaction herein involved is
the first business undertaken by plaintiff in the Philippines, although on a previous occasion
plaintiff's vessel was chartered by the National Rice and Corn Corporation to carry rice cargo
from abroad to the Philippines. These two isolated transactions do not constitute engaging in
business in the Philippines within the purview of Sections 68 and 69 of the Corporation Law so
as to bar plaintiff from seeking redress in our courts. (Marshall Wens Co. vs. Henry W. Elser &
Co. 49 Phil., 70; Pacific Vegetable Oil Corporation vs. Angel O. Singson, G.R. No. L-7917, April
29, 1955)'. 102 Phil., pp. 1, 18.

5. LUZON DEVELOPMENT BANK vs. ASSO. OF LDB EMPLOYEES and GARCIA

FACTS:

From a submission agreement of the LDB and the Association of Luzon Development Bank
Employees (ALDBE) arose an arbitration case to resolve the following issue:

Whether or not the company has violated the CBA provision and the MOA on promotion.

At a conference, the parties agreed on the submission of their respective Position Papers. Atty.
Garcia, in her capacity as Voluntary Arbitrator, received ALDBEs Position Paper ; LDB, on
the other hand, failed to submit its Position Paper despite a letter from the Voluntary Arbitrator
reminding them to do so. As of May 23, 1995 no Position Paper had been filed by LDB.

Without LDBs Position Paper, the Voluntary Arbitrator rendered a decision disposing as
follows:
WHEREFORE, finding is hereby made that the Bank has not adhered to the CBA provision nor
the MOA on promotion.

Hence, this petition for certiorari and prohibition seeking to set aside the decision of the
Voluntary Arbitrator and to prohibit her from enforcing the same.

ISSUE:

Whether or not a voluntary arbiters decision is appealable to the CA and not the SC.

HELD:

The Court resolved to REFER this case to the Court of Appeals.

YES

The jurisdiction conferred by law on a voluntary arbitrator or a panel of such arbitrators is quite
limited compared to the original jurisdiction of the labor arbiter and the appellate jurisdiction of
the NLRC for that matter. The (d)ecision, awards, or orders of the Labor Arbiter are final and
executory unless appealed to the Commission Hence, while there is an express mode of
appeal from the decision of a labor arbiter, Republic Act No. 6715 is silent with respect to an
appeal from the decision of a voluntary arbitrator.

Yet, past practice shows that a decision or award of a voluntary arbitrator is, more often than not,
elevated to the SC itself on a petition for certiorari, in effect equating the voluntary arbitrator
with the NLRC or the CA. In the view of the Court, this is illogical and imposes an unnecessary
burden upon it.

In Volkschel Labor Union, et al. v. NLRC, et al., 8 on the settled premise that the judgments of
courts and awards of quasi-judicial agencies must become final at some definite time, this
Court ruled that the awards of voluntary arbitrators determine the rights of parties; hence, their
decisions have the same legal effect as judgments of a court. In Oceanic Bic Division (FFW), et
al. v. Romero,et al., this Court ruled that a voluntary arbitrator by the nature of her
functions acts in a quasi-judicial capacity. Under these rulings, it follows that the voluntary
arbitrator, whether acting solely or in a panel, enjoys in law the status of a quasi-judicial
agency but independent of, and apart from, the NLRC since his decisions are not appealable to
the latter.

Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the Court of
Appeals shall exercise:

(B) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or
awards of RTC s and quasi-judicial agencies, instrumentalities, boards or commissions,
including the Securities and Exchange Commission, the Employees Compensation Commission
and the Civil Service Commission, except those falling within the appellate jurisdiction of the
Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under
Presidential Decree No. 442, as amended, 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.
Assuming arguendo that the voluntary arbitrator or the panel of voluntary arbitrators may not
strictly be considered as a quasi-judicial agency, board or commission, still both he and the panel
are comprehended within the concept of a quasi-judicial instrumentality.

An instrumentality is anything used as a means or agency. Thus, the terms governmental


agency or instrumentality are synonymous in the sense that either of them is a means
by which a government acts, or by which a certain government act or function is performed. The
word instrumentality, with respect to a state, contemplates an authority to which the state
delegates governmental power for the performance of a state function. An individual person, like
an administrator or executor, is a judicial instrumentality in the settling of an estate, in the same
manner that a sub-agent appointed by a bankruptcy court is an instrumentality of the court, and a
trustee in bankruptcy of a defunct corporation is an instrumentality of the state.

The voluntary arbitrator no less performs a state function pursuant to a governmental power
delegated to him under the provisions therefor in the Labor Code and he falls, therefore, within
the contemplation of the term instrumentality in the aforequoted Sec. 9 of B.P. 129. The fact
that his functions and powers are provided for in the Labor Code does not place him within the
exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as contemplated therein.

It will be noted that, although the Employees Compensation Commission is also provided for in
the Labor Code, Circular No. 1-91, which is the forerunner of the present Revised Administrative
Circular No. 1-95, laid down the procedure for the appealability of its decisions to the CA under
the foregoing rationalization, and this was later adopted by Republic Act No. 7902 in amending
Sec. 9 of B.P. 129. A fortiori, the decision or award of the voluntary arbitrator or panel of
arbitrators should likewise be appealable to the CA, in line with the procedure outlined in
Revised Administrative Circular No. 1-95, just like those of the quasi-judicial agencies, boards
and commissions enumerated therein.

In the same vein, it is worth mentioning that under Section 22 of Republic Act No. 876, also
known as the Arbitration Law, arbitration is deemed a special proceeding of which the court
specified in the contract or submission, or if none be specified, the RTC for the province or city
in which one of the parties resides or is doing business, or in which the arbitration is held, shall
have jurisdiction.

In effect, this equates the award or decision of the voluntary arbitrator with that of the RTC.
Consequently, in a petition for certiorari from that award or decision, the CA must be deemed to
have concurrent jurisdiction with the SC. As a matter of policy, this Court shall henceforth
remand to the Court of Appeals petitions of this nature for proper disposition.

6. ASSOCIATED BANK V. COURT OF APPEALS, 233 SCRA 137 [1994].

FACTS:

In a complaint for Violation of the Negotiable Instrument Law and Damages, plaintiffs 1seek the
recovery of the amount of P900,913.60 which defendant bank 2charged against their current
account by virtue of the sixteen (16) checks drawn by them despite the apparent alterations
therein with respect to the name of the payee, that is, the name Filipinas Shell was erased and
substituted with Ever Trading and DBL Trading by their supervisor Jeremias Cabrera, without
their knowledge and consent.

With leave of court, defendant bank filed a Third-Party Complaint against Philippine
Commercial International Bank, Far East Bank & Trust Company, Security Bank and Trust
Company and Citytrust Banking Corporation for reimbursement, contribution, indemnity from
said third-party defendants for being the collecting banks of the subject checks and by virtue of
their bank guarantee for all checks sent for clearing to the Philippine Clearing House Corporation
(PCHC), as provided for in Section 17, (PCHC), as provided for in Section 17, PCHC Clearing
House Rules and Regulations.

Philippine Commercial International Bank alleged among others that this Court has no
jurisdiction over the suit as it and third-party plaintiff are members of the Philippine Clearing
House and bound by the Rules and Regulations thereof providing for
arbitration.chanroblesvirtualawlibrarychanrobles virtual law library

A Motion To Dismiss was filed by Security Bank and Trust Company on the grounds that third-
party plaintiff failed to resort to arbitration as provided for in Section 36 of the Clearing House
Rules and Regulations of the Philippine Clearing House Corporation, and that it was released
from any liability with the acceptance by third-party plaintiff of the subject
check.chanroblesvirtualawlibrarychanrobles virtual law library

On the other hand, third-party plaintiff maintains that this Court has jurisdiction over the suit as
the provisions of the Clearing House Rules and Regulations are applicable only if the suit or
action is between participating member banks, whereas the plaintiffs are private persons and the
third-party complaint between participating member banks is only a consequence of the original
action initiated by the plaintiffs.

The trial court dismissed the third-party complaint for lack of jurisdiction. After the trial court
denied plaintiffs Motion for Reconsideration, 6petitioner appealed to the Court of Appeals which
promulgated the challenged decision on November 18, 1992 dismissing the petition for lack of
merit.Undaunted, petitioner is now before this Court seeking a review of respondent courts
decision

ISSUE:

Whether or not the court has jurisdiction.

RULING:

We affirm the dismissal of the third-party complaint filed by Associated Bank against Philippine
Commercial International Bank, Far East Bank & Trust Company, Security Bank and Trust
Company, and Citytrust Banking Corporation for lack of jurisdiction, it being shown that the said
parties were bound by the Clearing House Rules and Regulations on Arbitration of the Philippine
Clearing House Corporation.

Under the rules and regulations of the Philippine Clearing House Corporation (PCHC), the mere
act of participation of the parties concerned in its operations in effect amounts to a manifestation
of agreement by the parties to abide by its rules and regulations. As a consequence of such
participation, a party cannot invoke the jurisdiction of the courts over disputes and controversies
which fall under the PCHC Rules and Regulations without first going through the arbitration
processes laid out by the body.

Clearly therefore, petitioner Associated Bank, by its voluntary participation and its consent to
the arbitration rules cannot go directly to the Regional Trial Court when it finds it convenient to
do so. The jurisdiction of the PCHC under the rules and regulations is clear, undeniable and is
particularly applicable to all the parties in the third party complaint under their obligation to first
seek redress of their disputes and grievances with the PCHC before going to the trial court.

7. ALLIED BANKING CORP. V. COURT OF APPEALS, 294 SCRA 803 [1998]

FACTS:
Hyatt Terraces Baguio issued two crossed checks drawn against Allied Banking Corp.
(hereinafter, ALLIED) in favor of appellee Meszellen Commodities Services, Inc. (hereinafter,
MESZELLEN). Said checks were deposited on August 5, 1980 and August 18, 1980,
respectively, with the now defunct Commercial Bank and Trust Company (hereinafter,
COMTRUST). Upon receipt of the above checks, COMTRUST stamped at the back thereof the
warranty All prior endorsements and/or lack of endorsements guaranteed. After the checks were
cleared through the Philippine Clearing House Corporation (hereinafter, PCHC), ALLIED
BANK paid the proceeds of said checks to COMTRUST as the collecting bank.

On March 17, 1981, the payee, MESZELLEN, sued the drawee, ALLIED BANK, for damages
which it allegedly suffered when the value[s] of the checks were paid not to it but to some other
person.

Almost ten years later, or on January 10, 1991, before defendant ALLIED BANK could finish
presenting its evidence, it filed a third party complaint against Bank of the Philippine Islands
(hereinafter, BPI, appellee herein) as successor-in-interest of COMTRUST, for reimbursement in
the event that it would be adjudged liable in the main case to pay plaintiff, MESZELLEN. The
third party complaint was admitted [in] an Order dated May 16, 1991 issued by the Regional
Trial Court of Pasig, Branch 162. On July 16, 1991, BPI filed a motion to dismiss said third party
complaint grounded on the following: 1) that the court ha[d] no jurisdiction over the nature of the
action; and 2) that the cause of action of the third party plaintiff ha[d] already prescribed.

On September 16, 1991, the trial court issued an order dismissing the third party
complaint. Defendant-third party plaintiffs motion for reconsideration of this order was
subsequently denied.

Private respondent argues that the trial court had no authority to admit a third-party claim that
was filed by one bank against another and involved a check cleared through the Philippine
Clearing House Corporation (PCHC).

ISSUE:

Whether or not the trial court had the authority to admit a third-party claim that was filed by one
bank against another and involved a check cleared through the Philippine Clearing House
Corporation (PCHC).
RULING:

Under the rules and regulations of the Philippine Clearing House Corporation (PCHC), the mere
act of participation of the parties concerned in its operations in effect amounts to a manifestation
of agreement by the parties to abide by its rules and regulations. As a consequence of such
participation, a party cannot invoke the jurisdiction of the courts over disputes and controversies
which fall under the PCHC Rules and Regulations without first going through the arbitration
processes laid out by the body. Since claims relating to the regularity of checks cleared by
banking institutions are among those claims which should first be submitted for resolution by the
PCHCs Arbitration Committee, petitioner Associated Bank, having voluntarily bound itself to
abide by such rules and regulations, is estopped from seeking relief from the Regional Trial
Court on the coattails of a private claim and in the guise of a third party complaint without first
having obtained a decision adverse to its claim from the said body. It cannot bypass the
arbitration process on the basis of its averment that its third party complaint is inextricably linked
to the original complaint in the Regional Trial Court.

xxxxxxxxx

Clearly therefore, petitioner Associated Bank, by its voluntary participation and its consent to the
arbitration rules cannot go directly to the Regional Trial Court when it finds it convenient to do
so.The jurisdiction of the PCHC under the rules and regulations is clear, undeniable and is
particularly applicable to all the parties in the third party complaint under their obligation to first
seek redress of their disputes and grievances [from] the PCHC before going to the trial court.

Finally, the contention that the third party complaint should not have been dismissed for being a
necessary and inseparable offshoot of the main case over which the court a quo had already
exercised jurisdiction misses the fundamental point about such pleading. A third party complaint
is a mere procedural device which under the Rules of Court is allowed only with the courts
permission. It is an action actually independent of, separate and distinct from the plaintiffs
complaint (s)uch that, were it not for the Rules of Court, it would be necessary to file the action
separately from the original complaint by the defendant against the third party. (Italics supplied.)

Banco de Oro and Associated Bank are clear and unequivocal: a third-party complaint of one
bank against another involving a check cleared through the PCHC is unavailing, unless the third-
party claimant has first exhausted the arbitral authority of the PCHC Arbitration Committee and
obtained a decision from said body adverse to its claim.
Recognizing the role of the PCHC in the arbitration of disputes between participating banks, the
Court in Associated Bank further held: Pursuant to its function involving the clearing of checks
and other clearing items, the PCHC has adopted rules and regulations designed to provide
member banks with a procedure whereby disputes involving the clearance of checks and other
negotiable instruments undergo a process of arbitration prior to submission to the courts
below. This procedure not only ensures a uniformity of rulings relating to factual disputes
involving checks and other negotiable instruments but also provides a mechanism for settling
minor disputes among participating and member banks which would otherwise go directly to the
trial courts.

We defer to the primary authority of PCHC over the present dispute, because its technical
expertise in this field enables it to better resolve questions of this nature. This is not prejudicial to
the interest of any party, since primary recourse to the PCHC does not preclude an appeal to the
regional trial courts on questions of law.

Furthermore, when the error is so patent, gross and prejudicial as to constitute grave abuse of
discretion, courts may address questions of fact already decided by the arbitrator.[9]
We are not unaware of the rule that a trial court, which has jurisdiction over the main action, also
has jurisdiction over the third party complaint, even if the said court would have had no
jurisdiction over it had it been filed as an independent action. [10] However, this doctrine does not
apply in the case of banks, which have given written and subscribed consent to arbitration under
the auspices of the PCHC.
By participating in the clearing operations of the PCHC, petitioner agreed to submit disputes of
this nature to arbitration. Accordingly, it cannot invoke the jurisdiction of the trial courts without
a prior recourse to the PCHC Arbitration Committee. Having given its free and voluntary consent
to the arbitration clause, petitioner cannot unilaterally take it back according to its whim. In the
world of commerce, especially in the field of banking, the promised word is crucial. Once given,
it may no longer be broken.
Upon the other hand, arbitration as an alternative method of dispute-resolution is encouraged by
this Court. Aside from unclogging judicial dockets, it also hastens solutions especially of
commercial disputes.
In view of the foregoing, a discussion of the issues raised by the petitioners is unnecessary.
8. METRO CONSTRUCTION, INC. V. CHATHAM
PROPERTIES, INC., 365 SCRA 697 [2001].
FACTS :
Respondent Chatham Properties, Inc. (CHATHAM) and petitioner Metro Construction,
Inc. (MCI) entered into a contract for the construction of a multi-storey building
known as the Chatham House. In April 1998, MCI sought to collect from CHATHAM a
sum of money for unpaid progress billings and other charges and instituted a
request for adjudication of its claims with the CIAC. The preliminary conference
before the CIAC started in June 1998 and was concluded a month after with the
signing of the Terms of Reference (TOR) of the Case. In the meantime, the TOR was
amended and finalized on 19 August 1998. The facts, as admitted by the parties
before the CIAC and incorporated in the original TOR, are as follows :

1. On 21 April 1994, the parties formally entered into a contract for the construction
of the "Chatham House" . . . for the contract price of price of P50,000,000.00

2. On 12 July 1994, a Supplemental Contract was executed by and between the


parties whereby CHATHAM authorized MCI to procure in behalf of the former
materials, equipment, etc.

3. Under Section I.04 of the Supplemental Contract, the total amount of


procurement and transportation cost[s] and expenses which may be reimbursed by
MCI from CHATHAM shall not exceed the amount of P75, 000,000.00.

4. In the course of the construction, Change Orders No. 1, 4, 8A, 11, 12 and 13 were
implemented,

5. CHATHAM reimbursed MCI the amount of P60,000.00 corresponding to bonuses


advanced to its workers by the latter for the 14th, 16th, and 17th floors.

6. CHATHAM's payments to MCI totaled P104,875,792.37, representing payments for


portions of MCI's progress billings and x x x additional charges..

In the resolution of these issues, the CIAC discovered significant data, which were
not evident or explicit in the documents and records but otherwise revealed or
elicited during the hearings, which the CIAC deemed material and relevant to the
complete adjudication of the case

The CIAC disposed of the specific money claims by either granting or reducing
them. On Issue No. 9, i.e., whether CHATHAM failed to complete and/or deliver the
project within the approved completion period and, if so, whether CHATHAM is liable
for liquidated damages and how much.

CIAC rendered JUdgement in favor of the Claimant [MCI] directing Respondent


[CHATHAM] to pay Claimant [MCI] the net sum of SIXTEEN MILLION ONE HUNDRED
TWENTY SIX THOUSAND NINE HUNDRED TWENTY TWO & 91/100 (16,126,922.91)
PESOS. Impugning the decision of the CIAC, CHATHAM instituted a petition for
review with the Court of Appeals

In upholding the decision of the CIAC, the Court of Appeals confirmed the
jurisprudential principle that absent any showing of arbitrariness, the CIAC's findings
as an administrative agency and quasi judicial body should not only be accorded
great respect but also given the stamp of finality. However the Court of Appeals
found exception in the CIAC's disquisition of Issue No.9 on the matter of liquidated
damages.

ISSUE :

WON under existing law and rules the Court of Appeals can also review findings of
facts of the Construction Industry Arbitration Commission (CIAC).
HELD :

EO. No. 1008 vest upon the CIAC original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered into by parties involved in
construction in the Philippines, whether the dispute arises before or after the
completion of the contract, or after the abandonment or breach thereof. By express
provision of Section 19 thereof, the arbitral award of the CIAC is final and
unappealable, except on questions of law, which are appealable to the Supreme
Court.

The parties, however, disagree on whether the subsequent Supreme Court


issuances on appellate procedure and R.A. No. 7902 removed from the Supreme
Court its appellate jurisdiction in Section 19 of E.O. No. 1008 and vested the same in
the Court of Appeals, and whether appeals from CISC awards are no longer confined
to questions of law.

Through Circular No. 1-91, the Supreme Court intended to establish a uniform
procedure for the review of the final orders or decisions of the Court of Tax Appeals
and other quasi judicial. The Circular designated the Court of Appeals as the
reviewing body to resolve questions of fact or of law or mixed questions of fact and
law.

It is clear that Circular No. 1-91 covers the CIAC. In the first place, it is a quasi
judicial agency. In the second place, the language of Section 1 of Circular No. 1-91
emphasizes the obvious inclusion of the CIAC even if it is not named in the
enumeration of quasi-judicial agencies. In sum, under Circular No. 1-91, appeals
from the arbitral awards of the CIAC may be brought to the Court of Appeals, and
not to the Supreme Court alone. The grounds for the appeal are likewise broadened
to include appeals on questions of facts and appeals involving mixed questions of
fact and law

The jurisdiction of the Court of Appeals over appeals from final orders or decisions
of the CIAC is further fortified by the amendments to B.P. Blg. 129, as introduced by
RA. No. 7902. With the amendments, the Court of Appeals is vested with appellate
jurisdiction over all final judgments, decisions, resolutions, orders or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or
commissions, except "those within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the Labor Code of the Philippines under
Presidential Decree No. 442, as amended, 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.". In view of all the foregoing,
The Supreme Court rejects MCI's submission that Circular No. 1-91, B.P. Blg. 129, as
amended by RA. 7902, Revised Administrative Circular 1-95, and Rule 43 of the
1997 Rules of Civil Procedure failed to efficaciously modify the provision on appeals
in E.O. No. 1008.

9. NATIONAL UNION FIRE INS. CO. OF PITTSBURG V. STOLT-


NIELSEN PHIL., INC., 184 SCRA 682 [1990
FACTS:

United Coconut Chemicals, Inc. (SHIPPER) shipped 404.774 metric tons of distilled
C6-C18 fatty acid on board MT "Stolt Sceptre," a tanker owned by Stolt-Nielsen
Philippines Inc. (CARRIER), from Bauan, Batangas, Philippines, consigned to "Nieuwe
Matex" at Rotterdam, Netherlands, covered by a Tanker Bill of Lading. The shipment
was insured under a marine cargo policy with Petitioner National Union Fire
Insurance Company of Pittsburg (INSURER), through its settling agent in the
Philippines, the American International Underwriters (Philippines), Inc.

It appears that the Bill of Lading issued by the CARRIER contained a general
statement of incorporation of the terms of a Charter Party between the SHIPPER and
Parcel Tankers, Inc., entered into in Greenwich, Connecticut, USA.

Upon receipt of the cargo by the CONSIGNEE in the Netherlands, it was found to be
discolored and totally contaminated. The claim filed by the SHIPPER-ASSURED
having been denied, the INSURER indemnified the SHIPPER and thereafter
proceeded with its claim against the CARRIER.

Before the trial court, the CARRIER moved to dismiss or suspend the proceedings on
the ground that the RTC had no jurisdiction over the claim the same being an
arbitrable one. It further claimed that as subrogee of the SHIPPER-ASSURED, the
INSURER is subject to the provisions of the BIll of Lading, which includes a provision
that the shipment is carried pursuant to the terms of the Charter Party between the
SHIPPER-ASSURED and Parcel Tankers, Inc. providing for arbitrator.

The INSURER opposed the dismissal/suspension on the ground that it was not
legally bound to submit the claim for arbitration inasmuch as the arbitration clause
provided in the Charter Party was not incorporated into the Bill of Lading, and that
the it is only

RTC initially denied the Motion but subsequently reconsidered and suspended the
proceedings.

On appeal before the CA, the said court set aside the ruling of RTC and ordered the
INSURER to refer its claim for arbitration.

Hence, this petition.

ISSUE:

Whether the the terms Charter Party, particularly the provision on arbitration, are
binding on the INSURER

HELD:

Petition DENIED.

Since the right of action of the SHIPPER-ASSURED is governed by the provisions of


the Bill of Lading, which includes by reference the terms of the Charter Party,
necessarily a suit by the INSURER is subject to the same agreements

It is settled law that the charter may be made part of the contract under which the
goods are carried by an appropriate reference in the Bill of Lading. This should
include the provision on arbitration even without a specific stipulation to that effect.
The entire contract must be read together and its clauses interpreted in relation to
one another and not by parts.

As the respondent Appellate Court found, the INSURER "cannot feign ignorance of
the arbitration clause since it was already charged with notice of the existence of
the charter party due to an appropriate reference thereof in the bill of lading and, by
the exercise of ordinary diligence, it could have easily obtained a copy thereof
either from the shipper or the charterer."
We hold, therefore, that the INSURER cannot avoid the binding effect of the
arbitration clause. By subrogation, it became privy to the Charter Party as fully as
the SHIPPER before the latter was indemnified, because as subrogee, it stepped into
the shoes of the SHIPPER-ASSURED and is surrogated merely to the latter's rights. It
can recover only the amount that is recoverable by the assured. And since the right
of action of the SHIPPER-ASSURED is governed by the provisions of the Bill of
Lading, which includes by reference the terms of the Charter Party, necessarily a
suit by the INSURER is subject to the same agreements.

Arbitration, as an alternative mode of settling disputes, has long been recognized


and accepted in our jurisdiction. Republic Act No. 876 (The Arbitration Law) also
expressly authorizes arbitration of domestic disputes. Foreign arbitration is a system
of settling commercial disputes of an international character was likewise
recognized when the Philippines adhered to the United Nations "Convention on the
Recognition and the Enforcement of Foreign Arbitral Awards of 1958" under the
Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and
allowing enforcement of international arbitration agreements between parties of
different nationalities within a contracting state.

It has not been shown that the arbitral clause in question is null and void,
inoperative, or incapable of being performed. Nor has any conflict been pointed out
between the Charter Party and the Bill of Lading.

In fine, referral to arbitration in New York pursuant to the arbitration clause, and the
suspension of the proceedings, pending the return of the arbitral award, is indeed
called for.

10. DEL MONTE CORPORATION-USA V. COURT OF APPEALS.


351 SCRA 375 [2001]
FACTS:
1 July 1994 - 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 for a period
of five (5) years, renewable for two (2) consecutive five (5) year periods with
the consent of the parties.
Said agreement provided for an arbitration clause, which states:
This Agreement shall be governed by the laws of the State of California
and/or, if applicable, the United States of America. 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
October 1994 - appointment of MMI as the sole and exclusive distributor of
Del Monte products in the Philippines was published in several newspapers in
the country.
Immediately after its appointment, MMI appointed Sabrosa Foods, Inc. (SFI),
with the approval of DMC-USA, as MMIs marketing arm to concentrate on its
marketing and selling function as well as to manage its critical relationship
with the trade.
3 October 1996 - 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.
MMI et al. predicated their complaint on the alleged violations by Del Monte
et al. of Articles 201, 212 and 233 of the Civil Code.
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 in March 1995 they had to cause, after prior consultation
with Antonio Ongpin, Market Director for Special Markets of Del Monte
Philippines, Inc., the publication of a "warning to the trade" paid
advertisement in leading newspapers. DMC-USA and Paul E. Derby, Jr.,
apparently upset with the publication, instructed private respondent MMI to
stop coordinating with Antonio Ongpin and to communicate directly instead
with DMC-USA through Paul E. Derby, Jr.
MMI et al. further averred that:
1. DMC-USA et al. knowingly and surreptitiously continued to deal with the
former in bad faith by involving disinterested third parties and by
proposing solutions which were entirely out of their control
2. they had exhausted all possible avenues for an amicable resolution and
settlement of their grievances
3. as a result of the fraud, bad faith, malice and wanton attitude of DMC-USA
et al., they should be held responsible for all the actual expenses incurred
by MMI et al. in the delayed shipment of orders which resulted in the extra
handling thereof, the actual expenses and cost of money for the unused
Letters of Credit (LCs) and the substantial opportunity losses due to
created out-of-stock situations and unauthorized shipments of Del Monte-
USA products to the Philippine Duty Free Area and Economic Zone
4. the bad faith, fraudulent acts and willful negligence of DMC-USA et al.,
motivated by their determination to squeeze MMI et al. out of the
outstanding and on-going Distributorship Agreement in favor of another
party, had placed Lily Sy on tenterhooks since then
5. the shrewd and subtle manner with which DMC-USA et al. concocted
imaginary violations by MMI of the Distributorship Agreement in order to
justify the untimely termination thereof was a subterfuge
21 October 1996 DMC-USA et al. filed a Motion to Suspend Proceedings,
invoking the arbitration clause.
RTC: deferred consideration of DMC-USA et al.s Motion to Suspend
Proceedings as the grounds alleged therein did not constitute the suspension
of the proceedings considering that the action was for damages with prayer
for the issuance of Writ of Preliminary Attachment and not on the
Distributorship Agreement
DMC-USA et al. filed a MR to which MMI et al. filed their comment/opposition.
DMC-USA et al. filed a reply. They later on filed a Motion to Admit
Supplemental Pleading.
Said motion was admitted.
As a result of the admission of the Supplemental Complaint, DMC-USA et al.
filed on 22 July 1997 a Manifestation adopting their Motion to Suspend
Proceedings of 17 October 1996 and Motion for Reconsideration of 14 January
1997.

1
Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall
indemnify the latter for the same.

2
Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the damage.

3
Art. 23. Even when an act or event causing damage to another's property was not due to the fault or
negligence of the defendant, the latter shall be liable for indemnity if through the act or event he was
benefited.
11 November 1997 - the Motion to Suspend Proceedings was denied by the
trial court 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:

Wether or not the dispute between the parties warrants an order compelling them
to submit to arbitration [NO]

HELD:

There is no doubt that arbitration is valid and constitutional in our jurisdiction.


Even before the enactment of RA 876, this Court has countenanced the
settlement of disputes through arbitration. Unless the agreement is such as
absolutely to close the doors of the courts against the parties, which
agreement would be void, the courts will look with favor upon such amicable
arrangement and will only interfere with great reluctance to anticipate or
nullify the action of the arbitrator. Moreover, as RA 876 expressly authorizes
arbitration of domestic disputes, foreign arbitration as a system of settling
commercial disputes was likewise recognized when the Philippines adhered to
the United Nations "Convention on the Recognition and the Enforcement of
Foreign Arbitral Awards of 1958" under the 10 May 1965 Resolution No. 71 of
the Philippine Senate, giving reciprocal recognition and allowing enforcement
of international arbitration agreements between parties of different
nationalities within a contracting state.
A careful examination of the instant case shows that the arbitration clause in
the Distributorship Agreement between DMC-USA and MMI is valid and the
dispute between the parties is arbitrable. However, this Court must deny the
petition.
The Agreement between DMC-USA and MMI is a contract. The
provision to submit to arbitration any dispute arising therefrom and
the relationship of the parties is part of that contract and is itself a
contract. As a rule, contracts are respected as the law between the
contracting parties and produce effect as between them, their assigns and
heirs.
Clearly, only parties to the Agreement, i.e., DMC-USA and its Managing
Director for Export Sales Paul E. Derby, Jr., and MMI and its Managing Director
LILY SY are bound by the Agreement and its arbitration clause as they are the
only signatories thereto.
o Daniel Collins and Luis Hidalgo, and SFI, not parties to the Agreement and
cannot even be considered assigns or heirs of the parties, are not bound
by the Agreement and the arbitration clause therein.
Consequently, referral to arbitration in the State of California
pursuant to the arbitration clause and the suspension of the
proceedings in Civil Case No. 2637-MN pending the return of the
arbitral award could be called for but only as to DMC-USA and Paul
E. Derby, Jr., and MMI and LILY SY, and not as to the other parties in
this case, in accordance with the recent case of Heirs of Augusto L. Salas, Jr.
v. Laperal Realty Corporation, which superseded that of Toyota Motor
Philippines Corp. v. Court of Appeals.
o 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."
o 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.

Dispositive: Petition denied.

11. HEIRS OF AUGUSTO L. SALAS, JR. VS. LAPERAL REALTY CORPORATION,


ET AL. [1999]
FACTS:
Augusto Salas, Jr. was the registered owner of a vast tract of
land in Lipa City, Batangas. He entered into an Owner-
Contractor Agreement with Respondent Laperal Realty
Corporation to render and provide complete (horizontal)
construction services on his land. Said agreement contains
an arbitration clause, to wit :
ARTICLE VI. ARBITRATION.
All cases of dispute between CONTRACTOR and OWNERS
representative shall be referred to the committee
represented by:
1. One representative of the OWNER;
2. One representative of the CONTRACTOR;
3. One representative acceptable to both OWNER and
CONTRACTOR.
Salas, Jr. then executed a Special Power of Attorney in favor
of Respondent Laperal Realty to exercise general control,
supervision and management of the sale of his land, for
cash or on installment basis. By virtue thereof, Respondent
Laperal Realty subdivided said land and sold portions
thereof to Respondents Rockway Real Estate Corporation and
South Ridge Village, Inc. in 1990; to Respondent spouses
Abrajano and Lava and Oscar Dacillo in 1991; and to
Respondents Eduardo Vacuna, Florante de la Cruz and Jesus
Vicente Capalan in 1996 (Respondent Lot Buyers
hereinafter).
Back in 1989, Salas, Jr. left his home in the morning for a
business trip to Nueva Ecija. He, however, never returned
on that unfaithful morning. Seven years later or in 1996,
his wife, Teresita Diaz-Salas filed with the RTC of Makati
City a verified Petition for the Declaration of
Presumptive Death , which Petition was granted.
In 1998, Petitioners, as heirs of Salas, Jr. filed in the RTC
of Lipa City a Complaint for Declaration of Nullity of
Sale, Reconveyance, Cancellation of Contract, Accounting
and Damages against Respondents.
Respondent Laperal Realty filed a Motion to Dismiss on the
ground that Petitioners failed to submit their grievance to
arbitration as required under Article VI of the Owner-
Contractor Agreement . Respondent spouses Abrajano and Lava
and Respondent Dacillo filed a Joint Answer with
Counterclaim and Crossclaim praying for dismissal of
Petitioners Complaint for the same reason.
The RTC then issued the herein assailed Order dismissing
Petitioners Complaint for non-compliance with the
foregoing arbitration clause.
Hence the present Petition for Review on Certiorari under Rule
45.
ISSUE:
Whether or not the arbitration clause under Article VI of the
Owner-Contractor Agreement is binding upon the Respondent
Lot Buyers?
ARGUMENTS:
Petitioners argue that (1) their causes of action did not
emanate from the Owner-Contractor Agreement , (2) that their
causes of action for cancellation of contract and
accounting are covered by the exception under the
Arbitration Law, and (3) that failure to arbitrate is not a
ground for dismissal.
Petitioners claim that they suffered lesion of more than one-
fourth (1/4) of the value of Salas, Jr.s land when
Respondent Laperal Realty subdivided it and sold portions
thereof to Respondent Lot Buyers. Thus, they instituted
action against both Respondent Laperal Realty and
Respondent Lot Buyers for rescission of the sale
transactions and reconveyance to them of the subdivided
lots. They argue that rescission, being their cause of
action, falls under the exception clause in Sec. 2
of Republic Act No. 876 which provides that such
submission [to] or contract [of arbitration] shall be
valid, enforceable and irrevocable, save upon such grounds
as exist at law for the revocation of any contract.
RULING:
NO. Respondent Lot Buyers are neither parties to the Agreement
nor the latters assigns or heirs. Consequently, the
right to arbitrate as provided in Article VI of the
Agreement was never vested in Respondent Lot Buyers.
Respondent Laperal Realty, on the other hand, as a contracting
party to the Agreement, has the right to compel Petitioners
to first arbitrate before seeking judicial relief.
However, to split the proceedings into arbitration for
Respondent Laperal Realty and trial for the Respondent Lot
Buyers, or to hold trial in abeyance pending arbitration
between Petitioners and Respondent Laperal Realty, would in
effect result in multiplicity of suits, duplicitous
procedure and unnecessary delay. On the other hand, it
would be in the interest of justice if the trial court
hears the complaint against all herein Respondents and
adjudicates Petitioners rights as against theirs in a
single and complete proceeding.
Petition is GRANTED. The assailed Order of RTC of Lipa City is
NULLIFIED and SET ASIDE.
RATIO DECIDENDI:
In a catena of cases inspired by Justice Malcolms provocative
dissent in Vega v. San Carlos Milling Co. [1924] , the SC
has recognized arbitration agreements as valid, binding,
enforceable and not contrary to public policy so much so
that when there obtains a written provision for arbitration
which is not complied with, the trial court should suspend
the proceedings and order the parties to proceed to
arbitration in accordance with the terms of their
agreement. Arbitration is the wave of the future in
dispute resolution. To brush aside a contractual agreement
calling for arbitration in case of disagreement between
parties would be a step backward.
A submission to arbitration is a contract. As such, the
Agreement, containing the stipulation on arbitration, binds
the parties thereto, as well as their assigns and heirs.
But only they. Petitioners, as heirs of Salas, Jr., and
Respondent Laperal Realty are certainly bound by the
Agreement. If Respondent Laperal Realty, had assigned its
rights under the Agreement to a third party, making the
former, the assignor, and the latter, the assignee, such
assignee would also be bound by the arbitration provision
since assignment involves such transfer of rights as to
vest in the assignee the power to enforce them to the same
extent as the assignor could have enforced them against the
debtor or, in this case, against the heirs of the original
party to the Agreement. However, Respondent Lot Buyers are
NOT assignees of the rights of Respondent Laperal Realty
under the Agreement to develop Salas, Jr.s land and sell
the same. They are, rather, buyers of the land that
Respondent Laperal Realty was given the authority to
develop and sell under the Agreement. As such, they are
NOT assigns contemplated in Art. 1311 of the New Civil
Code which provides that contracts take effect only
between the parties, their assigns and heirs.
In the same vein, Petitioners contention that rescission,
being their cause of action, falls under the exception
clause in Sec. 2 of Republic Act No. 876 is without merit.
For while rescission, as a general rule, is an arbitrable
issue, they impleaded in the suit for rescission the
Respondent Lot Buyers who are neither parties to the
Agreement nor the latters assigns or heirs.
Consequently, the right to arbitrate as provided in Article
VI of the Agreement was never vested in Respondent Lot
Buyers.
12. EQUITABLE INSURANCE AND CASUALTY INSURANCE CO. VS. RURAL
INSURANCE AND SURETY CO

FACTS:

Equitable reinsured with Rural the stock covered by the fire insurance policy issued
by Equitable to Messrs. Jaen Bermers Cooperative Marketing Association, Inc. The
stocks were burned. A statement of account covering the share of the loss assumed
by Rural was sent by Equitable. Despite repeated demands Rural refused to pay.

Equitable likewise reinsured with Rural the stocks of Electric and Lamp Supplies
covered by fire insurance policies. The stocks were burned. Rural refused to pay its
share of loss. Hence this complaint for recovery was filed. Rural moved for its
dismissal alleging that there is no cause of action. Invoking Article VIII of the
Reinsurance Agreement, it alleged that the matter should be brought to the board
of arbitrators before the court action could take place. Motion to dismiss denied. The
RTC ruled in favor of Equitable. The appeal to CA was brought to the SC.

ISSUE:

Whether or not Equitable has a cause of action against Rural.

HELD:

Yes. It is true that paragraph (Article VIII) of said Reciprocal Facultative Reinsurance
Agreement required that 'in the event of any question arising as to the meaning of,
or any way connected with or relating to this Agreement, whether before or after its
termination, the parties shall endeavor to arrive at a satisfactory compromise by
amicable settlement rather than by court action'; and that the dispute should be
referred to the decision of two arbitrators and umpire, as provided, therein.
However, in this particular case, there is absolutely no dispute between the two
parties, because in the stipulation of facts, the defendant has admitted that plaintiff
has paid its liability to the insured as per its fire insurance policies specified in the
two causes of action of the complaint. Defendant has, likewise, admitted its liability
as reinsurer under the Reciprocal Facultative Reinsurance Agreement to pay to the
plaintiff its proportional shares, the amounts of which are not disputed. Indeed,
according to the complaint as admitted by the defendant, statements of account as
to the amounts of its share as reinsurer and, for all that appears, said defendant has
never questioned the correctness of said amounts.

The appellants claim that the court erred in failing to rule that in a facultative
obligation the right to choose an alternative remedy lies only with the debtor, who
in this case is Rural was held untenable. The term "facultative" is so used in
reinsurance contracts merely to define the right of the reinsurer to accept or not to
accept participation in the risk insured. But once the share is accepted, as it was in
the case at bar, the obligation is absolute and the liability assumed thereunder can
be discharged by payment of the share of the losses. There is no alternative nor
substitute prestation.