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Republic of the Philippines Mid-Pasig, however, denied it accepted Rocklands offer and claimed that no check was

SUPREME COURT attached to the said letter. It also vehemently denied receiving the P1 million check, much less
Manila depositing it in its account.

SECOND DIVISION In its letter10 dated February 6, 2001, Mid-Pasig replied to Rockland that it was only upon
receipt of the latters February 2 letter that the former came to know where the check came
G.R. No. 164587 February 4, 2008 from and what it was for. Nevertheless, it categorically informed Rockland that it could not
entertain the latters lease application. Mid-Pasig reiterated its refusal of Rocklands offer in a
letter11 dated February 13, 2001.
ROCKLAND CONSTRUCTION COMPANY, INC., petitioner,
vs.
MID-PASIG LAND DEVELOPMENT CORPORATION, respondent. Rockland then filed an action for specific performance docketed as Civil Case No. 68350 in the
RTC, Branch 67 of Pasig City. Rockland sought to compel Mid-Pasig to execute in Rocklands
favor, a contract of lease over a 3.1-hectare portion 12 of Mid-Pasigs property in Pasig City.
DECISION

On September 2, 2002, the trial court rendered a decision, the dispositive portion of which
QUISUMBING, J.:
reads in part:
This petition for review seeks the reversal of the Decision 1 and Resolution2 dated February 27,
WHEREFORE, judgment is rendered, as follows:
2004 and July 21, 2004, respectively, of the Court of Appeals in CA-G.R. CV No. 76370. The
appellate court had reversed and set aside the Decision 3 dated September 2, 2002 of the
Regional Trial Court (RTC), Branch 67 of Pasig City, in Civil Case No. 68350; dismissed 1. Declaring that the plaintiff and the defendant have duly agreed upon a valid and
petitioners complaint; and held that there was no perfected contract of lease between the enforceable lease agreement of subject portions of [defendants] properties designated
parties. in Exh. A as areas "A", "B" and "C", comprising an area of 5,000 square meters, 11,000
square meters and 15,000 square meters, or a total of 31,000 square meters;
The antecedents facts, culled from the records, are as follows:
2. Holding that the principal terms and conditions of the aforesaid lease agreement are
4 as stated in plaintiffs June 8, 2000 letter (Exh. D), to wit:
Rockland Construction Company, Inc. (Rockland), in a letter dated March 1, 2000, offered to
lease from Mid-Pasig Land Development Corporation (Mid-Pasig) the latters 3.1-hectare
property in Pasig City. This property is covered by Transfer Certificate of Title Nos. 469702 and xxxx
337158 under the control of the Presidential Commission on Good Government (PCGG). Upon
instruction of Mid-Pasig to address the offer to the PCGG, Rockland wrote the PCGG on April 3. Ordering the defendant to execute a written lease contract in favor of the plaintiff
15, 2000. The letter,5 addressed to PCGG Chairman Magdangal Elma, included Rocklands containing the principal terms and conditions mentioned in the next-preceding
proposed terms and conditions for the lease. This letter was also received by Mid-Pasig on paragraph, within sixty (60) days from finality of this judgment, and likewise ordering
April 18, 2000, but Mid-Pasig made no response. the plaintiff to pay rent to the defendant as specified in said terms and conditions;

Again, in another letter6 dated June 8, 2000 addressed to the Chairman of Mid-Pasig, Mr. 4. Ordering the defendant to keep and maintain the plaintiff in the peaceful possession
Ronaldo Salonga, Rockland sent a Metropolitan Bank and Trust Company Check No. and enjoyment of the leased premises during the term of said contract;
29300501687 for P1 million as a sign of its good faith and readiness to enter into the lease
agreement under the certain terms and conditions stipulated in the letter. Mid-Pasig received 5. Ordering the defendant to pay plaintiff [attorneys] fees in the sum of One Million
this letter on July 28, 2000. Pesos (P1,000,000.00), plus P2,000.00 for every appearance made by counsel in
court;
In a subsequent follow-up letter8 dated February 2, 2001, Rockland then said that it presumed
that Mid-Pasig had accepted its offer because the P1 million check it issued had been credited 6. The temporary restraining order dated April 2, 2001 is hereby made PERMANENT;
to Mid-Pasigs account on December 5, 2000.9
7. Dismissing defendants counterclaim.
With costs against the defendant. meeting of the offer and acceptance upon the thing which are to constitute a contract. To
produce a contract, the offer must be certain and the acceptance absolute. 18
SO ORDERED.13
A close review of the events in this case, in the light of the parties evidence, shows that there
On appeal, the Court of Appeals reversed and set aside the trial courts decision on the was no perfected contract of lease between the parties. Mid-Pasig was not aware that
following grounds: (1) there was no meeting of the minds as to the offer and acceptance Rockland deposited the P1 million check in its account. It only learned of Rocklands check
between the parties; (2) there was no implied acceptance of the P1 million check as Mid-Pasig when it received Rocklands February 2, 2001 letter. Mid-Pasig, upon investigation, also
was not aware of its source at the time Mid-Pasig discovered the existence of the P1 million in learned that the check was deposited at the Philippine National Bank (PNB) San Juan Branch,
its account; and (3) Rocklands subsequent acts and/or omissions contradicted its claim that instead of PNB Ortigas Branch where Mid-Pasig maintains its account. Immediately, Mid-Pasig
there was already a contract of lease, as it neither took possession of the property, nor did it wrote Rockland on February 6, 2001 rejecting the offer, and proposed that Rockland apply
pay for the corresponding monthly rentals. Accordingly, the Court of Appeals dismissed the P1 million to its other existing lease instead. These circumstances clearly show that there
Rocklands complaint, as well as Mid-Pasigs counterclaim. Rockland sought reconsideration, was no concurrence of Rocklands offer and Mid-Pasigs acceptance.
but it was denied.
Mid-Pasig is also not in estoppel in pais. The doctrine of estoppel is based on the grounds of
Petitioner Rockland now comes before us raising a complex issue: public policy, fair dealing, good faith and justice, and its purpose is to forbid one to speak
against his own act, representations, or commitments to the injury of one to whom they were
directed and who reasonably relied thereon.19 Since estoppel is based on equity and justice, it
. . . WHETHER OR NOT RESPONDENTS ACT OF DEPOSITING INTO ITS
is essential that before a person can be barred from asserting a fact contrary to his act or
CORPORATE BANK ACCOUNT PETITIONERS P1 MILLION CHECK AND
conduct, it must be shown that such act or conduct has been intended and would unjustly
COLLECTING THE PROCEEDS THEREOF: (A) PRODUCES THE LEGAL EFFECT
cause harm to those who are misled if the principle were not applied against him. 20
OF AN ACCEPTANCE OF PETITIONERS OFFER AND CONSIDERED AS CONSENT
TO THE PAYMENT FOR WHICH IT WAS INTENDED; AND/OR [(B)] CONSTITUTES
IN LEGAL CONTEMPLATION ESTOPPEL IN PAIS, SUFFICIENT TO APPRECIATE From the start, Mid-Pasig never falsely represented its intention that could lead Rockland to
RESPONDENTS CONSENT TO THE LEASE.14 believe that Mid-Pasig had accepted Rocklands offer. Mid-Pasig consistently rejected
Rocklands offer. Further, Rockland never secured the approval of Mid-Pasigs Board of
Directors and the PCGG to lease the subject property to Rockland. As noted by the Court of
Simply stated, the issue may be rephrased into two questions: Was there a perfected contract
Appeals, if indeed Rockland believed that Mid-Pasig impliedly accepted the offer, then it should
of lease? Had estoppel in pais set in?
have taken possession of the property and paid the monthly rentals. But it did not. For estoppel
to apply, the action giving rise thereto must be unequivocal and intentional because, if
Rockland contends that the contract of lease had been perfected and that Mid-Pasig is in misapplied, estoppel may become a tool of injustice.21
estoppel in pais because it impliedly accepted its offer when the P1 million check was credited
to Mid-Pasigs account.
WHEREFORE, the instant petition is DENIED. The Decision and Resolution dated February
27, 2004 and July 21, 2004, respectively, of the Court of Appeals in CA-G.R. CV No. 76370
Mid-Pasig counters that it never accepted Rocklands offer. It avers it immediately rejected are AFFIRMED. Costs against the petitioner.
Rocklands offer upon learning of the mysterious deposit of the P1 million check in its account.
SO ORDERED.
Since the re-stated issues are intertwined, we shall discuss them jointly.

A contract has three distinct stages: preparation, perfection, and consummation. Preparation or
negotiation begins when the prospective contracting parties manifest their interest in the
contract and ends at the moment of their agreement. Perfection or birth of the contract occurs
when they agree upon the essential elements thereof. Consummation, the last stage, occurs
when the parties "fulfill or perform the terms agreed upon in the contract, culminating in the G.R. No. 175404 January 31, 2011
extinguishment thereof."15
CARGILL PHILIPPINES, INC., Petitioner,
Negotiation is formally initiated by an offer. Accordingly, an offer that is not accepted, either vs.
expressly or impliedly,16precludes the existence of consent, which is one of the essential SAN FERNANDO REGALA TRADING, INC., Respondent.
elements17 of a contract. Consent, under Article 1319 of the Civil Code, is manifested by the
DECISION Respondent filed an Opposition, 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. It cited
PERALTA, J.: cases wherein arbitration clauses, such as the subject clause in the contract, 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, thus, ousting the courts of jurisdiction.
Before us is a petition for review on certiorari seeking to reverse and set aside the
Decision1 dated July 31, 2006 and the Resolution2 dated November 13, 2006 of the Court of
Appeals (CA) in CA G.R. SP No. 50304. In its Reply, petitioner maintained that the cited decisions were already inapplicable, having
been rendered prior to the effectivity of the New Civil Code in 1950 and the Arbitration Law in
1953.
The factual antecedents are as follows:

In its Rejoinder, respondent argued that the arbitration clause relied upon by petitioner is
On June 18, 1998, respondent San Fernando Regala Trading, Inc. filed with the Regional Trial
invalid and unenforceable, considering that the requirements imposed by the provisions of the
Court (RTC) of Makati City a Complaint for Rescission of Contract with Damages 3 against
Arbitration Law had not been complied with.
petitioner Cargill Philippines, Inc. In its Complaint, 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. Respondent alleged that it entered into a contract dated July 11, 1996 By way of Sur-Rejoinder, petitioner contended that respondent had even clarified that the issue
with petitioner, wherein it was agreed upon that respondent would purchase from petitioner boiled down to whether the arbitration clause contained in the contract subject of the complaint
12,000 metric tons of Thailand origin cane blackstrap molasses at the price of US$192 per is valid and enforceable; that the arbitration clause did not violate any of the cited provisions of
metric ton; that the delivery of the molasses was to be made in January/February 1997 and the Arbitration Law.
payment was to be made by means of an Irrevocable Letter of Credit payable at sight, to be
opened by September 15, 1996; that sometime prior to September 15, 1996, the parties On September 17, 1998, the RTC rendered an Order,8 the dispositive portion of which reads:
agreed that instead of January/February 1997, the delivery would be made in April/May 1997
and that payment would be by an Irrevocable Letter of Credit payable at sight, to be opened Premises considered, defendant's "Motion To Dismiss/Suspend Proceedings and To Refer
upon petitioner's advice. Petitioner, as seller, failed to comply with its obligations under the Controversy To Voluntary Arbitration" is hereby DENIED. Defendant is directed to file its answer
contract, despite demands from respondent, thus, the latter prayed for rescission of the within ten (10) days from receipt of a copy of this order.9
contract and payment of damages.
In denying the motion, the RTC found that there was no clear basis for petitioner's plea to
On July 24, 1998, petitioner filed a Motion to Dismiss/Suspend Proceedings and To Refer dismiss the case, pursuant to Section 7 of the Arbitration Law. The RTC said that the provision
Controversy to Voluntary Arbitration,4 wherein it argued that the alleged contract between the directed the court concerned only to stay the action or proceeding brought upon an issue
parties, dated July 11, 1996, was never consummated because respondent never returned the arising out of an agreement providing for the arbitration thereof, but did not impose the sanction
proposed agreement bearing its written acceptance or conformity nor did respondent open the of dismissal. However, the RTC did not find the suspension of the proceedings warranted,
Irrevocable Letter of Credit at sight. Petitioner contended that the controversy between the since the Arbitration Law contemplates an arbitration proceeding that must be conducted in the
parties was whether or not the alleged contract between the parties was legally in existence Philippines under the jurisdiction and control of the RTC; and before an arbitrator who resides
and the RTC was not the proper forum to ventilate such issue. It claimed that the contract in the country; and that the arbitral award is subject to court approval, disapproval and
contained an arbitration clause, to wit: modification, and that there must be an appeal from the judgment of the RTC. The RTC found
that the arbitration clause in question contravened these procedures, i.e., the arbitration clause
ARBITRATION contemplated an arbitration proceeding in New York before a non-resident arbitrator (American
Arbitration Association); that the arbitral award shall be final and binding on both parties. The
Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be RTC said that to apply Section 7 of the Arbitration Law to such an agreement would result in
settled by arbitration in the City of New York before the American Arbitration Association. The disregarding the other sections of the same law and rendered them useless and mere
Arbitration Award shall be final and binding on both parties. 5 surplusages.

that respondent must first comply with the arbitration clause before resorting to court, thus, the Petitioner filed its Motion for Reconsideration, which the RTC denied in an Order 10 dated
RTC must either dismiss the case or suspend the proceedings and direct the parties to November 25, 1998.
proceed with arbitration, pursuant to Sections 66 and 77 of Republic Act (R.A.) No. 876, or the
Arbitration Law. 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 the arbitration cannot proceed because petitioner assailed the existence of the entire
been complied with. 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
Respondent filed its Comment and Reply. The parties were then required to file their respective filed the complaint for rescission and damages with the RTC, which based its cause of action
Memoranda. 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,
On July 31, 2006, the CA rendered its assailed Decision denying the petition and affirming the
the fact remains that the agreement sued upon provides for an arbitration clause; that
RTC Orders.
respondent cannot use the provisions favorable to him and completely disregard those that are
unfavorable, such as the arbitration clause.
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
Petitioner contends that as the defendant in the RTC, it presented two alternative
resolution has long been accepted in our jurisdiction and expressly provided for in the Civil
defenses, i.e., the parties had not entered into any agreement upon which respondent as
Code; that R.A. No. 876 (the Arbitration Law) also expressly authorized the arbitration of
plaintiff can sue upon; and, assuming that such agreement existed, there was an arbitration
domestic disputes. The CA found error in the RTC's holding that Section 7 of R.A. No. 876 was
clause that should be enforced, thus, the dispute must first be submitted to arbitration before
inapplicable to arbitration clause simply because the clause failed to comply with the
an action can be instituted in court. Petitioner argues that under Section 1(j) of Rule 16 of the
requirements prescribed by the law. The CA found that there was nothing in the Civil Code, or
Rules of Court, included as a ground to dismiss a complaint is when a condition precedent for
R.A. No. 876, that require that arbitration proceedings must be conducted only in the
filing the complaint has not been complied with; and that submission to arbitration when such
Philippines and the arbitrators should be Philippine residents. It also found that the RTC ruling
has been agreed upon is one such condition precedent. Petitioner submits that the
effectively invalidated not only the disputed arbitration clause, but all other agreements which
proceedings in the RTC must be dismissed, or at least suspended, and the parties be ordered
provide for foreign arbitration. The CA did not find illegal or against public policy the arbitration
to proceed with arbitration.
clause so as to render it null and void or ineffectual.

On March 12, 2007, petitioner filed a Manifestation 12 saying that the CA's rationale in declining
Notwithstanding such findings, the CA still held that the case cannot be brought under the
to order arbitration based on the 2005 Gonzales ruling had been modified upon a motion for
Arbitration Law for the purpose of suspending the proceedings before the RTC, since in its
reconsideration decided in 2007; that the CA decision lost its legal basis, because it had been
Motion to Dismiss/Suspend proceedings, petitioner alleged, as one of the grounds thereof, that
ruled that the arbitration agreement can be implemented notwithstanding that one of the parties
the subject contract between the parties did not exist or it was invalid; that the said contract
thereto repudiated the contract which contained such agreement based on the doctrine of
bearing the arbitration clause was never consummated by the parties, thus, it was proper that
separability.
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. In its Comment, 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. It claims that the Arbitration Law which petitioner invoked as basis for its
Petitioner's motion for reconsideration was denied in a Resolution dated November 13, 2006.
Motion prescribed, under its Section 29, a remedy, i.e., appeal by a petition for review
on certiorari under Rule 45. Respondent contends that the Gonzales case, which was decided
Hence, this petition. in 2007, is inapplicable in this case, especially as to the doctrine of separability enunciated
therein. Respondent argues that even if the existence of the contract and the arbitration clause
Petitioner alleges that the CA committed an error of law in ruling that arbitration cannot proceed is conceded, the decisions of the RTC and the CA declining referral of the dispute between the
despite the fact that: (a) it had ruled, in its assailed decision, that the arbitration clause is valid, parties to arbitration would still be correct. This is so because respondent's complaint filed in
enforceable and binding on the parties; (b) the case of Gonzales v. Climax Mining Ltd.11 is Civil Case No. 98-1376 presents the principal issue of whether under the facts alleged in the
inapplicable here; (c) parties are generally allowed, under the Rules of Court, to adopt several complaint, respondent is entitled to rescind its contract with petitioner and for the latter to pay
defenses, alternatively or hypothetically, even if such damages; that such issue constitutes a judicial question or one that requires the exercise of
judicial function and cannot be the subject of arbitration.
defenses are inconsistent with each other; and (d) the complaint filed by respondent with the
trial court is premature. Respondent contends that Section 8 of the Rules of Court, which allowed a defendant to adopt
in the same action several defenses, alternatively or hypothetically, even if such defenses are
Petitioner alleges that the CA adopted inconsistent positions when it found the arbitration inconsistent with each other refers to allegations in the pleadings, such as complaint,
clause between the parties as valid and enforceable and yet in the same breath decreed that counterclaim, cross-claim, third-party complaint, answer, but not to a motion to dismiss. Finally,
respondent claims that petitioner's argument is premised on the existence of a contract with We found that Gonzales petition for certiorari raises a question of law, but not a question of
respondent containing a provision for arbitration. However, its reliance on the contract, which it jurisdiction; that Judge Pimentel acted in accordance with the procedure prescribed in R.A. No.
repudiates, is inappropriate. 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
In its Reply, petitioner insists that respondent filed an action for rescission and damages on the as long as a court acts within its jurisdiction and does not gravely abuse its discretion in the
basis of the contract, thus, respondent admitted the existence of all the provisions contained exercise thereof, any supposed error committed by it will amount to nothing more than an error
thereunder, including the arbitration clause; that if respondent relies on said contract for its of judgment reviewable by a timely appeal and not assailable by a special civil action
cause of action against petitioner, it must also consider itself bound by the rest of the terms and of certiorari.14
conditions contained thereunder notwithstanding that respondent may find some provisions to
be adverse to its position; that respondents citation of the Gonzales case, decided in 2005, to In this case, petitioner raises before the CA the issue that the respondent Judge acted in
show that the validity of the contract cannot be the subject of the arbitration proceeding and excess of jurisdiction or with grave abuse of discretion in refusing to dismiss, or at least
that it is the RTC which has the jurisdiction to resolve the situation between the parties herein, suspend, the proceedings a quo, despite the fact that the partys agreement to arbitrate had not
is not correct since in the resolution of the Gonzales' motion for reconsideration in 2007, it had been complied with. Notably, the RTC found the existence of the arbitration clause, since it said
been ruled that an arbitration agreement is effective notwithstanding the fact that one of the in its decision that "hardly disputed is the fact that the arbitration clause in question
parties thereto repudiated the main contract which contained it. 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
We first address the procedural issue raised by respondent that petitioners petition of the Arbitration Law and render them useless and mere surplusages." However,
for certiorari under Rule 65 filed in the CA against an RTC Order denying a Motion to notwithstanding the finding that an arbitration agreement existed, the RTC denied petitioner's
Dismiss/Suspend Proceedings and to Refer Controversy to Voluntary Arbitration was a wrong motion and directed petitioner to file an answer.
remedy invoking Section 29 of R.A. No. 876, which provides:
In La Naval Drug Corporation v. Court of Appeals,15 it was held that R.A. No. 876 explicitly
Section 29. confines the courts authority only to the determination of whether or not there is an agreement
in writing providing for arbitration. In the affirmative, the statute ordains that the court shall
issue an order summarily directing the parties to proceed with the arbitration in accordance
x x x An appeal may be taken from an order made in a proceeding under this Act, or from a
with the terms thereof. If the court, upon the other hand, finds that no such agreement exists,
judgment entered upon an award through certiorari proceedings, but such appeals shall be
the proceedings shall be dismissed.
limited to question of law. x x x.

In issuing the Order which denied petitioner's Motion to Dismiss/Suspend Proceedings and to
To support its argument, respondent cites the case of Gonzales v. Climax Mining
Refer Controversy to Voluntary Arbitration, the RTC went beyond its authority of determining
Ltd.13 (Gonzales case), wherein we ruled the impropriety of a petition for certiorari under Rule
only the issue of whether or not there is an agreement in writing providing for arbitration by
65 as a mode of appeal from an RTC Order directing the parties to arbitration.
directing petitioner to file an answer, instead of ordering the parties to proceed to arbitration. In
so doing, it acted in excess of its jurisdiction and since there is no plain, speedy, and adequate
We find the cited case not in point. remedy in the ordinary course of law, petitioners resort to a petition for certiorari is the proper
remedy.
In the Gonzales case, Climax-Arimco filed before the RTC of Makati a petition to compel
arbitration under R.A. No. 876, pursuant to the arbitration clause found in the Addendum We now proceed to the substantive issue of whether the CA erred in finding that this case
Contract it entered with Gonzales. Judge Oscar Pimentel of the RTC of Makati then directed cannot be brought under the arbitration law for the purpose of suspending the proceedings in
the parties to arbitration proceedings. Gonzales filed a petition for certiorari with Us contending the RTC.
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
We find merit in the petition.
counterclaim that the Addendum Contract containing the arbitration clause was null and void.
Climax-Arimco assailed the mode of review availed of by Gonzales, citing Section 29 of R.A.
No. 876 contending that certiorari under Rule 65 can be availed of only if there was no appeal Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted
or any adequate remedy in the ordinary course of law; that R.A. No. 876 provides for an appeal in our jurisdiction.16R.A. No. 87617 authorizes arbitration of domestic disputes. Foreign
from such order. We then ruled that Gonzales' petition for certiorari should be dismissed as it arbitration, as a system of settling commercial disputes of an international character, is likewise
was filed in lieu of an appeal by certiorari which was the prescribed remedy under R.A. No. 876 recognized.18 The enactment of R.A. No. 9285 on April 2, 2004 further institutionalized the use
and the petition was filed far beyond the reglementary period. of alternative dispute resolution systems, including arbitration, in the settlement of disputes. 19
A contract is required for arbitration to take place and to be binding. 20 Submission to arbitration However, the Gonzales case,25 which the CA relied upon for not ordering arbitration, had been
is a contract 21 and a clause in a contract providing that all matters in dispute between the modified upon a motion for reconsideration in this wise:
parties shall be referred to arbitration is a contract. 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 x x x The adjudication of the petition in G.R. No. 167994 effectively modifies part of the
contract.23 Decision dated 28 February 2005 in G.R. No. 161957. Hence, we now hold that the
validity of the contract containing the agreement to submit to arbitration does not affect
In this case, the contract sued upon by respondent provides for an arbitration clause, to wit: the applicability of the arbitration clause itself. A contrary ruling would suggest that a
party's mere repudiation of the main contract is sufficient to avoid arbitration. That is
ARBITRATION exactly the situation that the separability doctrine, as well as jurisprudence applying it,
seeks to avoid. We add that when it was declared in G.R. No. 161957 that the case should
not be brought for arbitration, it should be clarified that the case referred to is the case actually
Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be
filed by Gonzales before the DENR Panel of Arbitrators, which was for the nullification of the
settled by arbitration in the City of New York before the American Arbitration Association, The
main contract on the ground of fraud, as it had already been determined that the case should
Arbitration Award shall be final and binding on both parties.
have been brought before the regular courts involving as it did judicial issues. 26
The CA ruled that arbitration cannot be ordered in this case, since petitioner alleged that the
In so ruling that the validity of the contract containing the arbitration agreement does not affect
contract between the parties did not exist or was invalid and arbitration is not proper when one
the applicability of the arbitration clause itself, we then applied the doctrine of separability, thus:
of the parties repudiates the existence or validity of the contract. Thus, said the CA:

The doctrine of separability, or severability as other writers call it, enunciates that an arbitration
Notwithstanding our ruling on the validity and enforceability of the assailed arbitration clause
agreement is independent of the main contract. The arbitration agreement is to be treated as a
providing for foreign arbitration, it is our considered opinion that the case at bench still cannot
separate agreement and the arbitration agreement does not automatically terminate when the
be brought under the Arbitration Law for the purpose of suspending the proceedings before the
contract of which it is a part comes to an end.
trial court. We note that in its Motion to Dismiss/Suspend Proceedings, etc, petitioner Cargill
alleged, as one of the grounds thereof, that the alleged contract between the parties do not
legally exist or is invalid. As posited by petitioner, it is their contention that the said contract, The separability of the arbitration agreement is especially significant to the determination of
bearing the arbitration clause, was never consummated by the parties. That being the case, it whether the invalidity of the main contract also nullifies the arbitration clause. Indeed, the
is but proper that such issue be first resolved by the court through an appropriate trial. The doctrine denotes that the invalidity of the main contract, also referred to as the "container"
issue involves a question of fact that the trial court should first resolve. contract, does not affect the validity of the arbitration agreement. Irrespective of the fact that
the main contract is invalid, the arbitration clause/agreement still remains valid and
enforceable.27
Arbitration is not proper when one of the parties repudiates the existence or validity of the
contract. Apropos is Gonzales v. Climax Mining Ltd., 452 SCRA 607, (G.R.No.161957), where
the Supreme Court held that: Respondent argues that the separability doctrine is not applicable in petitioner's case, 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; while
The question of validity of the contract containing the agreement to submit to arbitration
Gonzales, who resisted the move of Climax-Arimco for arbitration, did not deny the existence of
will affect the applicability of the arbitration clause itself. A party cannot rely on the
the contract but merely assailed the validity thereof on the ground of fraud and oppression.
contract and claim rights or obligations under it and at the same time impugn its
Respondent claims that in the case before Us, petitioner who is the party insistent on
existence or validity. Indeed, litigants are enjoined from taking inconsistent positions....
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; thus, there is no
Consequently, the petitioner herein cannot claim that the contract was never consummated room for the application of the separability doctrine, since there is no container or main contract
and, at the same time, invokes the arbitration clause provided for under the contract which it or an arbitration clause to speak of.
alleges to be non-existent or invalid. Petitioner claims that private respondent's complaint lacks
a cause of action due to the absence of any valid contract between the parties. Apparently, the
We are not persuaded.
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, the parties may then be spared the rigors and Applying the Gonzales ruling, an arbitration agreement which forms part of the main contract
expenses that arbitration in a foreign land would surely entail. 24 shall not be regarded as invalid or non-existent just because the main contract is invalid or did
not come into existence, since the arbitration agreement shall be treated as a separate
agreement independent of the main contract. To reiterate. a contrary ruling would suggest that On a review on certiorari, we affirmed the CAs finding that the Panel of Arbitrators who, under
a party's mere repudiation of the main contract is sufficient to avoid arbitration and that is R.A. No. 7942 of the Philippine Mining Act of 1995, has exclusive and original jurisdiction to
exactly the situation that the separability doctrine sought to avoid. Thus, we find that even the hear and decide mining disputes, such as mining areas, mineral agreements, FTAAs or permits
party who has repudiated the main contract is not prevented from enforcing its arbitration and surface owners, occupants and claimholders/concessionaires, is bereft of jurisdiction over
clause. the complaint for declaration of nullity of the addendum contract; thus, the Panels' jurisdiction is
limited only to those mining disputes which raised question of facts or matters requiring the
Moreover, it is worthy to note that respondent filed a complaint for rescission of contract and technical knowledge and experience of mining authorities. We then said:
damages with the RTC. In so doing, respondent alleged that a contract exists between
respondent and petitioner. It is that contract which provides for an arbitration clause which In Pearson v. Intermediate Appellate Court, this Court observed that the trend has been to
states that "any dispute which the Buyer and Seller may not be able to settle by mutual make the adjudication of mining cases a purely administrative matter. Decisions of the
agreement shall be settled before the City of New York by the American Arbitration Association. Supreme Court on mining disputes have recognized a distinction between (1) the primary
The arbitration agreement clearly expressed the parties' intention that any dispute between powers granted by pertinent provisions of law to the then Secretary of Agriculture and Natural
them as buyer and seller should be referred to arbitration. It is for the arbitrator and not the Resources (and the bureau directors) of an executive or administrative nature, such as
courts to decide whether a contract between the parties exists or is valid. granting of license, permits, lease and contracts, or approving, rejecting, reinstating or
canceling applications, or deciding conflicting applications, and (2) controversies or
Respondent contends that assuming that the existence of the contract and the arbitration disagreements of civil or contractual nature between litigants which are questions of a judicial
clause is conceded, the CA's decision declining referral of the parties' dispute to arbitration is nature that may be adjudicated only by the courts of justice. This distinction is carried on even
still correct. It claims that its complaint in the RTC presents the issue of whether under the facts in Rep. Act No. 7942.28
alleged, it is entitled to rescind the contract with damages; and that issue constitutes a judicial
question or one that requires the exercise of judicial function and cannot be the subject of an We found that since the complaint filed before the DENR Panel of Arbitrators charged
arbitration proceeding. Respondent cites our ruling in Gonzales, wherein we held that a panel respondents with disregarding and ignoring the addendum contract, and acting in a fraudulent
of arbitrator is bereft of jurisdiction over the complaint for declaration of nullity/or termination of and oppressive manner against petitioner, the complaint filed before the Panel was not a
the subject contracts on the grounds of fraud and oppression attendant to the execution of the dispute involving rights to mining areas, or was it a dispute involving claimholders or
addendum contract and the other contracts emanating from it, and that the complaint should concessionaires, but essentially judicial issues. We then said that the Panel of Arbitrators did
have been filed with the regular courts as it involved issues which are judicial in nature. not have jurisdiction over such issue, since it does not involve the application of technical
knowledge and expertise relating to mining. It is in this context that we said that:
Such argument is misplaced and respondent cannot rely on the Gonzales case to support its
argument. Arbitration before the Panel of Arbitrators is proper only when there is a disagreement between
the parties as to some provisions of the contract between them, which needs the interpretation
In Gonzales, petitioner Gonzales filed a complaint before the Panel of Arbitrators, Region II, and the application of that particular knowledge and expertise possessed by members of that
Mines and Geosciences Bureau, of the Department of Environment and Natural Resources Panel. It is not proper when one of the parties repudiates the existence or validity of such
(DENR) against respondents Climax- Mining Ltd, Climax-Arimco and Australasian Philippines contract or agreement on the ground of fraud or oppression as in this case. The validity of the
Mining Inc, seeking the declaration of nullity or termination of the addendum contract and the contract cannot be subject of arbitration proceedings. Allegations of fraud and duress in the
other contracts emanating from it on the grounds of fraud and oppression. The Panel execution of a contract are matters within the jurisdiction of the ordinary courts of law. These
dismissed the complaint for lack of jurisdiction. However, the Panel, upon petitioner's motion for questions are legal in nature and require the application and interpretation of laws and
reconsideration, ruled that it had jurisdiction over the dispute maintaining that it was a mining jurisprudence which is necessarily a judicial function.29
dispute, since the subject complaint arose from a contract between the parties which involved
the exploration and exploitation of minerals over the disputed area.1wphi1 Respondents In fact, We even clarified in our resolution on Gonzales motion for reconsideration that "when
assailed the order of the Panel of Arbitrators via a petition for certiorari before the CA. The CA we declared that the case should not be brought for arbitration, it should be clarified that the
granted the petition and declared that the Panel of Arbitrators did not have jurisdiction over the case referred to is the case actually filed by Gonzales before the DENR Panel of Arbitrators,
complaint, since its jurisdiction was limited to the resolution of mining disputes, such as those which was for the nullification of the main contract on the ground of fraud, as it had already
which raised a question of fact or matter requiring the technical knowledge and experience of been determined that the case should have been brought before the regular courts involving as
mining authorities and not when the complaint alleged fraud and oppression which called for it did judicial issues." We made such clarification in our resolution of the motion for
the interpretation and application of laws. The CA further ruled that the petition should have reconsideration after ruling that the parties in that case can proceed to arbitration under the
been settled through arbitration under R.A. No. 876 the Arbitration Law as provided under Arbitration Law, as provided under the Arbitration Clause in their Addendum Contract.
the addendum contract.
WHEREFORE, the petition is GRANTED. The Decision dated July 31, 2006 and the Notably, Article VII of the milling contracts provides that 34% of the sugar and molasses
Resolution dated November 13, 2006 of the Court of Appeals in CA-G.R. SP No. 50304 produced from milling the Planters sugarcane shall belong to the centrals (respondents) as
are REVERSED and SET ASIDE. The parties are hereby ORDERED to SUBMIT themselves compensation, 65% thereof shall go to the Planter and the remaining 1% shall go the
to the arbitration of their dispute, pursuant to their July 11, 1996 agreement. association to which the Planter concerned belongs, as aid to the said association. The 1% aid
shall be used by the association for any purpose that it may deem fit for its members, laborers
SO ORDERED. and their dependents. If the Planter was not a member of any association, then the said 1%
shall revert to the centrals. Article XIV, paragraph B 4 states that the centrals may not, during the
life of the milling contract, sign or execute any contract or agreement that will provide better or
more benefits to a Planter, 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. Article XX provides that all differences and controversies which may
arise between the parties concerning the agreement shall be submitted for discussion to a
G.R. No. 156660 August 24, 2009 Board of Arbitration, consisting of five (5) memberstwo (2) of which shall be appointed by the
centrals, two (2) by the Planter and the fifth to be appointed by the four appointed by the
ORMOC SUGARCANE PLANTERS' ASSOCIATION, INC. (OSPA),OCCIDENTAL LEYTE parties.
FARMERS MULTI-PURPOSE COOPERATIVE, INC. (OLFAMCA), UNIFARM MULTI-
PURPOSE COOPERATIVE, INC. (UNIFARM) and ORMOC NORTH DISTRICT IRRIGATION On June 4, 1999, petitioners, without impleading any of their individual members, filed twin
MULTI-PURPOSE COOPERATIVE, INC. (ONDIMCO), Petitioners, petitions with the RTC for Arbitration under R.A. 876, Recovery of Equal Additional Benefits,
vs. Attorneys Fees and Damages, against HIDECO and OSCO, docketed as Civil Case Nos.
THE COURT OF APPEALS (Special Former Sixth Division), HIDECO SUGAR MILLING 3696-O and 3697-O, respectively.
CO., INC., and ORMOC SUGAR MILLING CO., INC., Respondents.
Petitioners claimed that respondents violated the Milling Contract when they gave to
DECISION independent planters who do not belong to any association the 1% share, instead of reverting
said share to the centrals. Petitioners contended that respondents unduly accorded the
LEONARDO-DE CASTRO, J.: 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. They
Before the Court is a special civil action for certiorari assailing the Decision 1 dated December 7, also demanded that respondents be penalized by increasing their member Planters 65% share
2001 and the Resolution dated October 30, 2002 of the Court of Appeals (CA) in CA-G.R. SP provided in the milling contract by 1%, to 66%.
No. 56166 which set aside the Joint Orders 2 dated August 26, 1999 and October 29, 1999
issued by the Regional Trial Court (RTC) of Ormoc City, Branch 12 upholding petitioners legal Respondents filed a motion to dismiss on ground of lack of cause of action because petitioners
personality to demand arbitration from respondents and directing respondents to nominate two had no milling contract with respondents. According to respondents, only some eighty (80)
arbitrators to represent them in the Board of Arbitrators. Planters who were members of OSPA, one of the petitioners, executed milling contracts.
Respondents and these 80 Planters were the signatories of the milling contracts. Thus, it was
Petitioners are associations organized by and whose members are individual sugar planters the individual Planters, and not petitioners, who had legal standing to invoke the arbitration
(Planters). The membership of each association follows: 264 Planters were members of OSPA; clause in the milling contracts. Petitioners, not being privy to the milling contracts, had no legal
533 Planters belong to OLFAMCA; 617 Planters joined UNIFARM; 760 Planters enlisted with standing whatsoever to demand or sue for arbitration.
ONDIMCO; and the rest belong to BAP-MPC which did not join the lawsuit.
On August 26, 1999, the RTC issued a Joint Order5 denying the motion to dismiss, declaring
Respondents Hideco Sugar Milling Co., Inc. (Hideco) and Ormoc Sugar Milling Co, Inc. the existence of a milling contract between the parties, and directing respondents to nominate
(OSCO) are sugar centrals engaged in grinding and milling sugarcane delivered to them by two arbitrators to the Board of Arbitrators, to wit:
numerous individual sugar planters, who may or may not be members of an association such
as petitioners. When these cases were called for hearing today, counsels for the petitioners and respondents
argued their respective stand. The Court is convinced that there is an existing milling contract
Petitioners assert that the relationship between respondents and the individual sugar planters between the petitioners and respondents and these planters are represented by the officers of
is governed by milling contracts. To buttress this claim, petitioners presented representative the associations. The petitioners have the right to sue in behalf of the planters.
samples of the milling contracts.3
This Court, acting on the petitions, directs the respondents to nominate two arbitrators to Petitioners principally argue that the CA committed a grave error in setting aside the
represent HIDECO/HISUMCO and OSCO in the Board of Arbitrators within fifteen (15) days challenged Joint Orders of the RTC which allegedly unduly curtailed the right of petitioners to
from receipt of this Order. xxx represent their planters-members and enforce the milling contracts with respondents.
Petitioners assert the said which orders were issued in accordance with Article XX of the Milling
However, if the respondents fail to nominate their two arbitrators, upon proper motion by the Contract and the applicable provisions of Republic Act (R.A.) No. 876.
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.A. 876. 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
xxx special civil action for certiorari. Erroneous findings and conclusions do not render the
appellate court vulnerable to the corrective writ of certiorari. For where the court has jurisdiction
over the case, even if its findings are not correct, they would, at most constitute errors of law
Their subsequent motion for reconsideration having been denied by the RTC in its Joint
and not abuse of discretion correctable by certiorari. 9
Order6 dated October 29, 1999, 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. Moreover, even if this Court overlooks the procedural lapse committed by petitioners and
decides this matter on the merits, the present petition will still not prosper.
On December 7, 2001, the CA rendered its challenged Decision, setting aside the assailed
Orders of the RTC. The CA held that petitioners neither had an existing contract with Stripped to the core, the pivotal issue here is whether or not petitioners sugar planters
respondents nor were they privy to the milling contracts between respondents and the associations are clothed with legal personality to file a suit against, or demand arbitration
individual Planters. In the main, the CA concluded that petitioners had no legal personality to from, respondents in their own name without impleading the individual Planters.
bring the action against respondents or to demand for arbitration.
On this point, we agree with the findings of the CA.
Petitioners filed a motion for reconsideration, but it too was denied by the CA in its
Resolution7 dated October 30, 2002. Thus, the instant petition. Section 2 of R.A. No. 876 (the Arbitration Law) 10 pertinently provides:

At the outset, it must be noted that petitioners filed the instant petition for certiorari under Rule Sec. 2. Persons and matters subject to arbitration. Two or more persons or parties may
65 of the Rules of Court, to challenge the judgment of the CA. Section 1 of Rule 65 states: 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, or the parties to any
Section 1. Petition for Certiorari. When any tribunal, board or officer exercising judicial or contract may in such contract agree to settle by arbitration a controversy thereafter arising
quasi-judicial functions has acted without or in excess of its jurisdiction, or with grave abuse of between them. Such submission or contract shall be valid, enforceable and irrevocable, save
discretion amounting to lack or excess of its or his jurisdiction and there is no appeal, or any upon such grounds as exist at law for the revocation of any contract. xxx (Emphasis ours)
plain, speedy and adequate remedy in the course of law, a person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with certainty and praying that judgment The foregoing provision speaks of two modes of arbitration: (a) an agreement to submit to
be rendered annulling or modifying the proceedings of such tribunal, board or officer, and arbitration some future dispute, usually stipulated upon in a civil contract between the parties,
granting such incidental relief as law and justice require. xxx xxx xxx (emphasis ours) and known as an agreement to submit to arbitration, and (b) an agreement submitting an
existing matter of difference to arbitrators, termed the submission agreement. Article XX of the
The instant recourse is improper because the resolution of the CA was a final order from which milling contract is an agreement to submit to arbitration because it was made in anticipation of
the remedy of appeal was available under Rule 45 in relation to Rule 56. The existence and a dispute that might arise between the parties after the contracts execution.
availability of the right of appeal proscribes resort to certiorari because one of the requirements
for availment of the latter is precisely that there should be no appeal. It is elementary that for Except where a compulsory arbitration is provided by statute, the first step toward the
certiorari to prosper, it is not enough that the trial court committed grave abuse of discretion settlement of a difference by arbitration is the entry by the parties into a valid agreement to
amounting to lack or excess of jurisdiction; the requirement that there is no appeal, nor any arbitrate. An agreement to arbitrate is a contract, the relation of the parties is contractual, and
plain, speedy and adequate remedy in the ordinary course of law must likewise be the rights and liabilities of the parties are controlled by the law of contracts. 11 In an agreement
satisfied.8 The proper mode of recourse for petitioners was to file a petition for review of the for arbitration, the ordinary elements of a valid contract must appear, including an agreement to
CAs decision under Rule 45. arbitrate some specific thing, and an agreement to abide by the award, either in express
language or by implication.
The requirements that an arbitration agreement must be written and subscribed by the parties means to write underneath, as ones name; to sign at the end of a document. That word may
thereto were enunciated by the Court in B.F. Corporation v. CA. 12 sometimes be construed to mean to give consent to or to attest. 13

During the proceedings before the CA, it was established that there were more than two Petitioners would argue that they could sue respondents, notwithstanding the fact that they
thousand (2,000) Planters in the district at the time the case was commenced at the RTC in were not signatories in the milling contracts because they are the recognized representatives of
1999. The CA further found that of those 2,000 Planters, only about eighty (80) Planters, who the Planters.
were all members of petitioner OSPA, in fact individually executed milling contracts with
respondents. No milling contracts signed by members of the other petitioners were presented This claim has no leg to stand on since petitioners did not sign the milling contracts at all,
before the CA. whether as a party or as a representative of their member Planters. The individual Planter and
the appropriate central were the only signatories to the contracts and there is no provision in
By their own allegation, petitioners are associations duly existing and organized under the milling contracts that the individual Planter is authorizing the association to represent
Philippine law, i.e. they have juridical personalities separate and distinct from that of their him/her in a legal action in case of a dispute over the milling contracts.
member Planters. 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 Moreover, even assuming that petitioners are indeed representatives of the member Planters
parties. In other words, none of the petitioners were parties or signatories to the milling who have milling contracts with the respondents and assuming further that petitioners signed
contracts. This circumstance is fatal to petitioners' cause since they anchor their right to the milling contracts as representatives of their members, petitioners could not initiate
demand arbitration from the respondent sugar centrals upon the arbitration clause found in the arbitration proceedings in their own name as they had done in the present case. As mere
milling contracts. There is no legal basis for petitioners' purported right to demand arbitration agents, they should have brought the suit in the name of the principals that they purportedly
when they are not parties to the milling contracts, especially when the language of the represent. Even if Section 4 of R.A. No. 876 allows the agreement to arbitrate to be signed by a
arbitration clause expressly grants the right to demand arbitration only to the parties to the representative, the principal is still the one who has the right to demand arbitration.
contract.
Indeed, Rule 3, Section 2 of the Rules of Court requires suits to be brought in the name of the
Simply put, petitioners do not have any agreement to arbitrate with respondents. Only eighty real party in interest, to wit:
(80) Planters who were all members of OSPA were shown to have such an agreement to
arbitrate, included as a stipulation in their individual milling contracts. The other petitioners Sec. 2. Parties in interest. A real party in interest is the party who stands to be benefited or
failed to prove that any of their members had milling contracts with respondents, much less, injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless
that respondents had an agreement to arbitrate with the petitioner associations themselves. otherwise authorized by law or these Rules, every action must be prosecuted or defended in
the name of the real party in interest.
Even assuming that all the petitioners were able to present milling contracts in favor of their
members, it is undeniable that under the arbitration clause in these contracts it is the parties We held in Oco v. Limbaring14 that:
thereto who have the right to submit a controversy or dispute to arbitration.
As applied to the present case, this provision has two requirements: 1) to institute an action,
Section 4 of R.A. 876 provides: the plaintiff must be the real party in interest; and 2) the action must be prosecuted in the name
of the real party in interest. Necessarily, the purposes of this provision are 1) to prevent the
Section 4. Form of Arbitration Agreement A contract to arbitrate a controversy thereafter prosecution of actions by persons without any right, title or interest in the case; 2) to require
arising between the parties, as well as a submission to arbitrate an existing controversy, shall that the actual party entitled to legal relief be the one to prosecute the action; 3) to avoid a
be in writing and subscribed by the party sought to be charged, or by his lawful agent. multiplicity of suits; and 4) to discourage litigation and keep it within certain bounds, pursuant to
sound public policy.
The making of a contract or submission for arbitration described in section two hereof,
providing for arbitration of any controversy, shall be deemed a consent of the parties to the Interest within the meaning of the Rules means material interest or an interest in issue
jurisdiction of the Court of First Instance of the province or city where any of the parties resides, to be affected by the decree or judgment of the case, as distinguished from mere curiosity
to enforce such contract of submission. about the question involved. One having no material interest to protect cannot invoke the
jurisdiction of the court as the plaintiff in an action. When the plaintiff is not the real party in
The formal requirements of an agreement to arbitrate are therefore the following: (a) it must be interest, the case is dismissible on the ground of lack of cause of action.
in writing and (b) it must be subscribed by the parties or their representatives. To subscribe
xxx xxx xxx
The parties to a contract are the real parties in interest in an action upon it, as Lastly, petitioners theorize that they could demand and sue for arbitration independently of the
consistently held by the Court. Only the contracting parties are bound by the stipulations in Planters because the milling contract is a contract pour autrui under Article 1311 of the Civil
the contract; they are the ones who would benefit from and could violate it. Thus, one who Code.
is not a party to a contract, and for whose benefit it was not expressly made, cannot maintain
an action on it. One cannot do so, even if the contract performed by the contracting ART. 1311. Contracts take effect only between the parties, their assigns and heirs, except in
parties would incidentally inure to ones benefit. (emphasis ours) case where the rights and obligations arising from the contract are not transmissible by their
nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the
In Uy v. Court of Appeals,15 this Court held that the agents of the parties to a contract do not property he received from the decedent.
have the right to bring an action even if they rendered some service on behalf of their
principals. To quote from that decision: If a contract should contain some stipulation in favor of a third person, he may demand its
fulfillment provided he communicated his acceptance to the obligor before its revocation. A
[Petitioners] are mere agents of the owners of the land subject of the sale. As agents, they mere incidental benefit or interest of a person is not sufficient. The contracting parties must
only render some service or do something in representation or on behalf of their principals. The have clearly and deliberately conferred a favor upon a third person.
rendering of such service did not make them parties to the contracts of sale executed in
behalf of the latter. Since a contract may be violated only by the parties thereto as against each To summarize, the requisites of a stipulation pour autrui or a stipulation in favor of a third
other, the real parties-in-interest, either as plaintiff or defendant, in an action upon that person are the following: (1) there must be a stipulation in favor of a third person, (2) the
contract must, generally, either be parties to said contract. (emphasis and words in stipulation must be a part, not the whole, of the contract, (3) the contracting parties must have
brackets ours) clearly and deliberately conferred a favor upon a third person, not a mere incidental benefit or
interest, (4) the third person must have communicated his acceptance to the obligor before its
The main cause of action of petitioners in their request for arbitration with the RTC is the revocation, and (5) neither of the contracting parties bears the legal representation or
alleged violation of the clause in the milling contracts involving the proportionate sharing in the authorization of the third party.17 These requisites are not present in this case.
proceeds of the harvest. Petitioners essentially demand that respondents increase the share of
the member Planters to 66% to equalize their situation with those of the non-member Planters. Article VI of the Milling Contract is the solitary provision that mentions some benefit in favor of
Verily, from petitioners' own allegations, the party who would be injured or benefited by a the association of which the planter is a member and we quote:
decision in the arbitration proceedings will be the member Planters involved and not
petitioners. In sum, petitioners are not the real parties in interest in the present case. VI
SHARE IN THE SUGAR
Assuming petitioners had properly brought the case in the name of their members who had
existing milling contracts with respondents, petitioners must still prove that they were indeed Thirty four per centrum (34%) of the sugar ad molasses resulting from the milling of the
authorized by the said members to institute an action for and on the members' behalf. In the PLANTERs sugarcane, as computed from the weight and analysis of the sugarcane delivered
same manner that an officer of the corporation cannot bring action in behalf of a corporation by the PLANTER, shall belong to the CENTRAL; sixty five per centum (65%) thereof to the
unless it is clothed with a board resolution authorizing an officer to do so, an authorization from PLANTER, and one per centum (1%) as aid to the association of the PLANTER; provided that,
the individual member planter is a sine qua non for the association or any of its officers to bring if the PLANTER is not a member of any association recognized by the CENTRAL, said one per
an action before the court of law. The mere fact that petitioners were organized for the purpose centum (1%) shall revert to the CENTRAL. The 1% aid shall be used by the association for any
of advancing the interests and welfare of their members does not necessarily mean that purpose that it may deem fit for its members, laborers and their dependents, or for its other
petitioners have the authority to represent their members in legal proceedings, including the socio-economic projects.
present arbitration proceedings.
The foregoing provision cannot, by any stretch of the imagination, be considered as a
As we see it, petitioners had no intention to litigate the case in a representative capacity, as stiputation pour autrui or for the benefit of the petitioners. The primary rationale for the said
they contend. All the pleadings from the RTC to this Court belie this claim. Under Section 3 of stipulation is to ensure a just share in the proceeds of the harvest to the Planters. In other
Rule 3, where the action is allowed to be prosecuted by a representative, the beneficiary shall
words, it is a stipulation meant to benefit the Planters. Even the 1% share to be given to the
be included in the title of the case and shall be deemed to be the real party in interest. As association as aid does not redound to the benefit of the association but is intended to be used
repeatedly pointed out earlier, the individual Planters were not even impleaded as parties to for its member Planters. Not only that, it is explicit that said share reverts back to respondent
this case. In addition, petitioners need a power-of-attorney to represent the Planters whether in sugar centrals if the contracting Planter is not affiliated with any recognized association.
the lawsuit or to demand arbitration.16 None was ever presented here.
To be considered a pour autrui provision, an incidental benefit or interest, which another person On June 1, 1987, Benguet and J.G. Realty entered into a RAWOP, wherein J.G. Realty was
gains, is not sufficient. The contracting parties must have clearly and deliberately conferred a acknowledged as the owner of four mining claims respectively named as Bonito-I, Bonito-II,
favor upon a third person.18 Even the clause stating that respondents must secure the consent Bonito-III, and Bonito-IV, with a total area of 288.8656 hectares, situated in Barangay
of the association if respondents grant better benefits to a Planter has for its rationale the Luklukam, Sitio Bagong Bayan, Municipality of Jose Panganiban, Camarines Norte. The
protection of the member Planter. The only interest of the association therein is that its member parties also executed a Supplemental Agreement5 dated June 1, 1987. The mining claims were
Planter will not be put at a disadvantage vis a vis other Planters. Thus, the associations covered by MPSA Application No. APSA-V-0009 jointly filed by J.G. Realty as claimowner and
interest in these milling contracts is only incidental to their avowed purpose of advancing the Benguet as operator.
welfare and rights of their member Planters.
In the RAWOP, Benguet obligated itself to perfect the rights to the mining claims and/or
In all, the Court finds no grave abuse of discretion nor reversible error committed by the CA in otherwise acquire the mining rights to the mineral claims. Within 24 months from the execution
setting aside the Joint Orders issued by the RTC. of the RAWOP, 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
WHEREFORE, petition is hereby DISMISSED. profitable production. Benguet undertook also to furnish J.G. Realty with a report on the
examination, within a reasonable time after the completion of the examination. Moreover, also
within the examination period, Benguet shall conduct all necessary exploration in accordance
Costs against petitioners.
with a prepared exploration program. If it chooses to do so and before the expiration of the
examination period, Benguet may undertake to develop the mining claims upon written notice
SO ORDERED. to J.G. Realty. Benguet must then place the mining claims into commercial productive stage
within 24 months from the written notice.6 It is also provided in the RAWOP that if the mining
claims were placed in commercial production by Benguet, J.G. Realty should be entitled to a
royalty of five percent (5%) of net realizable value, and to royalty for any production done by
Benguet whether during the examination or development periods.

G.R. No. 163101 February 13, 2008 Thus, on August 9, 1989, the Executive Vice-President of Benguet, Antonio N. Tachuling,
issued a letter informing J.G. Realty of its intention to develop the mining claims. However, on
BENGUET CORPORATION, petitioner, February 9, 1999, J.G. Realty, through its President, Johnny L. Tan, then sent a letter to the
vs. President of Benguet informing the latter that it was terminating the RAWOP on the following
DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES -MINES ADJUDICATION grounds:
BOARD and J.G. REALTY AND MINING CORPORATION, respondents.
a. The fact that your company has failed to perform the obligations set forth in the
DECISION RAWOP, i.e., to undertake development works within 2 years from the execution of the
Agreement;
VELASCO, JR., J.:
b. Violation of the Contract by allowing high graders to operate on our claim.
The instant petition under Rule 65 of the Rules of Court seeks the annulment of the December
2, 2002 Decision1and March 17, 2004 Resolution2 of the Department of Environment and c. No stipulation was provided with respect to the term limit of the RAWOP.
Natural Resources-Mining Adjudication Board (DENR-MAB) in MAB Case No. 0124-01 (Mines
Administrative Case No. R-M-2000-01) entitled Benguet Corporation (Benguet) v. J.G. Realty d. Non-payment of the royalties thereon as provided in the RAWOP.7
and Mining Corporation (J.G. Realty). The December 2, 2002 Decision upheld the March 19,
2001 Decision3 of the MAB Panel of Arbitrators (POA) which canceled the Royalty Agreement In response, Benguets Manager for Legal Services, Reynaldo P. Mendoza, wrote J.G. Realty a
with Option to Purchase (RAWOP) dated June 1, 19874 between Benguet and J.G. Realty, and letter dated March 8, 1999,8 therein alleging that Benguet complied with its obligations under
excluded Benguet from the joint Mineral Production Sharing Agreement (MPSA) application the RAWOP by investing PhP 42.4 million to rehabilitate the mines, and that the commercial
over four mining claims. The March 17, 2004 Resolution denied Benguets Motion for operation was hampered by the non-issuance of a Mines Temporary Permit by the Mines and
Reconsideration. Geosciences Bureau (MGB) which must be considered as force majeure, entitling Benguet to
an extension of time to prosecute such permit. Benguet further claimed that the high graders
The Facts mentioned by J.G. Realty were already operating prior to Benguets taking over of the
premises, and that J.G. Realty had the obligation of ejecting such small scale miners. Benguet supported by evidence?; and (3) Did the cancellation of the RAWOP amount to unjust
also alleged that the nature of the mining business made it difficult to specify a time limit for the enrichment of J.G. Realty at the expense of Benguet?
RAWOP. Benguet then argued that the royalties due to J.G. Realty were in fact in its office and
ready to be picked up at any time. It appeared that, previously, the practice by J.G. Realty was The Courts Ruling
to pick-up checks from Benguet representing such royalties. However, starting August 1994,
J.G. Realty allegedly refused to collect such checks from Benguet. Thus, Benguet posited that Before we dwell on the substantive issues, we find that the instant petition can be denied
there was no valid ground for the termination of the RAWOP. It also reminded J.G. Realty that it outright as Benguet resorted to an improper remedy.
should submit the disagreement to arbitration rather than unilaterally terminating the RAWOP.
The last paragraph of Section 79 of Republic Act No. (RA) 7942 or the "Philippine Mining Act of
On June 7, 2000, J.G. Realty filed a Petition for Declaration of Nullity/Cancellation of the 1995" states, "A petition for review by certiorari and question of law may be filed by the
RAWOP9 with the Legaspi City POA, Region V, docketed as DENR Case No. 2000-01 and aggrieved party with the Supreme Court within thirty (30) days from receipt of the order or
entitled J.G. Realty v. Benguet. decision of the [MAB]."

On March 19, 2001, the POA issued a Decision,10 dwelling upon the issues of (1) whether the However, this Court has already invalidated such provision in Carpio v. Sulu Resources
arbitrators had jurisdiction over the case; and (2) whether Benguet violated the RAWOP Development Corp.,13 ruling that a decision of the MAB must first be appealed to the Court of
justifying the unilateral cancellation of the RAWOP by J.G. Realty. The dispositive portion Appeals (CA) under Rule 43 of the Rules of Court, before recourse to this Court may be had.
stated: We held, thus:

WHEREFORE, premises considered, the June 01, 1987 [RAWOP] and its To summarize, there are sufficient legal footings authorizing a review of the MAB
Supplemental Agreement is hereby declared cancelled and without effect. BENGUET Decision under Rule 43 of the Rules of Court. First, Section 30 of Article VI of the 1987
is hereby excluded from the joint MPSA Application over the mineral claims Constitution, mandates that "[n]o law shall be passed increasing the appellate
denominated as "BONITO-I", "BONITO-II", "BONITO-III" and "BONITO-IV". jurisdiction of the Supreme Court as provided in this Constitution without its advice and
consent." On the other hand, Section 79 of RA No. 7942 provides that decisions of the
SO ORDERED. MAB may be reviewed by this Court on a "petition for review by certiorari." This
provision is obviously an expansion of the Courts appellate jurisdiction, an expansion
Therefrom, Benguet filed a Notice of Appeal 11 with the MAB on April 23, 2001, docketed as to which this Court has not consented. Indiscriminate enactment of legislation
Mines Administrative Case No. R-M-2000-01. Thereafter, the MAB issued the assailed enlarging the appellate jurisdiction of this Court would unnecessarily burden it.
December 2, 2002 Decision. Benguet then filed a Motion for Reconsideration of the assailed
Decision which was denied in the March 17, 2004 Resolution of the MAB. Hence, Benguet filed Second, when the Supreme Court, in the exercise of its rule-making power, transfers to
the instant petition. the CA pending cases involving a review of a quasi-judicial bodys decisions, such
transfer relates only to procedure; hence, it does not impair the substantive and vested
The Issues rights of the parties. The aggrieved partys right to appeal is preserved; what is
changed is only the procedure by which the appeal is to be made or decided. The
1. There was serious and palpable error when the Honorable Board failed to rule that parties still have a remedy and a competent tribunal to grant this remedy.
the contractual obligation of the parties to arbitrate under the Royalty Agreement is
mandatory. Third, the Revised Rules of Civil Procedure included Rule 43 to provide a uniform rule
on appeals from quasi-judicial agencies. Under the rule, appeals from their judgments
2. The Honorable Board exceeded its jurisdiction when it sustained the cancellation of and final orders are now required to be brought to the CA on a verified petition for
the Royalty Agreement for alleged breach of contract despite the absence of evidence. review. A quasi-judicial agency or body has been defined as an organ of government,
other than a court or legislature, which affects the rights of private parties through
either adjudication or rule-making. MAB falls under this definition; hence, it is no
3. The Questioned Decision of the Honorable Board in cancelling the RAWOP
different from the other quasi-judicial bodies enumerated under Rule 43. Besides, the
prejudice[d] the substantial rights of Benguet under the contract to the unjust
introductory words in Section 1 of Circular No. 1-91"among these agencies are"
enrichment of JG Realty.12
indicate that the enumeration is not exclusive or conclusive and acknowledge the
existence of other quasi-judicial agencies which, though not expressly listed, should be
Restated, the issues are: (1) Should the controversy have first been submitted to arbitration deemed included therein.
before the POA took cognizance of the case?; (2) Was the cancellation of the RAWOP
Fourth, the Court realizes that under Batas Pambansa (BP) Blg. 129 as amended by another to be selected by the OWNER and the third to be selected by the
RA No. 7902, factual controversies are usually involved in decisions of quasi-judicial aforementioned two arbitrators so appointed.
bodies; and the CA, which is likewise tasked to resolve questions of fact, has more
elbow room to resolve them. By including questions of fact among the issues that may xxxx
be raised in an appeal from quasi-judicial agencies to the CA, Section 3 of Revised
Administrative Circular No. 1-95 and Section 3 of Rule 43 explicitly expanded the list of 11.02 Court Action
such issues.
No action shall be instituted in court as to any matter in dispute as hereinabove stated,
According to Section 3 of Rule 43, "[a]n appeal under this Rule may be taken to the except to enforce the decision of the majority of the Arbitrators. 16
Court of Appeals within the period and in the manner herein provided whether the
appeal involves questions of fact, of law, or mixed questions of fact and law." Hence,
appeals from quasi-judicial agencies even only on questions of law may be brought to Thus, Benguet argues that the POA should have first referred the case to voluntary arbitration
the CA. before taking cognizance of the case, citing Sec. 2 of RA 876 on persons and matters subject
to arbitration.
Fifth, the judicial policy of observing the hierarchy of courts dictates that direct resort
from administrative agencies to this Court will not be entertained, unless the redress On the other hand, in denying such argument, the POA ruled that:
desired cannot be obtained from the appropriate lower tribunals, or unless exceptional
and compelling circumstances justify availment of a remedy falling within and calling While the parties may establish such stipulations clauses, terms and conditions as they may
for the exercise of our primary jurisdiction.14 deem convenient, the same must not be contrary to law and public policy. At a glance, there is
nothing wrong with the terms and conditions of the agreement. But to state that an aggrieved
The above principle was reiterated in Asaphil Construction and Development Corporation v. party cannot initiate an action without going to arbitration would be tying ones hand even if
Tuason, Jr. (Asaphil).15However, the Carpio ruling was not applied to Asaphil as the petition in there is a law which allows him to do so.17
the latter case was filed in 1999 or three years before the promulgation of Carpio in 2002.
Here, the petition was filed on April 28, 2004 when the Carpio decision was already applicable, The MAB, meanwhile, denied Benguets contention on the ground of estoppel, stating:
thus Benguet should have filed the appeal with the CA.
Besides, by its own act, Benguet is already estopped in questioning the jurisdiction of
Petitioner having failed to properly appeal to the CA under Rule 43, the decision of the MAB the Panel of Arbitrators to hear and decide the case. As pointed out in the appealed
has become final and executory. On this ground alone, the instant petition must be denied. Decision, Benguet initiated and filed an Adverse Claim docketed as MAC-R-M-2000-02
over the same mining claims without undergoing contractual arbitration. In this
Even if we entertain the petition although Benguet skirted the appeal to the CA via Rule 43, particular case (MAC-R-M-2000-02) now subject of the appeal, Benguet is likewise in
still, the December 2, 2002 Decision and March 17, 2004 Resolution of the DENR-MAB in MAB estoppel from questioning the competence of the Panel of Arbitrators to hear and
Case No. 0124-01 should be maintained. decide in the summary proceedings J.G. Realtys petition, 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. 18
First Issue: The case should have first been brought to
voluntary arbitration before the POA
Moreover, 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. 19
Secs. 11.01 and 11.02 of the RAWOP pertinently provide:
In its July 20, 2004 Comment,20 J.G. Realty reiterated the above rulings of the POA and MAB. It
11.01 Arbitration 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, such as RA 876. It also argued that
Any disputes, differences or disagreements between BENGUET and the OWNER with the POA cannot be considered as a "court" under the contemplation of RA 876 and that
reference to anything whatsoever pertaining to this Agreement that cannot be amicably jurisprudence saying that there must be prior resort to arbitration before filing a case with the
settled by them shall not be cause of any action of any kind whatsoever in any court or courts is inapplicable to the instant case as the POA is itself already engaged in arbitration.
administrative agency but shall, upon notice of one party to the other, be referred to a
Board of Arbitrators consisting of three (3) members, one to be selected by BENGUET, On this issue, we rule for Benguet.
Sec. 2 of RA 876 elucidates the scope of arbitration: suit or proceeding is pending, upon being satisfied that the issue involved in such suit
or proceeding is referable to arbitration, shall stay the action or proceeding until an
Section 2. Persons and matters subject to arbitration.Two or more persons or arbitration has been had in accordance with the terms of the agreement: Provided,
parties may submit to the arbitration of one or more arbitrators any controversy That the applicant, for the stay is not in default in proceeding with such arbitration.
existing between them at the time of the submission and which may be the (Emphasis supplied.)
subject of an action, or the parties to any contract may in such contract agree to
settle by arbitration a controversy thereafter arising between them. Such In other words, in the event a case that should properly be the subject of voluntary arbitration is
submission or contract shall be valid, enforceable and irrevocable, save upon erroneously filed with the courts or quasi-judicial agencies, on motion of the defendant, the
such grounds as exist at law for the revocation of any contract. court or quasi-judicial agency shall determine whether such contractual provision for arbitration
is sufficient and effective. If in affirmative, the court or quasi-judicial agency shall then order the
Such submission or contract may include question[s] arising out of valuations, enforcement of said provision. Besides, in BF Corporation v. Court of Appeals, we already
appraisals or other controversies which may be collateral, incidental, precedent or ruled:
subsequent to any issue between the parties. (Emphasis supplied.)
In this connection, it bears stressing that the lower court has not lost its jurisdiction
In RA 9285 or the "Alternative Dispute Resolution Act of 2004," the Congress reiterated the over the case. Section 7 of Republic Act No. 876 provides that proceedings therein
efficacy of arbitration as an alternative mode of dispute resolution by stating in Sec. 32 thereof have only been stayed. After the special proceeding of arbitration has been pursued
that domestic arbitration shall still be governed by RA 876. Clearly, a contractual stipulation that and completed, then the lower court may confirm the award made by the arbitrator.22
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. Thus, petitioner correctly cites several cases J.G. Realtys contention, that prior resort to arbitration is unavailing in the instant case because
whereby arbitration clauses have been upheld by this Court. 21 the POAs mandate is to arbitrate disputes involving mineral agreements, is misplaced. A
distinction must be made between voluntary and compulsory arbitration. In Ludo and Luym
Moreover, the contention that RA 7942 prevails over RA 876 presupposes a conflict between Corporation v. Saordino, the Court had the occasion to distinguish between the two types of
the two laws. Such is not the case here. To reiterate, availment of voluntary arbitration before arbitrations:
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. As stated in Secs. 6 and 7 of RA 876: Comparatively, in Reformist Union of R.B. Liner, Inc. vs. NLRC, compulsory arbitration
has been defined both as "the process of settlement of labor disputes by a
Section 6. Hearing by court.A party aggrieved by the failure, neglect or refusal of government agency which has the authority to investigate and to make an
another to perform under an agreement in writing providing for arbitration may award which is binding on all the parties, and as a mode of arbitration where the
petition the court for an order directing that such arbitration proceed in the parties are compelled to accept the resolution of their dispute through arbitration by a
manner provided for in such agreement. Five days notice in writing of the hearing of third party." While a voluntary arbitrator is not part of the governmental unit or labor
such application shall be served either personally or by registered mail upon the party departments personnel, said arbitrator renders arbitration services provided for
in default. The court shall hear the parties, and upon being satisfied that the under labor laws.23 (Emphasis supplied.)
making of the agreement or such failure to comply therewith is not in issue, shall
make an order directing the parties to proceed to arbitration in accordance with There is a clear distinction between compulsory and voluntary arbitration. The arbitration
the terms of the agreement. If the making of the agreement or default be in issue provided by the POA is compulsory, while the nature of the arbitration provision in the RAWOP
the court shall proceed to summarily hear such issue. If the finding be that no is voluntary, not involving any government agency. Thus, J.G. Realtys argument on this matter
agreement in writing providing for arbitration was made, or that there is no must fail.
default in the proceeding thereunder, the proceeding shall be dismissed. If the
finding be that a written provision for arbitration was made and there is a default As to J.G. Realtys contention that the provisions of RA 876 cannot apply to the instant case
in proceeding thereunder, an order shall be made summarily directing the which involves an administrative agency, it must be pointed out that Section 11.01 of the
parties to proceed with the arbitration in accordance with the terms thereof. RAWOP states that:

xxxx [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, upon notice of one
Section 7. Stay of civil action.If any suit or proceeding be brought upon an issue party to the other, be referred to a Board of Arbitrators consisting of three (3) members,
arising out of an agreement providing for the arbitration thereof, the court in which such
one to be selected by BENGUET, another to be selected by the OWNER and the third Sec. 14.05 of the RAWOP provides:
to be selected by the aforementioned two arbiters so appointed. 24 (Emphasis supplied.)
14.05 Bank Account
There can be no quibbling that POA is a quasi-judicial body which forms part of the DENR, an
administrative agency. Hence, the provision on mandatory resort to arbitration, freely entered OWNER shall maintain a bank account at ___________ or any other bank from time to
into by the parties, must be held binding against them. 25 time selected by OWNER with notice in writing to BENGUET where BENGUET shall
deposit to the OWNERs credit any and all advances and payments which may
In sum, on the issue of whether POA should have referred the case to voluntary arbitration, we become due the OWNER under this Agreement as well as the purchase price herein
find that, indeed, POA has no jurisdiction over the dispute which is governed by RA 876, the agreed upon in the event that BENGUET shall exercise the option to purchase
arbitration law. provided for in the Agreement. Any and all deposits so made by BENGUET shall be
a full and complete acquittance and release to [sic] BENGUET from any further
However, we find that Benguet is already estopped from questioning the POAs jurisdiction. As liability to the OWNER of the amounts represented by such deposits. (Emphasis
it were, when J.G. Realty filed DENR Case No. 2000-01, Benguet filed its answer and supplied.)
participated in the proceedings before the POA, Region V. Secondly, when the adverse March
19, 2001 POA Decision was rendered, it filed an appeal with the MAB in Mines Administrative Evidently, the RAWOP itself provides for the mode of royalty payment by Benguet. The fact that
Case No. R-M-2000-01 and again participated in the MAB proceedings. When the adverse there was the previous practice whereby J.G. Realty picked-up the checks from Benguet is
December 2, 2002 MAB Decision was promulgated, it filed a motion for reconsideration with unavailing. The mode of payment is embodied in a contract between the parties. As such, the
the MAB. When the adverse March 17, 2004 MAB Resolution was issued, Benguet filed a contract must be considered as the law between the parties and binding on both. 26 Thus, after
petition with this Court pursuant to Sec. 79 of RA 7942 impliedly recognizing MABs jurisdiction. J.G. Realty informed Benguet of the bank account where deposits of its royalties may be made,
In this factual milieu, the Court rules that the jurisdiction of POA and that of MAB can no longer Benguet had the obligation to deposit the checks. J.G. Realty had no obligation to furnish
be questioned by Benguet at this late hour. What Benguet should have done was to Benguet with a Board Resolution considering that the RAWOP itself provided for such payment
immediately challenge the POAs jurisdiction by a special civil action for certiorari when POA scheme.
ruled that it has jurisdiction over the dispute. To redo the proceedings fully participated in by the
parties after the lapse of seven years from date of institution of the original action with the POA Notably, Benguets claim that J.G. Realty must prove nonpayment of its royalties is both
would be anathema to the speedy and efficient administration of justice. illogical and unsupported by law and jurisprudence.

Second Issue: The cancellation of the RAWOP The allegation of nonpayment is not a positive allegation as claimed by Benguet. Rather, such
was supported by evidence is a negative allegation that does not require proof and in fact transfers the burden of proof to
Benguet. Thus, this Court ruled in Jimenez v. National Labor Relations Commission:
The cancellation of the RAWOP by the POA was based on two grounds: (1) Benguets failure
to pay J.G. Realtys royalties for the mining claims; and (2) Benguets failure to seriously As a general rule, one who pleads payment has the burden of proving it. Even where
pursue MPSA Application No. APSA-V-0009 over the mining claims. the plaintiff must allege non-payment, the general rule is that the burden rests on the
defendant to prove payment, rather than on the plaintiff to prove non-payment. The
As to the royalties, Benguet claims that the checks representing payments for the royalties of debtor has the burden of showing with legal certainty that the obligation has
J.G. Realty were available for pick-up in its office and it is the latter which refused to claim been discharged by payment.27 (Emphasis supplied.)
them. Benguet then thus concludes that it did not violate the RAWOP for nonpayment of
royalties. Further, Benguet reasons that J.G. Realty has the burden of proving that the former In the instant case, the obligation of Benguet to pay royalties to J.G. Realty has been admitted
did not pay such royalties following the principle that the complainants must prove their and supported by the provisions of the RAWOP. Thus, the burden to prove such obligation
affirmative allegations. rests on Benguet.

With regard to the failure to pursue the MPSA application, Benguet claims that the lengthy time It should also be borne in mind that MPSA Application No. APSA-V-0009 has been pending
of approval of the application is due to the failure of the MGB to approve it. In other words, with the MGB for a considerable length of time. Benguet, in the RAWOP, obligated itself to
Benguet argues that the approval of the application is solely in the hands of the MGB. 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
Benguets arguments are bereft of merit. the application approved. In fact, 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. Such allegations would show that, BF CORPORATION, petitioner,
indeed, Benguet was remiss in prosecuting the MPSA application and clearly failed to comply vs.
with its obligation in the RAWOP. COURT OF APPEALS, SHANGRI-LA PROPERTIES, INC., RUFO B. COLAYCO, ALFREDO
C. RAMOS, MAXIMO G. LICAUCO III and BENJAMIN C. RAMOS, respondents.
Third Issue: There is no unjust enrichment in the instant case

Based on the foregoing discussion, the cancellation of the RAWOP was based on valid
grounds and is, therefore, justified. The necessary implication of the cancellation is the ROMERO, J.:
cessation of Benguets right to prosecute MPSA Application No. APSA-V-0009 and to further
develop such mining claims. The basic issue in this petition for review on certiorari is whether or not the contract for the
construction of the EDSA Plaza between petitioner BF Corporation and respondent Shangri-la
In Car Cool Philippines, Inc. v. Ushio Realty and Development Corporation, we defined unjust Properties, Inc. embodies an arbitration clause in case of disagreement between the parties in
enrichment, as follows: the implementation of contractual provisions.

We have held that "[t]here is unjust enrichment when a person unjustly retains a Petitioner and respondent Shangri-la Properties, Inc. (SPI) entered into an agreement whereby
benefit to the loss of another, or when a person retains money or property of another the latter engaged the former to construct the main structure of the "EDSA Plaza Project," a
against the fundamental principles of justice, equity and good conscience." Article 22 of shopping mall complex in the City of Mandaluyong. The construction work was in progress
the Civil Code provides that "[e]very person who through an act of performance by when SPI decided to expand the project by engaging the services of petitioner again. Thus, the
another, or any other means, acquires or comes into possession of something at the parties entered into an agreement for the main contract works after which construction work
expense of the latter without just or legal ground, shall return the same to him." The began.
principle of unjust enrichment under Article 22 requires two conditions: (1) that a
person is benefited without a valid basis or justification, and (2) that such benefit is However, petitioner incurred delay in the construction work that SPI considered as "serious and
derived at anothers expense or damage. substantial."1 On the other hand, according to petitioner, the construction works "progressed in
faithful compliance with the First Agreement until a fire broke out on November 30, 1990
There is no unjust enrichment when the person who will benefit has a valid claim damaging Phase I" of the Project.2 Hence, SPI proposed the re-negotiation of the agreement
to such benefit.28(Emphasis supplied.) between them.

Clearly, there is no unjust enrichment in the instant case as the cancellation of the RAWOP, Consequently, on May 30, 1991, petitioner and SPI entered into a written agreement
which left Benguet without any legal right to participate in further developing the mining claims, denominated as "Agreement for the Execution of Builder's Work for the EDSA Plaza Project."
was brought about by its violation of the RAWOP. Hence, Benguet has no one to blame but Said agreement would cover the construction work on said project as of May 1, 1991 until its
itself for its predicament. eventual completion.

WHEREFORE, we DISMISS the petition, and AFFIRM the December 2, 2002 Decision and According to SPI, petitioner "failed to complete the construction works and abandoned the
March 17, 2004 Resolution of the DENR-MAB in MAB Case No. 0124-01 upholding the project."3 This resulted in disagreements between the parties as regards their respective
cancellation of the June 1, 1987 RAWOP. No costs. liabilities under the contract. On July 12, 1993, upon SPI's initiative, the parties' respective
representatives met in conference but they failed to come to an agreement. 4
SO ORDERED.
Barely two days later or on July 14, 1993, petitioner filed with the Regional Trial Court of Pasig
a complaint for collection of the balance due under the construction agreement. Named
defendants therein were SPI and members of its board of directors namely, Alfredo C. Ramos,
Rufo B. Calayco, Antonio B. Olbes, Gerardo O. Lanuza, Jr., Maximo G. Licauco III and
Benjamin C. Ramos.
G.R. No. 120105 March 27, 1998
On August 3, 1993, 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. 15, 1991. The said Articles of Agreement also provides that the "Contract
The following day, SPI submitted a copy of the conditions of the contract containing the Documents" therein listed "shall be deemed an integral part of this
arbitration clause that it failed to append to its motion to suspend proceedings. Agreement", and one of the said documents is the "Conditions of Contract"
which contains the Arbitration Clause relied upon by the defendants in their
Petitioner opposed said motion claiming that there was no formal contract between the parties Motion to Suspend Proceedings.
although they entered into an agreement defining their rights and obligations in undertaking the
project. It emphasized that the agreement did not provide for arbitration and therefore the court This Court notes, however, that the 'Conditions of Contract' referred to, contains the following
could not be deprived of jurisdiction conferred by law by the mere allegation of the existence of provisions:
an arbitration clause in the agreement between the parties.
3. Contract Document.
In reply to said opposition, SPI insisted that there was such an arbitration clause in the existing
contract between petitioner and SPI. It alleged that suspension of proceedings would not Three copies of the Contract Documents referred to in the
necessarily deprive the court of its jurisdiction over the case and that arbitration would expedite Articles of Agreement shall be signed by the parties to the
rather than delay the settlement of the parties' respective claims against each other. contract and distributed to the Owner and the Contractor for
their safe keeping." (emphasis supplied).
In a rejoinder to SPI's reply, petitioner reiterated that there was no arbitration clause in the
contract between the parties. It averred that granting that such a clause indeed formed part of And it is significant to note further that the said "Conditions of Contract" is not
the contract, suspension of the proceedings was no longer proper. It added that defendants duly signed by the parties on any page thereof although it bears the initials
should be declared in default for failure to file their answer within the reglementary period. of BF's representatives (Bayani F. Fernando and Reynaldo M. de la Cruz)
without the initials thereon of any representative of Shangri-La Properties, Inc.
In its sur-rejoinder, SPI pointed out the significance of petitioner's admission of the due
execution of the "Articles of Agreement." Thus, on page D/6 thereof, the signatures of Rufo B. Considering the insistence of the plaintiff that the said Conditions of Contract
Colayco, SPI president, and Bayani Fernando, president of petitioner appear, while page D/7 was not duly executed or signed by the parties, and the failure of the
shows that the agreement is a public document duly notarized on November 15, 1991 by defendants to submit any signed copy of the said document, this Court
Notary Public Nilberto R. Briones as document No. 345, page 70, book No. LXX, Series of entertains serious doubt whether or not the arbitration clause found in the said
1991 of his notarial register.5 Conditions of Contract is binding upon the parties to the Articles of
Agreement." (Emphasis supplied.)
Thereafter, upon a finding that an arbitration clause indeed exists, the lower court 6 denied the
motion to suspend proceedings, thus: 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." It quoted the following provision
It appears from the said document that in the letter-agreement dated May 30, of the arbitration clause:
1991 (Annex C, Complaint), plaintiff BF and defendant Shangri-La Properties,
Inc. agreed upon the terms and conditions of the Builders Work for the EDSA Notice of the demand for arbitration of a dispute shall be filed in writing with the
Plaza Project (Phases I, II and Carpark), subject to the execution by the other party to the contract and a copy filed with the Project Manager. The
parties of a formal trade contract. Defendants have submitted a copy of the demand for arbitration shall be made within a reasonable time after the dispute
alleged trade contract, which is entitled "Contract Documents For Builder's has arisen and attempts to settle amicably have failed; in no case, however,
Work Trade Contractor" dated 01 May 1991, page 2 of which is entitled shall the demand he made be later than the time of final payment except as
"Contents of Contract Documents" with a list of the documents therein otherwise expressly stipulated in the contract.
contained, and Section A thereof consists of the abovementioned Letter-
Agreement dated May 30, 1991. Section C of the said Contract Documents is Against the above backdrop, the lower court found that per the May 30, 1991 agreement, the
entitled "Articles of Agreement and Conditions of Contract" which, per its project was to be completed by October 31, 1991. Thereafter, the contractor would pay
Index, consists of Part A (Articles of Agreement) and B (Conditions of P80,000 for each day of delay counted from November 1, 1991 with "liquified (sic) damages up
Contract). The said Articles of Agreement appears to have been duly signed by to a maximum of 5% of the total contract price."
President Rufo B. Colayco of Shangri-La Properties, Inc. and President Bayani
F. Fernando of BF and their witnesses, and was thereafter acknowledged
before Notary Public Nilberto R. Briones of Makati, Metro Manila on November The lower court also found that after the project was completed in accordance with the
agreement that contained a provision on "progress payment billing," SPI "took possession and
started operations thereof by opening the same to the public in November, 1991." SPI, having completion or abandonment of the Works as to the
failed to pay for the works, petitioner billed SPI in the total amount of P110,883,101.52, construction of this Contract or as to any matter or thing of
contained in a demand letter sent by it to SPI on February 17, 1993. Instead of paying the whatsoever nature arising thereunder or in connection
amount demanded, SPI set up its own claim of P220,000,000.00 and scheduled a conference therewith (including any matter or being left by this Contract to
on that claim for July 12, 1993. The conference took place but it proved futile. the discretion of the Project Manager or the withholding by the
Project Manager of any certificate to which the Contractor may
Upon the above facts, the lower court concluded: claim to be entitled or the measurement and valuation
mentioned in clause 30 (5) (a) of these Conditions' or the
rights and liabilities of the parties under clauses 25, 26, 32 or
Considering the fact that under the supposed Arbitration Clause invoked by
33 of these Conditions), the Owner and the Contractor hereby
defendants, it is required that "Notice of the demand for arbitration of a dispute
agree to exert all efforts to settle their differences or dispute
shall be filed in writing with the other party . . . . in no case . . . . later than the
amicably. Failing these efforts then such dispute or difference
time of final payment . . . "which apparently, had elapsed, not only because
shall be referred to Arbitration in accordance with the rules
defendants had taken possession of the finished works and the plaintiff's
and procedures of the Philippine Arbitration Law.
billings for the payment thereof had remained pending since November, 1991
up to the filing of this case on July 14, 1993, but also for the reason that
defendants have failed to file any written notice of any demand for arbitration The fact that said conditions of contract containing the arbitration clause bear
during the said long period of one year and eight months, this Court finds that only the initials of respondent Corporation's representatives, Bayani Fernando
it cannot stay the proceedings in this case as required by Sec. 7 of Republic and Reynaldo de la Cruz, without that of the representative of petitioner
Act No. 876, because defendants are in default in proceeding with such Shangri-La Properties, Inc. does not militate against its effectivity. Said
arbitration. petitioner having categorically admitted that the document, Annex A to its reply
dated August 26, 1993 (Annex G, petition), is the agreement between the
parties, the initial or signature of said petitioner's representative to signify
The lower court denied SPI's motion for reconsideration for lack of merit and directed it and the
conformity to arbitration is no longer necessary. The parties, therefore, should
other defendants to file their responsive pleading or answer within fifteen (15) days from notice.
be allowed to submit their dispute to arbitration in accordance with their
agreement.
Instead of filing an answer to the complaint, SPI filed a petition for certiorari under Rule 65 of
the Rules of Court before the Court of Appeals. Said appellate court granted the petition,
2. The respondent Court held that petitioners "are in default in proceeding with
annulled and set aside the orders and stayed the proceedings in the lower court. In so ruling,
such arbitration." It took note of "the fact that under the supposed Arbitration
the Court of Appeals held:
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
The reasons given by the respondent Court in denying petitioners' motion to case . . . later than the time of final payment," which apparently, had elapsed,
suspend proceedings are untenable. not only because defendants had taken possession of the finished works and
the plaintiff's billings for the payment thereof had remained pending since
1. The notarized copy of the articles of agreement attached as Annex A to November, 1991 up to the filing of this case on July 14, 1993, but also for the
petitioners' reply dated August 26, 1993, has been submitted by them to the reason that defendants have failed to file any written notice of any demand for
respondent Court (Annex G, petition). It bears the signature of petitioner Rufo arbitration during the said long period of one year and eight months, . . . ."
B. Colayco, president of petitioner Shangri-La Properties, Inc., and of Bayani
Fernando, president of respondent Corporation (Annex G-1, petition). At page Respondent Court has overlooked the fact that under the arbitration
D/4 of said articles of agreement it is expressly provided that the conditions of clause
contract are "deemed an integral part" thereof (page 188, rollo). And it is at
pages D/42 to D/44 of the conditions of contract that the provisions for
Notice of the demand for arbitration dispute shall be filed in
arbitration are found (Annexes G-3 to G-5, petition, pp. 227-229). Clause No.
writing with the other party to the contract and a copy filed with
35 on arbitration specifically provides:
the Project Manager. The demand for arbitration shall be
made within a reasonable time after the dispute has arisen
Provided always that in case any dispute or difference shall and attempts to settle amicably had failed; in no case,
arise between the Owner or the Project Manager on his behalf however, shall the demand be made later than the time of final
and the Contractor, either during the progress or after the
payment except as otherwise expressly stipulated in the The above contention is without merit.
contract (emphasis supplied)
The rule that the special civil action of certiorari may not be invoked as a substitute for the
quoted in its order (Annex A, petition). As the respondent Court there said, remedy of appeal is succinctly reiterated in Ongsitco v. Court of Appeals8 as follows:
after the final demand to pay the amount of P110,883,101.52, instead of
paying, petitioners set up its own claim against respondent Corporation in the . . . . Countless times in the past, this Court has held that "where appeal is the
amount of P220,000,000.00 and set a conference thereon on July 12, 1993. proper remedy, certiorari will not lie." The writs of certiorari and prohibition are
Said conference proved futile. The next day, July 14, 1993, respondent remedies to correct lack or excess of jurisdiction or grave abuse of discretion
Corporation filed its complaint against petitioners. On August 13, 1993, equivalent to lack of jurisdiction committed by a lower court. "Where the proper
petitioners wrote to respondent Corporation requesting arbitration. Under the remedy is appeal, the action for certiorari will not be
circumstances, it cannot be said that petitioners' resort to arbitration was made entertained. . . . Certiorari is not a remedy for errors of judgment. Errors of
beyond reasonable time. Neither can they be considered in default of their judgment are correctible by appeal, errors of jurisdiction are reviewable
obligation to respondent Corporation. by certiorari."

Hence, this petition before this Court. Petitioner assigns the following errors: Rule 65 is very clear. The extraordinary remedies of certiorari, prohibition
and mandamus are available only when "there is no appeal or any plain,
A speedy and adequate remedy in the ordinary course of law . . . ." That is why
they are referred to as "extraordinary." . . . .
THE COURT OF APPEALS ERRED IN ISSUING THE EXTRAORDINARY
WRIT OF CERTIORARI ALTHOUGH THE REMEDY OF APPEAL WAS The Court has likewise ruled that "certiorari will not be issued to cure errors in proceedings or
AVAILABLE TO RESPONDENTS. 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
B errors of judgment which are reviewable by timely appeal and not by a special civil action
of certiorari."9
THE COURT OF APPEALS ERRED IN FINDING GRAVE ABUSE OF
DISCRETION IN THE FACTUAL FINDINGS OF THE TRIAL COURT THAT: This is not exactly so in the instant case. While this Court does not deny the eventual
jurisdiction of the lower court over the controversy, the issue posed basically is whether the
lower court prematurely assumed jurisdiction over it. If the lower court indeed prematurely
(i) THE PARTIES DID NOT ENTER INTO AN
assumed jurisdiction over the case, then it becomes an error of jurisdiction which is a proper
AGREEMENT TO ARBITRATE.
subject of a petition for certiorari before the Court of Appeals. And if the lower court does not
have jurisdiction over the controversy, then any decision or order it may render may be
(ii) ASSUMING THAT THE PARTIES DID annulled and set aside by the appellate court.
ENTER INTO THE AGREEMENT TO
ARBITRATE, RESPONDENTS ARE
However, the question of jurisdiction, which is a question of law depends on the determination
ALREADY IN DEFAULT IN INVOKING THE
of the existence of the arbitration clause, which is a question of fact. In the instant case, the
AGREEMENT TO ARBITRATE.
lower court found that there exists an arbitration clause. However, it ruled that in contemplation
of law, said arbitration clause does not exist.
On the first assigned error, petitioner contends that the Order of the lower court denying the
motion to suspend proceedings "is a resolution of an incident on the merits." As such, upon the
The issue, therefore, posed before the Court of Appeals in a petition for certiorari is whether
continuation of the proceedings, the lower court would appreciate the evidence adduced in
the Arbitration Clause does not in fact exist. On its face, the the question is one of fact which is
their totality and thereafter render a decision on the merits that may or may not sustain the
not proper in a petition for certiorari.
existence of an arbitration clause. A decision containing a finding that the contract has no
arbitration clause can then be elevated to a higher court "in an ordinary appeal" where an
adequate remedy could be obtained. Hence, to petitioner, the Court of Appeals should have The Court of Appeals found that an Arbitration Clause does in fact exist. In resolving said
dismissed the petition for certiorari because the remedy of appeal would still be available to question of fact, the Court of Appeals interpreted the construction of the subject contract
private respondents at the proper time.7 documents containing the Arbitration Clause in accordance with Republic Act No. 876
(Arbitration Law) and existing jurisprudence which will be extensively discussed hereunder. In
effect, the issue posed before the Court of Appeals was likewise a question of law. Being a that contained the said clause. Its other contentions, specifically that insinuating fraud as
question of law, the private respondents rightfully invoked the special civil action of certiorari. regards the alleged insertion of the arbitration clause, are questions of fact that should have
been threshed out below.
It is that mode of appeal taken by private respondents before the Court of Appeals that is being
questioned by the petitioners before this Court. But at the heart of said issue is the question of This Court may as well proceed to determine whether the arbitration clause does exist in the
whether there exists an Arbitration Clause because if an Arbitration Clause does not exist, then parties' contract. Republic Act No. 876 provides for the formal requisites of an arbitration
private respondents took the wrong mode of appeal before the Court of Appeals. agreement as follows:

For this Court to be able to resolve the question of whether private respondents took the proper Sec. 4. Form of arbitration agreement. A contract to arbitrate a controversy
mode of appeal, which, incidentally, is a question of law, then it has to answer the core issue of thereafter arising between the parties, as well as a submission to arbitrate an
whether there exists an Arbitration Clause which, admittedly, is a question of fact. existing controversy, shall be in writing and subscribed by the party sought to
be charged, or by his lawful agent.
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 The making of a contract or submission for arbitration described in section two
which are technical rules may be relaxed. 10 As we shall show hereunder, had the Court of hereof, providing for arbitration of any controversy, shall be deemed a consent
Appeals dismissed the petition for certiorari, the issue of whether or not an arbitration clause of the parties of the province or city where any of the parties resides, to
exists in the contract would not have been resolved in accordance with evidence extant in the enforce such contract of submission. (Emphasis supplied.).
record of the case. Consequently, this would have resulted in a judicial rejection of a
contractual provision agreed by the parties to the contract. 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. There is no
In the same vein, this Court holds that the question of the existence of the arbitration clause in denying that the parties entered into a written contract that was submitted in evidence before
the contract between petitioner and private respondents is a legal issue that must be the lower court. To "subscribe" means to write underneath, as one's name; to sign at the end of
determined in this petition for review on certiorari. a document. 11 That word may sometimes be construed to mean to give consent to or to
attest.12
Petitioner, while not denying that there exists an arbitration clause in the contract in question,
asserts that in contemplation of law there could not have been one considering the following The Court finds that, upon a scrutiny of the records of this case, these requisites were complied
points. First, the trial court found that the "conditions of contract" embodying the arbitration with in the contract in question. The Articles of Agreement, which incorporates all the other
clause is not duly signed by the parties. Second, private respondents misrepresented before contracts and agreements between the parties, was signed by representatives of both parties
the Court of Appeals that they produced in the trial court a notarized duplicate original copy of and duly notarized. The failure of the private respondent's representative to initial the
the construction agreement because what were submitted were mere photocopies thereof. The "Conditions of Contract" would therefor not affect compliance with the formal requirements for
contract(s) introduced in court by private respondents were therefore "of dubious authenticity" arbitration agreements because that particular portion of the covenants between the parties
because: (a) the Agreement for the Execution of Builder's Work for the EDSA Plaza Project was included by reference in the Articles of Agreement.
does not contain an arbitration clause, (b) private respondents "surreptitiously attached as
Annexes "G-3" to "G-5" to their petition before the Court of Appeals but these documents are Petitioner's contention that there was no arbitration clause because the contract incorporating
not parts of the Agreement of the parties as "there was no formal trade contract executed," (c) said provision is part of a "hodge-podge" document, is therefore untenable. A contract need not
if the entire compilation of documents "is indeed a formal trade contract," then it should have be contained in a single writing. It may be collected from several different writings which do not
been duly notarized, (d) the certification from the Records Management and Archives Office conflict with each other and which, when connected, show the parties, subject matter, terms
dated August 26, 1993 merely states that "the notarial record of Nilberto Briones . . . is and consideration, as in contracts entered into by correspondence. 13 A contract may be
available in the files of (said) office as Notarial Registry Entry only," (e) the same certification encompassed in several instruments even though every instrument is not signed by the parties,
attests that the document entered in the notarial registry pertains to the Articles of Agreement since it is sufficient if the unsigned instruments are clearly identified or referred to and made
only without any other accompanying documents, and therefore, it is not a formal trade part of the signed instrument or instruments. Similarly, a written agreement of which there are
contract, and (f) the compilation submitted by respondents are a "mere hodge-podge of two copies, one signed by each of the parties, is binding on both to the same extent as though
documents and do not constitute a single intelligible agreement." there had been only one copy of the agreement and both had signed it. 14

In other words, petitioner denies the existence of the arbitration clause primarily on the ground The flaw in petitioner's contentions therefore lies in its having segmented the various
that the representatives of the contracting corporations did not sign the "Conditions of Contract" components of the whole contract between the parties into several parts. This notwithstanding,
petitioner ironically admits the execution of the Articles of Agreement. Notably, too, the lower agreement calling for arbitration in case of disagreement between the parties would therefore
court found that the said Articles of Agreement "also provides that the 'Contract Documents' be a step backward.
therein listed 'shall be deemed an integral part of this Agreement,' and one of the said
documents is the 'Conditions of Contract' which contains the Arbitration Clause.'" It is this WHEREFORE, the questioned Decision of the Court of Appeals is hereby AFFIRMED and the
Articles of Agreement that was duly signed by Rufo B. Colayco, president of private respondent petition for certiorari DENIED. This Decision is immediately executory. Costs against petitioner.
SPI, and Bayani F. Fernando, president of petitioner corporation. The same agreement was
duly subscribed before notary public Nilberto R. Briones. In other words, the subscription of the SO ORDERED.
principal agreement effectively covered the other documents incorporated by reference therein.

This Court likewise does not find that the Court of Appeals erred in ruling that private
respondents were not in default in invoking the provisions of the arbitration clause which states
that "(t)he demand for arbitration shall be made within a reasonable time after the dispute has
arisen and attempts to settle amicably had failed." Under the factual milieu, private respondent
SPI should have paid its liabilities tinder the contract in accordance with its terms. However,
misunderstandings appeared to have cropped up between the parties ostensibly brought about
by either delay in the completion of the construction work or by force majeure or the fire that
partially gutted the project. The almost two-year delay in paying its liabilities may not therefore
be wholly ascribed to private respondent SPI.

Besides, private respondent SPI's initiative in calling for a conference between the parties was
a step towards the agreed resort to arbitration. However, petitioner posthaste filed the
complaint before the lower court. Thus, while private respondent SPI's request for arbitration on
August 13, 1993 might appear an afterthought as it was made after it had filed the motion to
suspend proceedings, it was because petitioner also appeared to act hastily in order to resolve
the controversy through the courts.

The arbitration clause provides for a "reasonable time" within which the parties may avail of the
relief under that clause. "Reasonableness" is a relative term and the question of whether the
time within which an act has to be done is reasonable depends on attendant
circumstances. 15 This Court finds that under the circumstances obtaining in this case, a one-
month period from the time the parties held a conference on July 12, 1993 until private
respondent SPI notified petitioner that it was invoking the arbitration clause, is a reasonable
time. Indeed, petitioner may not be faulted for resorting to the court to claim what was due it
under the contract. However, we find its denial of the existence of the arbitration clause as an
attempt to cover up its misstep in hurriedly filing the complaint before the lower court.

In this connection, it bears stressing that the lower court has not lost its jurisdiction over the
case. Section 7 of Republic Act No. 876 provides that proceedings therein have only been
stayed. After the special proceeding of arbitration 16 has been pursued and completed, then the
lower court may confirm the award 17 made by the arbitrator.

It should be noted that in this jurisdiction, arbitration has been held valid and constitutional.
Even before the approval on June 19, 1953 of Republic Act No. 876, this Court has
countenanced the settlement of disputes through arbitration. 18 Republic Act No. 876 was
adopted to supplement the New Civil Code's provisions on arbitration. 19 Its potentials as one of
the alternative dispute resolution methods that are now rightfully vaunted as "the wave of the
future" in international relations, is recognized worldwide. To brush aside a contractual