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1. Uniwide Sales Realty and Resource Corporation v.

Titan-Ikeda Construction d) should not be liable for the deficiencies in the defectively constructed
and Development Corporation Project 2
G.R. No. 126619
December 20, 2006 - An arbitral tribunal was established with a chairman and 2 members in
accordance to CIAC rules and procedure.
TINGA, J.: - IT conducted preliminary conference with the parties and thereafter issued a
Terms of Reference (TOR) which were signed by the parties.
The case originated from an action for a sum of money filed by Titan-Ikeda - Tribunal also conducted ocular inspection, hearings, and received evidence
Construction and Development Corporation (Titan) against Uniwide Sales Realty the parties consisting of affidavits subject to cross examination.
and Resources Corporation (Uniwide) with the Regional Trial Court (RTC), Branch - [Apr 17, 1995] – after the parties submitted their memorandas, the Arbitral
119,[3] Pasay City arising fromUniwides non-payment of certain claims billed by Titan Tribunal promulgated a decision…
after completion of three projects covered by agreements they entered into with each o Project 1 – uniwide is absolved from any liability
other. Upon Uniwides motion to dismiss/suspend proceedings and Titans open court o Project 2 – Uniwide is absolved of any liability for VAT/ Liable for
manifestation agreeing to the suspension, Civil Case No. 98-0814 was suspended for any unpaid
it to undergo arbitration.[4] Titans complaint was thus re-filed with the CIAC.[5] Before Balance P6,301,075.77 + 12% interest per annum
the CIAC, Uniwide filed an answer which was later amended and re-amended, from [Dec 19,
denying the material allegations of the complaint, with counterclaims for refund of 1992]
overpayments, actual and exemplary damages, and attorneys fees. The agreements o Project 3 – Uniwide is liable for unpaid balance P5,158,364.63 +
between Titan and Uniwide are briefly described below. 12% per annum

FACTS: - [Apr 17,1995] Uniwide filed am motion for reconsideration which was denied
[May 1991] -1st Agreement (Project 1) by CIAC, thus filing a petition for review against the Court of appeals which
- was a written construction agreement entered into by Titan and Uniwide was also denied by the same
whereby titan undertook to construct Uniwide’s Warehouse Club and - Hence coming to the Supreme Court by a petition of review under rule 45
Administration Building in Libis Quezon City for P120,936,591.50 payable in
monthly progress billings to be certified by Uniwide’s representative.
- Parties stipulated that the building shall be completed not later than [Nov 30, ISSUE:
1991]. WON the court should review the final judgement of CIAC
- Building was actually finished on [Feb 15, 1992] as found by CIAC
HELD:
[July 1992] – 2nd Agreement (Project 2) No, as a rule, findings of fact of administrative agencies and quasi-judicial
- was entered into by the parties where Titan agreed to construct an additional bodies, which have acquired expertise because their jurisdiction is confined to
floor and to renovate the Warehouse of Uniwide at EDSA Central Market specific matters, are generally accorded not only respect, but also finality, especially
Area in Mandaluyong City. when affirmed by the Court of Appeals. In particular, factual findings of construction
- There was no written contract executed for this project arbitrators are final and conclusive and not reviewable by this Court on appeal.This
- Construction was to be on the basis of drawings and specifications provided rule, however admits of certain exceptions.
by Uniwides Engineers
- Cost was estimated to be P21,301,075.77 inclusive of Titans 20% markup. In David v. Construction Industry and Arbitration Commission, we ruled that,
- Titan Conceded in its complaint to having received only P15m as exceptions, factual findings of construction arbitrators may be reviewed by this
- [Oct 1993] Project was completed. Court when the petitioner proves affirmatively that: (1) the award was procured by
corruption, fraud or other undue means; (2) there was evident partiality or corruption
[May 1992] – 3rd Agreement (Project 3) of the arbitrators or of any of them; (3) the arbitrators were guilty of misconduct in
- Written in a construction contract, titan undertook the Uniwide sales refusing to hear evidence pertinent and material to the controversy; (4) one or more of
deparment store building in Caloocan City for the price of P118,000,000.00 the arbitrators were disqualified to act as such under Section nine of Republic Act No.
payable in progress billings to be certified by Uniwide’s representative. 876 and willfully refrained from disclosing such disqualifications or of any other
- Project should be completed by [Feb 28, 1993] but it was completed and misbehavior by which the rights of any party have been materially prejudiced; or (5)
turned over by [June 1993]. the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual,
final and definite award upon the subject matter submitted to them was not made.
-Uniwide asserted in its petitions that:
a) it overpaid Titan for unauthorized additional works in Project 1 and 3 Other recognized exceptions are as follows: (1) when there is a very clear
b) not liable to pay the VAT for project 1 showing of grave abuse of discretion resulting in lack or loss of jurisdiction as when a
c) it is entitled to liquidated damages for all the delays in Project 1 & 3 party was deprived of a fair opportunity to present its position before the Arbitral
Tribunal or when an award is obtained through fraud or the corruption of
arbitrators,(2) when the findings of the Court of Appeals are contrary to those of the
CIAC,and (3) when a party is deprived of administrative due process.
2. G.R. No. 175404, January 31, 2011 ruling would suggest that a party's mere repudiation of the main contract is
CARGILL PHILIPPINES, INC., petitioner, vs. SAN FERNANDO REGALA sufficient to avoid arbitration. That is exactly the situation that the separability
TRADING, INC., respondent. doctrine, as well as jurisprudence applying it, seeks to avoid.
PERALTA, J.: Petition is GRANTED.

FACTS:

Respondent San Fernando Regala Trading filed with the RTC of Makati City a
Complaint for Rescission of Contract with Damages against petitioner Cargill.
It alleged that it agreed that it would purchase from Cargill 12,000 metric tons
of Thailand origin cane blackstrap molasses and that the payment would be
by an Irrevocable Letter of Credit payable at sight. The parties agreed that
the delivery would be made in April/May. Cargill failed to comply with its
obligations despite demands from respondent. The respondent then filed for
rescission.
The petitioner filed a Motion to Dismiss/Suspend proceeding, arguing that they
must first resort to arbitration as stated in their agreement before going to
court. However, the RTC ruled in favor of the respondent. The CA affirmed the
RTC decision, adding that the case cannot be brought under the Arbitration
Law for the purpose of suspending the proceedings before the RTC, since in
its Motion to Dismiss/Suspend proceedings, petitioner alleged, as one of the
grounds thereof,that the subjectcontract between the parties did not exist or
it was invalid; that the said contract bearing the arbitration clause was never
consummated by the parties, thus, it was proper that such issue be first
resolved by the court through an appropriate trial; that the issue involved a
question of fact that the RTC should first resolve.

ISSUE:

Whether the CA erred in finding that this case cannot be brought


under the arbitration law for the purpose of suspending the proceedings in the
RTC.

HELD:

The petition is meritorious.


CIVIL LAW - Arbitration; alternative dispute resolution; contracts
Arbitration, as an alternative mode of settling disputes, has long been
recognized and accepted in our jurisdiction. R.A. No. 876 authorizes
arbitration of domestic disputes. Foreign arbitration, as a system of settling
commercial disputes of an international character, is likewise recognized. The
enactment of R.A. No. 9285 on April 2, 2004 further institutionalized the use
of alternative dispute resolution systems, including arbitration, in the
settlement of disputes.
A contract is required for arbitration to take place and to be binding.
Submission to arbitration is a contract and a clause in a contract providing
that all matters in dispute between the parties shall be referred to arbitration
is a contract. The provision to submit to arbitration any dispute arising
therefrom and the relationship of the parties is part of the contract and is itself
a contract.
The validity of the contract containing the agreement to submit to arbitration
does not affect the applicability of the arbitration clause itself. A contrary
independent planters who do not belong to any association the 1% share, instead of
3 FIRST DIVISION reverting said share to the centrals. Petitioners contended that respondents unduly
[ G.R. NO. 156660, August 24, 2009 ] accorded the independent Planters more benefits and thus prayed that an order be
ORMOC SUGARCANE PLANTERS' ASSOCIATION, INC. (OSPA),OCCIDENTAL issued directing the parties to commence with arbitration in accordance with the terms
LEYTE FARMERS MULTI-PURPOSE COOPERATIVE, INC. (OLFAMCA), of the milling contracts. They also demanded that respondents be penalized by
UNIFARM MULTI-PURPOSE COOPERATIVE, INC. (UNIFARM) AND ORMOC increasing their member Planters' 65% share provided in the milling contract by 1%,
NORTH DISTRICT IRRIGATION MULTI-PURPOSE COOPERATIVE, INC. to 66%.
(ONDIMCO), PETITIONERS, VS. THE COURT OF APPEALS (SPECIAL FORMER
SIXTH DIVISION), HIDECO SUGAR MILLING CO., INC., AND ORMOC SUGAR Respondents filed a motion to dismiss on ground of lack of cause of action because
MILLING CO., INC., RESPONDENTS. petitioners had no milling contract with respondents. According to respondents, only
some eighty (80) Planters who were members of OSPA, one of the petitioners,
executed milling contracts. Respondents and these 80 Planters were the signatories
FACTS: of the milling contracts. Thus, it was the individual Planters, and not petitioners, who
had legal standing to invoke the arbitration clause in the milling contracts. Petitioners,
Petitioners are associations organized by and whose members are individual sugar not being privy to the milling contracts, had no legal standing whatsoever to demand
planters (Planters). The membership of each association follows: 264 Planters were or sue for arbitration.
members of OSPA; 533 Planters belong to OLFAMCA; 617 Planters joined
UNIFARM; 760 Planters enlisted with ONDIMCO; and the rest belong to BAP-MPC On August 26, 1999, the RTC issued a Joint Order denying the motion to dismiss,
which did not join the lawsuit. declaring the existence of a milling contract between the parties, and directing
respondents to nominate two arbitrators to the Board of Arbitrators, to wit:
Respondents Hideco Sugar Milling Co., Inc. (Hideco) and Ormoc Sugar Milling Co, When these cases were called for hearing today, counsels for the petitioners and
Inc. (OSCO) are sugar centrals engaged in grinding and milling sugarcane delivered respondents argued their respective stand. The Court is convinced that there is an
to them by numerous individual sugar planters, who may or may not be members of existing milling contract between the petitioners and respondents and these planters
an association such as petitioners. are represented by the officers of the associations. The petitioners have the right to
sue in behalf of the planters.
Petitioners assert that the relationship between respondents and the individual sugar
planters is governed by milling contracts. To buttress this claim, petitioners presented This Court, acting on the petitions, directs the respondents to nominate two arbitrators
representative samples of the milling contracts. to represent HIDECO/HISUMCO and OSCO in the Board of Arbitrators within fifteen
(15) days from receipt of this Order. xxx
Notably, Article VII of the milling contracts provides that 34% of the sugar and
molasses produced from milling the Planter's sugarcane shall belong to the centrals However, if the respondents fail to nominate their two arbitrators, upon proper motion
(respondents) as compensation, 65% thereof shall go to the Planter and the by the petitioners, then the Court will be compelled to use its discretion to appoint the
remaining 1% shall go the association to which the Planter concerned belongs, as aid two (2) arbitrators, as embodied in the Milling Contract and R.A. 876.
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 and their dependents. If the Planter was Their subsequent motion for reconsideration having been denied by the RTC in its
not a member of any association, then the said 1% shall revert to the centrals. Article Joint Order dated October 29, 1999, respondents elevated the case to the CA
XIV, paragraph B[4] states that the centrals may not, during the life of the milling through a Petition for Certiorari with Prayer for the Issuance of Temporary Restraining
contract, sign or execute any contract or agreement that will provide better or more Order and/or Writ of Preliminary Injunction.
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 On December 7, 2001, the CA rendered its challenged Decision, setting aside the
(30) kilometers from the mill. Article XX provides that all differences and controversies assailed Orders of the RTC. The CA held that petitioners neither had an existing
which may arise between the parties concerning the agreement shall be submitted for contract with respondents nor were they privy to the milling contracts between
discussion to a Board of Arbitration, consisting of five (5) members--two (2) of which respondents and the individual Planters. In the main, the CA concluded that
shall be appointed by the centrals, two (2) by the Planter and the fifth to be appointed petitioners had no legal personality to bring the action against respondents or to
by the four appointed by the parties. demand for arbitration.

On June 4, 1999, petitioners, without impleading any of their individual members, filed Petitioners filed a motion for reconsideration, but it too was denied by the CA in its
twin petitions with the RTC for Arbitration under R.A. 876, Recovery of Equal Resolutiondated October 30, 2002. Thus, the instant petition.
Additional Benefits, Attorney's Fees and Damages, against HIDECO and OSCO,
docketed as Civil Case Nos. 3696-O and 3697-O, respectively. At the outset, it must be noted that petitioners filed the instant petition for certiorari
under Rule 65 of the Rules of Court, to challenge the judgment of the CA.
Petitioners claimed that respondents violated the Milling Contract when they gave to
ISSUE: that were presented were signed only by the member Planter concerned and one of
the Centrals as parties. In other words, none of the petitioners were parties or
Whether or not petitioners sugar planters' associations are clothed with legal signatories to the milling contracts. This circumstance is fatal to petitioners' cause
personality to file a suit against, or demand arbitration from, respondents in their own since they anchor their right to demand arbitration from the respondent sugar centrals
name without impleading the individual Planters. upon the arbitration clause found in the milling contracts. There is no legal basis for
petitioners' purported right to demand arbitration when they are not parties to the
milling contracts, especially when the language of the arbitration clause expressly
grants the right to demand arbitration only to the parties to the contract.
RULING:
Simply put, petitioners do not have any agreement to arbitrate with respondents. Only
On this point, SC agrees with the findings of the CA. eighty (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.
Section 2 of R.A. No. 876 (the Arbitration Law) pertinently provides: The other petitioners failed to prove that any of their members had milling contracts
with respondents, much less, that respondents had an agreement to arbitrate with the
Sec. 2. Persons and matters subject to arbitration. - Two or more persons petitioner associations themselves.
or parties may submit to the arbitration of one or more arbitrators any
controversy existing between them at the time of the submission and Even assuming that all the petitioners were able to present milling contracts in favor
which may be the subject of an action, orthe parties to any contract may of their members, it is undeniable that under the arbitration clause in these contracts it
in such contract agree to settle by arbitration a controversy thereafter is the parties thereto who have the right to submit a controversy or dispute to
arising between them. Such submission or contract shall be valid, arbitration.
enforceable and irrevocable, save upon such grounds as exist at law for the
revocation of any contract. xxx (Emphasis ours) Section 4 of R.A. 876 provides:

The foregoing provision speaks of two modes of arbitration: (a) an agreement to Section 4. Form of Arbitration Agreement - A contract to arbitrate a
submit to arbitration some future dispute, usually stipulated upon in a civil contract controversy thereafter arising between the parties, as well as a submission
between the parties, and known as an agreement to submit to arbitration, and (b) an to arbitrate an existing controversy, shall be in writing and subscribed by the
agreement submitting an existing matter of difference to arbitrators, termed the party sought to be charged, or by his lawful agent.
submission agreement. Article XX of the milling contract is an agreement to submit to
arbitration because it was made in anticipation of a dispute that might arise between The making of a contract or submission for arbitration described in section
the parties after the contract's execution. two hereof, providing for arbitration of any controversy, shall be deemed a
consent of the parties to the jurisdiction of the Court of First Instance of the
Except where a compulsory arbitration is provided by statute, the first step toward the province or city where any of the parties resides, to enforce such contract of
settlement of a difference by arbitration is the entry by the parties into a valid submission.
agreement to arbitrate. An agreement to arbitrate is a contract, the relation of the
parties is contractual, and the rights and liabilities of the parties are controlled by the The formal requirements of an agreement to arbitrate are therefore the following: (a) it
law of contracts. In an agreement for arbitration, the ordinary elements of a valid must be in writing and (b) it must be subscribed by the parties or their
contract must appear, including an agreement to arbitrate some specific thing, and an representatives. To subscribe means to write underneath, as one's name; to sign at
agreement to abide by the award, either in express language or by implication. the end of a document. That word may sometimes be construed to mean to give
consent to or to attest.
The requirements that an arbitration agreement must be written and subscribed by
the parties thereto were enunciated by the Court in B.F. Corporation v. CA. Petitioners would argue that they could sue respondents, notwithstanding the fact that
they were not signatories in the milling contracts because they are the recognized
During the proceedings before the CA, it was established that there were more than representatives of the Planters.
two thousand (2,000) Planters in the district at the time the case was commenced at
the RTC in 1999. The CA further found that of those 2,000 Planters, only about eighty This claim has no leg to stand on since petitioners did not sign the milling contracts at
(80) Planters, who were all members of petitioner OSPA, in fact individually executed all, whether as a party or as a representative of their member Planters. The individual
milling contracts with respondents. No milling contracts signed by members of the Planter and the appropriate central were the only signatories to the contracts and
other petitioners were presented before the CA. there is no provision in the milling contracts that the individual Planter is authorizing
the association to represent him/her in a legal action in case of a dispute over the
By their own allegation, petitioners are associations duly existing and organized under milling contracts.
Philippine law, i.e. they have juridical personalities separate and distinct from that of
their member Planters. It is likewise undisputed that the eighty (80) milling contracts Moreover, even assuming that petitioners are indeed representatives of the member
Planters who have milling contracts with the respondents and assuming further that other, the real parties-in-interest, either as plaintiff or defendant, in an
petitioners signed the milling contracts as representatives of their members, action upon that contract must, generally, either be parties to said
petitioners could not initiate arbitration proceedings in their own name as they had contract. (emphasis and words in brackets ours)
done in the present case. As mere agents, they should have brought the suit in the
name of the principals that they purportedly represent. Even if Section 4 of R.A. No. The main cause of action of petitioners in their request for arbitration with the RTC is
876 allows the agreement to arbitrate to be signed by a representative, the principal is the alleged violation of the clause in the milling contracts involving the proportionate
still the one who has the right to demand arbitration. sharing in the proceeds of the harvest. Petitioners essentially demand that
respondents increase the share of the member Planters to 66% to equalize their
Indeed, Rule 3, Section 2 of the Rules of Court requires suits to be brought in the situation with those of the non-member Planters. Verily, from petitioners' own
name of the real party in interest, to wit: allegations, the party who would be injured or benefited by a decision in the
arbitration proceedings will be the member Planters involved and not petitioners. In
Sec. 2. Parties in interest. A real party in interest is the party who stands to sum, petitioners are not the real parties in interest in the present case.
be benefited or injured by the judgment in the suit, or the party entitled to the
avails of the suit. Unless otherwise authorized by law or these Rules, every Assuming petitioners had properly brought the case in the name of their members
action must be prosecuted or defended in the name of the real party in who had existing milling contracts with respondents, petitioners must still prove that
interest. they were indeed authorized by the said members to institute an action for and on the
members' behalf. In the same manner that an officer of the corporation cannot bring
As held in Oco v. Limbaring that: action in behalf of a corporation unless it is clothed with a board resolution authorizing
an officer to do so, an authorization from the individual member planter is a sine qua
As applied to the present case, this provision has two requirements: 1) to institute an non for the association or any of its officers to bring an action before the court of law.
action, the plaintiff must be the real party in interest; and 2) the action must be The mere fact that petitioners were organized for the purpose of advancing the
prosecuted in the name of the real party in interest. Necessarily, the purposes of this interests and welfare of their members does not necessarily mean that petitioners
provision are 1) to prevent the prosecution of actions by persons without any right, have the authority to represent their members in legal proceedings, including the
title or interest in the case; 2) to require that the actual party entitled to legal relief be present arbitration proceedings.
the one to prosecute the action; 3) to avoid a multiplicity of suits; and 4) to discourage
litigation and keep it within certain bounds, pursuant to sound public policy. As we see it, petitioners had no intention to litigate the case in a representative
capacity, as they contend. All the pleadings from the RTC to this Court belie this
Interest within the meaning of the Rules means material interest or an interest claim. Under Section 3 of Rule 3, where the action is allowed to be prosecuted by a
in issue to be affected by the decree or judgment of the case, as distinguished representative, the beneficiary shall be included in the title of the case and shall be
from mere curiosity about the question involved. One having no material interest to deemed to be the real party in interest. As repeatedly pointed out earlier, the
protect cannot invoke the jurisdiction of the court as the plaintiff in an action. When individual Planters were not even impleaded as parties to this case. In addition,
the plaintiff is not the real party in interest, the case is dismissible on the petitioners need a power-of-attorney to represent the Planters whether in the lawsuit
ground of lack of cause of action. or to demand arbitration. None was ever presented here.
xxx xxxxxx

The parties to a contract are the real parties in interest in an action upon it, as
consistently held by the Court. Only the contracting parties are bound by the
stipulations in the contract; they are the ones who would benefit from and could
violate it. Thus, one who 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 parties would incidentally inure to one's
benefit. (emphasis ours)

In Uy v. Court of Appeals, it was held that the agents of the parties to a contract do
not have the right to bring an action even if they rendered some service on behalf of
their principals. To quote from that decision:

...[Petitioners] are mere agents of the owners of the land subject of the sale.
As agents, they only render some service or do something in representation
or on behalf of their principals. The 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
4. DEL MONTE CORP. USA vs. CA According to them, DMC-USA products continued to be brought into the
GR No. 136154 | Feb 7, 2001 | Petition for Review on Certiorari | Bellosillo country by parallel importers despite the appointment of MMI as the sole and
Petitioners: Del Monte Corp. USA, Paul Derby Jr., Daniel Collins & Luis exclusive distributor of Del Monte products thereby causing them great
Hidalgo embarrassment and substantial damage. They alleged that the products
Respondents: CA, Malabon RTC Branch 74 Judge Bienvenido Reyes, brought into the country by these importers were aged, damaged, fake or
Montebueno Marketing, Inc., Liong Liong C. Sy and Sabrosa Fodds, Inc. counterfeit, so that in March 1995 they had to cause, after prior consultation
with Antonio Ongpin, Market Director for Special Markets of Del Monte
Facts: Philippines, Inc., the publication of a "warning to the trade" paid
 1 July 1994 - in a Distributorship Agreement, Del Monte Corporation-USA advertisement in leading newspapers. DMC-USA and Paul E. Derby, Jr.,
(DMC-USA) appointed Montebueno Marketing, Inc. (MMI) as the sole and apparently upset with the publication, instructed private respondent MMI to
exclusive distributor of its Del Monte products in the Philippines for a period stop coordinating with Antonio Ongpin and to communicate directly instead
of five (5) years, renewable for two (2) consecutive five (5) year periods with with DMC-USA through Paul E. Derby, Jr.
the consent of the parties.  MMI et al. further averred that:
 Said agreement provided for an arbitration clause, which states: 1. DMC-USA et al. knowingly and surreptitiously continued to deal with
This Agreement shall be governed by the laws of the State of California the former in bad faith by involving disinterested third parties and by
and/or, if applicable, the United States of America. All disputes arising out of proposing solutions which were entirely out of their control
or relating to this Agreement or the parties’ relationship, including the 2. they had exhausted all possible avenues for an amicable resolution and
termination thereof, shall be resolved by arbitration in the City of San settlement of their grievances
Francisco, State of California, under the Rules of the American Arbitration 3. as a result of the fraud, bad faith, malice and wanton attitude of DMC-
Association. The arbitration panel shall consist of three members, one of USA et al., they should be held responsible for all the actual expenses
whom shall be selected by DMC-USA, one of whom shall be selected by incurred by MMI et al. in the delayed shipment of orders which resulted
MMI, and third of whom shall be selected by the other two members and in the extra handling thereof, the actual expenses and cost of money for
shall have relevant experience in the industry the unused Letters of Credit (LCs) and the substantial opportunity
 October 1994 - appointment of MMI as the sole and exclusive distributor of losses due to created out-of-stock situations and unauthorized
Del Monte products in the Philippines was published in several newspapers shipments of Del Monte-USA products to the Philippine Duty Free Area
in the country. and Economic Zone
 Immediately after its appointment, MMI appointed Sabrosa Foods, Inc. (SFI), 4. the bad faith, fraudulent acts and willful negligence of DMC-USA et al.,
with the approval of DMC-USA, as MMI’s marketing arm to concentrate on motivated by their determination to squeeze MMI et al. out of the
its marketing and selling function as well as to manage its critical relationship outstanding and on-going Distributorship Agreement in favor of another
with the trade. party, had placed Lily Sy on tenterhooks since then
 3 October 1996 - MMI, SFI and MMI’s Managing Director Liong Liong C. Sy 5. the shrewd and subtle manner with which DMC-USA et al. concocted
(LILY SY) filed a Complaint against DMC-USA, Managing Director of Del imaginary violations by MMI of the Distributorship Agreement in order to
Monte Corporation’s Export Sales Department Paul E. Derby, Jr., Regional justify the untimely termination thereof was a subterfuge
Director of Del Monte Corporation’s Export Sales Department Daniel Collins,  21 October 1996 – DMC-USA et al. filed a Motion to Suspend Proceedings,
Head of Credit Services Department of Del Monte Corporation Luis Hidalgo invoking the arbitration clause.
and Dewey Ltd. before Malabon RTC.  RTC: deferred consideration of DMC-USA et al.’s Motion to Suspend
 MMI et al. predicated their complaint on the alleged violations by Del Monte Proceedings as the grounds alleged therein did not constitute the
et al. of Articles 201, 212 and 233 of the Civil Code. suspension of the proceedings considering that the action was for damages
with prayer for the issuance of Writ of Preliminary Attachment and not on the
Distributorship Agreement
 DMC-USA et al. filed a MR to which MMI et al. filed their
1Art.20. Every person who, contrary to law, wilfully or negligently causes damage to comment/opposition.
another, shall indemnify the latter for the same.  DMC-USA et al. filed a reply. They later on filed a Motion to Admit
Supplemental Pleading.
2Art.21. Any person who wilfully causes loss or injury to another in a manner that is  Said motion was admitted.
contrary to morals, good customs or public policy shall compensate the latter for the  As a result of the admission of the Supplemental Complaint, DMC-USA et al.
damage. filed on 22 July 1997 a Manifestation adopting their Motion to Suspend
Proceedings of 17 October 1996 and Motion for Reconsideration of 14
3Art. 23. Even when an act or event causing damage to another's property was not due to January 1997.
the fault or negligence of the defendant, the latter shall be liable for indemnity if through  11 November 1997 - the Motion to Suspend Proceedings was denied by the
the act or event he was benefited. trial court on the ground that it "will not serve the ends of justice and to allow
said suspension will only delay the determination of the issues, frustrate the o In Toyota, the Court ruled that "[t]he contention that the arbitration
quest of the parties for a judicious determination of their respective claims, clause has become dysfunctional because of the presence of third
and/or deprive and delay their rights to seek redress. parties is untenable ratiocinating that "[c]ontracts are respected as the
 On appeal, the CA affirmed the RTC decision. law between the contracting parties" and that "[a]s such, the parties are
 Hence, this petition. thereby expected to abide with good faith in their contractual
commitments."
Issue: o However, in Salas, Jr., only parties to the Agreement, their assigns or
WON the dispute between the parties warrants an order compelling them to submit to heirs have the right to arbitrate or could be compelled to arbitrate. The
arbitration [NO] Court went further by declaring that in recognizing the right of the
contracting parties to arbitrate or to compel arbitration, the
Ratio: splitting of the proceedings to arbitration as to some of the parties
 There is no doubt that arbitration is valid and constitutional in our on one hand and trial for the others on the other hand, or the
jurisdiction.Even before the enactment of RA 876, this Court has suspension of trial pending arbitration between some of the
countenanced the settlement of disputes through arbitration. Unless the parties, should not be allowed as it would, in effect, result in
agreement is such as absolutely to close the doors of the courts against the multiplicity of suits, duplicitous procedure and unnecessary delay.
parties, which agreement would be void, the courts will look with favor upon  The object of arbitration is to allow the expeditious determination of a
such amicable arrangement and will only interfere with great reluctance to dispute.
anticipate or nullify the action of the arbitrator. Moreover, as RA 876 Clearly, the issue before us could not be speedily and efficiently resolved in
expressly authorizes arbitration of domestic disputes, foreign arbitration as a its entirety if we allow simultaneous arbitration proceedings and trial, or
system of settling commercial disputes was likewise recognized when the suspension of trial pending arbitration. Accordingly, the interest of justice
Philippines adhered to the United Nations "Convention on the Recognition would only be served if the trial court hears and adjudicates the case in a
and the Enforcement of Foreign Arbitral Awards of 1958" under the 10 May single and complete proceeding.
1965 Resolution No. 71 of the Philippine Senate, giving reciprocal
recognition and allowing enforcement of international arbitration agreements Dispositive: Petition denied.
between parties of different nationalities within a contracting state.
 A careful examination of the instant case shows that the arbitration clause in
the Distributorship Agreement between DMC-USA and MMI is valid and the
dispute between the parties is arbitrable. However, this Court must deny the
petition.
 The Agreement between DMC-USA and MMI is a contract. The
provision to submit to arbitration any dispute arising therefrom and the
relationship of the parties is part of that contract and is itself a
contract. As a rule, contracts are respected as the law between the
contracting parties and produce effect as between them, their assigns and
heirs.
 Clearly, only parties to the Agreement, i.e., DMC-USA and its Managing
Director for Export Sales Paul E. Derby, Jr., and MMI and its Managing
Director LILY SY are bound by the Agreement and its arbitration clause as
they are the only signatories thereto.
o Daniel Collins and Luis Hidalgo, and SFI, not parties to the Agreement
and cannot even be considered assigns or heirs of the parties, are not
bound by the Agreement and the arbitration clause therein.
 Consequently, referral to arbitration in the State of California pursuant
to the arbitration clause and the suspension of the proceedings in Civil
Case No. 2637-MN pending the return of the arbitral award could be
called for but only as to DMC-USA and Paul E. Derby, Jr., and MMI and
LILY SY, and not as to the other parties in this case, in accordance with
the recent case of Heirs of Augusto L. Salas, Jr. v. Laperal Realty
Corporation, which superseded that of Toyota Motor Philippines Corp. v.
Court of Appeals.
5.BF Corporation v. Court of Appeals et.al. - The RTC found that the arbitration clause did exist, however the lower court
G.R. No. 120105 denied motion to suspend proceedings and ruled in favor of BF (see reasons
March 27, 1998 below)
o This was because despite the fact there was an arbitration
ROMERO, J.: agreement, the Conditions of Contractonly the initials of Bayani
Fernando was present, while no signature on the part of Shang.
FACTS: o There were no singed documents to prove Shang’s claims thus
- BF Corporation (BF) and respondent Shangri-La Properties, Inc. (Shang) there is serious doubt to the validity of the arbitration clause found
entered into the 1st agreement whereby Shang engaged BF to construct the in the Conditions of Contract
main structure of the EDSA Plaza Project – the EDSA Shangri-La Mall – in o Assuming that the arbitration clause was valid and binding, it was
Mandaluyong City. too late for Shang to invoke arbitration because:
- While the construction work was in progress Shang once again hired BF for  the demand should have been made before the time of
the expansion of the project, the 2nd agreement. final payment except as otherwise expressly stipulated in
- BF incurred delay in the construction work that SPI considered as serious the contract
and substantial. BF contended that they had faithfully complied with the first  the court found that the project was to be completed on
agreement until a fire broke out on [Nov 30, 1990] damaging phase 1 of the [Oct 31, 1991] and any delays would incur 80K for each
project, Hence SPI proposed the renegotiation of the agreement between day of delay from [Nov 1,1991] with liquefied damages up
them. to a maximum of 5% of the total contract price
- [May 30, 1991] – Parties entered into another agreement named  the court found out that the project was completed in
“Agreement for the Execution of Builders Work for the EDSA Plaza accordance with the agreement and Shang had took
Project” (3rd agreement) that would cover the construction work on said possession and started operations thereof by opening the
project as of [May 1, 1991] until its eventual completion. same to the public in [Nov, 1911].
- [July 14, 1993] BF filed with the RTC of Pasig a complaint for the collection  BF billed Shang the total amount of P110,883,101.52
of the balance due under the construction agreement. Named Defendants contained in a demand letter sent on Feb 17, 1993.
therein were Shang and members of its board of directors – A. Ramos, Instead of paying the amound demanded, SPI set up its
Colayco, Obles, Lanuza Jr., Licauco&B.Ramos. own claim of P220,000,000.00 and scheduled a
- [Aug 3, 1993] Shang and its co-defendants filed a motion to suspend conference on that claim for July 12, 1993. The
proceedings instead of filing an answer. conference took place but was futile.
o Motion was anchored on the defendants allegation that the formal - Shang filed a motion for reconsideration but was denied because of lack of
trade contract of the the construction project provided for a clause merit and directed the other defendants to file their responsive pleading
requiring prior resort to arbitration before judicial intervention. within the reglementary period.
- [Aug 4, 1993] Shang submitted a copy of the condition of the contract - Instead of filing an answer to the complaint, SPI filed a petition for Certiorari
containing arbitration clause that it failed to attach its motion to suspend under Rule 65 before the Court of appeals.
proceedings. - The Court of Appealsgranted the petition and annulled and set aside the
- BF opposed said motion stating that there was no formal contract between orders and stayed the proceedings in the lower court.
the parties although they entered into an agreement. They emphasized that o According to the contract the project manager and the contractor
the agreement did not provide for an arbitration thus cannot deprive the should coordinate with the owner, should there be failure to resolve
court of its jurisdiction. differences, dispute shall be submitted for arbitration.
- Shang insisted that there was an arbitration clause in the existing contract o Although it was only the initials of Bayani Fernando and De La Cruz
between them. It alleged that the suspension would not deprive the court of present and none from Shang, it does not affect its effectivity. BF
its jurisdiction and would expedite the settlement proceedings rather than categorically admitted that the document is the agreement
delay it. bewtween the parties, the initial signature of BF representative to
- In a rejoinder, BF reiterated that there was no arbitration clause in the signify conformity to arbitration is no longer necessary. The parties
contract bewtween the parties. It averred that if there was an arbitration should be allowed to submit their dispute to arbitration in
clause, suspension of the proceedings was no longer proper and that accordance with their agreement.
defendants should be declared in default for failure to answer within the o Demand for arbitration was made within a reasonable time after the
reglementary period. dispute has arisen and attempts to settle amicably has failed. This
- In its sur-rejoinder, Shang pointed out the significance of the petitioners was evidenced by the fact that such demands were acted upon
admission of the due execution of the Articles of Agreement. It was shown only months. Jul 12 conference > Jul 14 Shang complaint against
that the Signature of Colayco (Shang President) and Bayani Fernando BF > Aug 13 Request for arbitration.
(BF President) was in such agreement and was even duly notarized. - Hence the petition before the Supreme Court.
ISSUE:
WON the parties entered into an arbitrary agreement

HELD:
Yes, according to Sec 4 of R.A. 876 a contract to arbitrate a controversy
thereafter arising between the parties, as well as a submission to arbitrate an existing
controversy, shall be in writing and subscribed by the party sought to be charged, or
by his lawful agent.

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
of the province or city where any of the parties resides, to enforce such contract of
submission. (Underscoring supplied.)

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 denying that the parties entered into a written contract
that was submitted in evidence before the lower court. To subscribe means to write
underneath, as ones name; to sign at the end of a document.That word may
sometimes be construed to mean to give consent to or to attest.
The Court finds that, upon a scrutiny of the records of this case, these requisites
were complied with in the contract in question. The Articles of Agreement, which
incorporates all the other contracts and agreements between the parties, was signed
by representatives of both parties and duly notarized. The failure of the private
respondents representative to initial the `Conditions of Contract would therefore not
affect compliance with the formal requirements for arbitration agreements because
that particular portion of the covenants between the parties was included by reference
in the Articles of Agreement.
Petitioners contention that there was no arbitration clause because the contract
incorporating said provision is part of a hodge-podge document, is therefore
untenable. A contract need not be contained in a single writing. It may be collected
from several different writings which do not conflict with each other and which, when
connected, show the parties, subject matter, terms and consideration, as in contracts
entered into by correspondence.[13] A contract may be encompassed in several
instruments even though every instrument is not signed by the parties, since it is
sufficient if the unsigned instruments are clearly identified or referred to and made
part of the signed instrument or instruments.Similarly, a written agreement of which
there are two copies, one signed by each of the parties, is binding on both to the
same extent as though there had been only one copy of the agreement and both had
signed it.[14]
6.EQUITABLE PCI BANKING CORPORATION,1 GEORGE L. GO, PATRICK D. Issue: WON there is manifest disregard of the law by the ICC-ICA Held: The petition
GO, GENEVIEVE W.J. GO, FERDINAND MARTIN G. ROMUALDEZ, OSCAR P. must be denied.
LOPEZ-DEE, RENE J. BUENAVENTURA, GLORIA L. TAN-CLIMACO, ROGELIO
S. CHUA, FEDERICO C. PASCUAL, LEOPOLDO S. VEROY, WILFRIDO V. This is a procedural miscue for petitioners who erroneously bypassed the Court of
VERGARA, EDILBERTO V. JAVIER, ANTHONY F. CONWAY, ROMULAD U. DY Appeals (CA) in pursuit of its appeal. While this procedural gaffe has not been raised
TANG, WALTER C. WESSMER, and ANTONIO N. COTOCO vs. RCBC CAPITAL by RCBC, still we would be remiss in not pointing out the proper mode of appeal from
CORPORATION a decision of the RTC confirming, vacating, setting aside, modifying, or correcting an
arbitral award. Rule 45 is not the remedy available to petitioners as the proper mode
The Facts of appeal assailing the decision of the RTC confirming as arbitral award is an appeal
Petitioners Equitable PCI Bank, Inc. (EPCIB) and the individual shareholders of before the CA pursuant to Sec. 46 of Republic Act No. (RA) 9285, otherwise known
Bankard, Inc., as sellers, and respondent 5 RCBC Capital Corporation (RCBC), as as the Alternative Dispute Resolution Act of 2004, or completely, An Act to
buyer, executed a Share Purchase Agreement (SPA) for the purchase of petitioners’ Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines
interests in Bankard, representing 226,460,000 shares, for the price of PhP and to Establish the Office for Alternative Dispute Resolution, and for other Purposes,
1,786,769,400. To expedite the purchase, RCBC agreed to dispense with the conduct promulgated on April 2, 2004 and became effective on April 28, 2004 after its
of a due diligence audit on the financial status of Bankard. RCBC deposited the publication on April 13, 2004. In Korea Technologies Co., Ltd v. Lerma, we explained,
stipulated downpayment amount in an escrow account after which it was given full inter alia, that the RTC decision of an assailed arbitral award is appealable to the CA
management and operational control of Bankard. June 2, 2000 is also considered by and may further be appealed to this Cour t.
the parties as the Closing Date referred to in the SPA. Sometime in September 2000,
RCBC had Bankard’s accounts audited, creating for the purpose an audit team and It is clear from the factual antecedents that RA 9285 applies to the instant case. This
the conclusion was that the warranty, as contained in Section 5(h) of the SPA (simply law was already effective at the time the arbitral proceedings were commenced by
Sec. 5[h] hereinafter), was correct. RCBC paid the balance of the contract price. The RCBC through a request for arbitration filed before the ICC-ICA on May 12, 2004.
corresponding deeds of sale for the shares in question were executed in January
2001. Thereafter RCBC informed petitioners of its having overpaid the purchase price The Court Will Not Overturn an Arbitral Award Unless It Was Made in Manifest
of the subject shares, claiming that there was an overstatement of valuation of Disregard of the Law Following Asset Privatization Trust vs CA, , errors in law and
accounts amounting to PhP 478 million, resulting in the overpayment of over PhP 616 fact would not generally justify the reversal of an arbitral award. A party asking for the
million. vacation of an arbitral award must show that any of the grounds for vacating,
rescinding, or modifying an award are present or that the arbitral award was made in
Thus, RCBC claimed that petitioners violated their warranty, as sellers, embodied in manifest disregard of the law. Otherwise, the Court is duty-bound to uphold an arbitral
Sec. 5(g) of the SPA (Sec. 5[g] hereinafter). RCBC, in accordance with Sec. 10 of the award. The instant petition dwells on the alleged manifest disregard of the law by the
SPA, filed a Request for Arbitration dated May 12, 2004 with the ICC-ICA. In the ICC-ICA. The US case of Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros law" in
request, RCBC charged Bankard with deviating from, contravening and not following the following wise:
generally accepted accounting principles and practices in maintaining their books. 18
Arbitration in the ICC-ICA proceeded after the formation of the arbitration tribunal
consisting of retired Justice Santiago M. Kapunan, nominated by petitioners; Neil expounded on the phrase "manifest disregard of the
Kaplan, RCBC’s nominee; an d Sir Ian Barker, appointed by the ICC-ICA. After drawn
out proceedings with each party alleging deviation and non-compliance by the other This court has emphasized that manifest disregard of the law is a very narrow
with arbitration rules, the tribunal, with Justice Kapunan dissenting, rendered a Partial standard of review. Anaconda Co. th v. District Lodge No. 27, 693 F.2d 35 (6
Award . On the matter of prescription, the tribunal held that RCBC’s claim is not time- Cir.1982). A mere error in interpretation or application of the law is insufficient.
barred, the claim properly falling under the contemplation of Sec. 5(g) and not Sec. Anaconda, 693 F.2d at 37-38. Rather, the decision must fly in the face of clearly
5(h). established legal precedent. When faced with questions of law, an arbitration panel
does not act in manifest disregard of the law unless (1) the applicable legal principle
As such, the tribunal concluded, RCBC’s claim was filed within the three (3) -year is clearly defined and not subject to reasonable debate; and (2) the arbitrators refused
period under Sec. 5(g) and that the six (6)month period under Sec. 5(h) did not to heed that legal principle. Thus, to justify the vacation of an arbitral award on
apply.The tribunal also exonerated RCBC from laches, the latter having sought relief account of "manifest disregard of the law," the arbiter’s findings must clearly and
within the three (3)-year period prescribed in the SPA. Notably, the tribunal unequivocally violate an established legal precedent. Anything less would not suffice.
considered the rescission of the SPA and ASPA as impracticable and "totally out of A review of petitioners’ arguments would, however, show that their arguments are
the question." RCBC filed with the RTC a Motion to Confirm Partial Award. The RTC bereft of merit. Thus, the Partial Award cannot be vacated. RCBC’s Claim Is Not
issued the first assailed order confirming the Partial Award and denying the adverted Time-Barred The Court upholds the conclusion of the tribunal and rules that the claim
separate motions to vacate and to suspend and inhibit. From this order, petitioners of RCBC under Sec. 5(g) is not time-barred.
sought reconsideration, but their motion was denied by the RTC .
Petitioners Were Not Denied Due Process Petitioners assert that "the arbitrators’
partial award admitted and used the Summaries as evidence, and held on the basis
of the ‘information’ contained in them that petitioners were in breach of their warranty tribunal properly ruled that petitioners failed to prove that the formation of the
in GAAP compliance." Petitioners’ position is bereft of merit. The petitioners afforded Transition Committee and the conduct of the audit by Rubio and Legaspi were
the opportunity to refute the summaries and pieces of evidence submitted by RCBC admissions or representations by RCBC that it would not pursue a claim under Sec.
which became the bases of the experts’ opinion. Petitioners’ right to due process was 5(g) and that petitioners relied on such representation to their detriment. The SC
not breached. Sec. 15 of RA 876 or the Arbitration Law provides that: Section 15. agrees with the findings of the tribunal that estoppel is not present in the situation at
Hearing by arbitrators. – Arbitrators may, at the commencement of the hearing, ask bar. It becomes evident from all of the foregoing findings that the ICC-ICA is not guilty
both parties for brief statements of the issues in controversy and/or an agreed of any manifest disregard of the law on estoppel. As shown above, the findings of the
statement of facts. ICC-ICA in the Partial Award are well-supported in law and grounded on facts. The
Partial Award must be upheld. The member of the three-person arbitration panel was
Thereafter the parties may offer such evidence as they desire, and shall produce selected by petitioners, while another was respondent’s cho ice. The respective
such additional evidence as the arbitrators shall require or deem necessary to an interests of the parties, therefore, are very much safeguarded in the arbitration
understanding and determination of the dispute. The arbitrators shall be the sole proceedings. Any suggestion, therefore, on the partiality of the arbitration tribunal has
judge of the relevancy and materiality of the evidence offered or produced, and shall to be dismissed.
not be bound to conform to the Rules of Court pertaining to evidence. Arbitrators shall
receive as exhibits in evidence any document which the parties may wish to submit
and the exhibits shall be properly identified at the time of submission. All exhibits shall
remain in the custody of the Clerk of Court during the course of the arbitration and
shall be returned to the parties at the time the award is made.

The arbitrators may make an ocular inspection of any matter or premises which are in
dispute, but such inspection shall be made only in the presence of all parties to the
arbitration, unless any party who shall have received notice thereof fails to appear, in
which event such inspection shall be made in the absence of such party. (Emphasis
supplied.) The well-settled rule is that administrative agencies exercising quasi-
judicial powers shall not be fettered by the rigid technicalities of procedure, albeit they
are, at all times required, to adhere to the basic concepts of fair play. The right to
cross-examine is not an indispensable aspect of due process. RCBC Is Not Estopped
from Questioning the Financial Condition of Bankard On estoppel, petitioners contend
that RCBC is now precluded from denying the fairness and accuracy of said accounts
since it did not seek price reduction under Sec. 5(h). Lastly, they ass everate that
RCBC continued with Bankard’s
71

x x x (Emphasis supplied.)

accounting policies and practices and found them to conform to the generally
accepted accounting principles, contrary to RCBC’s allegations. Petitioners’
contention is not meritorious. The doctrine of estoppel is based upon the grounds of
public policy, fair dealing, good faith, and justice; and its purpose is to forbid one to
speak against one’s own acts, representations, or commitments to the injury of one to
whom they were 72 directed and who reasonably relied on them. The elements of
estoppel pertaining to the party estopped are: (1) conduct which amounts to a false
representation or concealment of material facts, or, at least, which calculated to
convey the impression that the facts are otherwise than, and inconsistent with, those
which the party subsequently attempts to assert; (2) intention, or at least expectation,
that such conduct shall be acted upon by 74 the other party; and (3) knowledge,
actual or constructive, of the actual facts. In the case at bar, the first element of
estoppel in relation to the party sought to be estopped is not present. Petitioners’
position is that "RCBC was aware of the manner in which the Bankard accounts were
recorded, well before it 75 consummated the SPA by taking delivery of the shares
and paying the outstanding 80% balance of the contract price." The Arbitral Tribunal
explained in detail why estoppel is not present in the case at bar. In summary, the
7.
8.JORGE GONZALES and PANEL OF ARBITRATORS vs. CLIMAX MINING The doctrine of separability or severability enunciates that an arbitration agreement is
LTD.,CLIMAX-ARIMCO MINING CORP.and independent of the main contract. The arbitration agreement is to be treated as a
AUSTRALASIAN PHILIPPINES MINING INC.,G.R. No. 161957, January 22, 2007 separate agreement and the arbitration agreement does not automatically terminate
when the contract of which it is part comes to an end.
Facts:This is a consolidation of two petitions rooted in the same disputed Addendum
Contract entered into by the parties. The separability of the arbitration agreement is especially significant to the
determination of whether the invalidity of the main contract also nullifies the arbitration
In one case, the Court held that the DENR Panel of Arbitrators had no jurisdiction clause. Indeed, the doctrine denotes that the invalidity of the main contract, also
over the complaint for the annulment of the Addendum Contract on grounds of fraud referred to as the “container” contract, does not affect the validity of the arbitration
and violation of the Constitution and that the action should have been brought before agreement. Irrespective of the fact that the main contract is invalid, the arbitration
the regular courts as it involved judicial issues. clause/agreement still remains valid and enforceable.

Gonzales averred that the DENR Panel of Arbitrators Has jurisdiction because the The validity of the contract containing the agreement to submit to arbitration does not
case involves a mining dispute that properly falls within the ambit of the Panel’s affect the applicability of the arbitration clause itself. A contrary ruling would suggest
authority. that a party’s mere repudiation of the main contract is sufficient to avoid
arbitration. That is exactly the situation that the separability doctrine, as well as
Respondents Climax Mining Ltd., et al., on the other hand, seek jurisprudence applying it, seeks to avoid.
reconsideration/clarification on the decision holding that the case should not be
brought for arbitration under R.A. No. 876. Theyargued that the arbitration clause in TheCourt added that when it declared that the case should not be brought for
the Addendum Contract should be treated as an agreement independent of the other arbitration, it should be clarified that the case referred to is the case actually filed by
terms of the contract, and that a claimed rescission of the main contract does not Gonzales before the DENR Panel of Arbitrators, which was for the nullification of the
avoid the duty to arbitrate. main contract on the ground of fraud, as it had already been determined that the case
should have been brought before the regular courts involving as it did judicial issues.
On another case, Gonzales challenged the order of the RTC requiring him to
proceed with the arbitration proceedings while the complaint for the nullification of the
Addendum Contract was pending before the DENR Panel of Arbitrators. He
contended that any issue as to the nullity, inoperativeness, or incapability of
performance of the arbitration clause/agreement raised by one of the parties to the
alleged arbitration agreement must be determined by the court prior to referring them
to arbitration.

While Climax-Arimcocontended that an application to compel arbitration under Sec. 6


of R.A. No. 876 confers on the trial court only a limited and special jurisdiction, i.e., a
jurisdiction solely to determine (a) whether or not the parties have a written contract to
arbitrate, and (b) if the defendant has failed to comply with that contract.

Issue: Whether or not arbitration is proper even though issues of validity and nullity of
the Addendum Contract and, consequently, of the arbitration clause were raised.

Ruling: Positive.

In La Naval Drug Corporation v. Court of Appeals, the Court held that R.A. No. 876
explicitly confines the court's 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 with the terms thereof." If the court, upon the other
hand, finds that no such agreement exists, "the proceeding shall be dismissed." The
cited case also stressed that the proceedings are summary in nature.

Implicit in the summary nature of the judicial proceedings is the separable or


independent character of the arbitration clause or agreement.
9. INTERIM MEASURES IN ARBITRATION (JUDICIAL REVIEW and COURT an order vacating an arbitral award only “in any of the . . . . .cases” enumerated
INTERVENTION) therein. As it did not expressly provide for errors of fact and/or law and grave abuse of
ABS-CBN BROADCASTING CORPORATION vs. WORLD INTERACTIVE discretion (proper grounds for a petition for review under Rule 43 and a petition for
NETWORK SYSTEMS (WINS) JAPAN CO., LTD. certiorari under Rule 65, respectively) as grounds maintaining a petition to vacate an
(G.R. NO. 169332, February 11, 2008) arbitral award in the RTC, it necessarily follows that a party may not avail of the latter
remedy on the grounds of errors of fact and/or law or grave abuse of discretion to
FACTS: overturn an arbitral award.
 Petitioner, ABS-CBN Broadcasting Corporation entered into a licensing Therefore, the remedy petitioner availed of, namely: petition to review under
agreement with respondent, World Interactive Network Systems (WINS) Rule 43 and petition for certiorari under Rule 65, was wrong.
Japan Co., Ltd., a foreign corporation licensed under the laws of Japan.
 Under the agreement, respondent was granted the exclusive license to
distribute and sublicense the distribution of the television service known as
the “The Filipino Channel” (TFC) in Japan.
 The dispute arose between the parties, when petitioner accused respondent
of inserting nine episodes of WINS WEEKLY, a weekly 35-minute
community news program for Filipinos in Japan, into the TFC programming
from March to May 2002 in which the petitioner claimed that these were
unauthorized insertions consisting a material breach of their agreement.
 The parties entered into arbitration and the arbitrator ruled in favor of the
respondent.
 Petitioner filed in the Court of Appeals a petition to review under Rule 43
of the Rules of Court or, in the alternative, a petition for certiorari under
Rule 65 of the same rules, with the application for temporary restraining
order and writ of preliminary injunction alleging that there was serious errors
of fact and laws and/or grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the arbitrator.
 Meanwhile, the respondent filed a petition for confirmation if the arbitral
award before the RTC of Quezon City.
 Consequently, petitioner file a supplemental petition in the CA seeking to
enjoin the RTC in Quezon City from further proceeding with the hearing of
respondent’s petition for confirmation of arbitral award which was granted.
 Respondent filed a motion for reconsideration in the CA and was denied
because of lack of jurisdiction. It ruled that it is the RTC which has
jurisdiction over questions relating to arbitration.
 Petitioner moved for reconsideration and the same was denied.

ISSUE:
Whether or not an aggrieved party in a voluntary arbitration dispute may
avail of, directly in the CA, a petition for review under Rule 43 or a petition for
certiorari under Rule 65 of the Rules of Court, instead of filing a petition to vacate the
award in the RTC when the grounds invoked to overturn the arbitrator’s decision are
other than those for a petition to vacate and award enumerated under R.A. 876.

RULING:
R.A. 876 itself mandates that it is the Court if First Instance, now the RTC,
which has jurisdiction over questions relating to arbitration, such as to vacate an
arbitral award. Sec. 24 of R.A. 876 enumerates the grounds for a petition to vacate an
award made by an arbitrator. The law itself clearly provides that the RTC must issue
10. not have jurisdiction over disputes that are properly the subject of arbitration pursuant
11. Korea Technologies Co., Ltd. v. Hon. Alberto A. Lerma and Pacific General to an arbitration clause. In the earlier case of BF Corporation v. Court of Appeals and
Steel Manufacturing Corporation, Shangri-la Properties, Inc., where the trial court refused to refer the parties to
G.R. No. 143581, Jan. 7, 2008. arbitration notwithstanding the existence of an arbitration agreement between them,
the Supreme Court said the trial court had prematurely exercised its jurisdiction over
Facts: Korea Technologies Co., Ltd. [Korea Tech], a Korean corporation, entered into a the case.
contract with Pacific General Steel Manufacturing Corporation [Pacific General], a The Court further emphasized that a submission to arbitration is a contract. As a rule,
domestic corporation, whereby Korea Tech undertook to ship and install in Pacific contracts are respected as the law between the contracting parties and produce effect
General’s site in Carmona, Cavite the machinery and facilities necessary for between them, their assigns and heirs.8 Courts should liberally review arbitration
manufacturing LPG cylinders, and to initially operate the plant after it is installed. clauses. Any doubt should be resolved in favor of arbitration.
The plant, after completion of installation, could not be operated by Pacific General 2. Re: Enforcement of award in a domestic or international arbitration
due to its financial difficulties affecting the supply of materials. The last payments
made by Pacific General to Korea Tech consisted of postdated checks which were An arbitral award in a domestic or international arbitration is subject to enforcement
dishonored upon presentment. According to Pacific General, it stopped payment by a court upon application of the prevailing party for the confirmation or recognition
because Korea Tech had delivered a hydraulic press which was different in kind and and enforcement of an award. Under Section 42 of the ADR Act, “The recognition and
of lower quality than that agreed upon. Korea Tech also failed to deliver equipment enforcement of such (foreign) arbitral awards shall be filed with the Regional Trial
parts already paid for by it. It threatened to cancel the contract with Korea Tech and Court in accordance with the rules of procedure to be promulgated by the Supreme
dismantle the Carmona plant. Court.” An arbitral award is immediately executory upon the lapse of the period
Finally, Pacific General filed before the Office of the Prosecutor a Complaint-Affidavit provided by law.
for estafaagainst Mr. Dae Hyun Kang, President of Korea Tech. Korea Tech informed For an award rendered in domestic or non-international arbitration, unless a petition
PGSMC that it could not unilaterally rescind the contract. Of greater importance to the to vacate the award is filed within thirty (30) days from the date of serve upon the
present article, KOGIES also insisted that their dispute be settled by arbitration as latter, the award is subject to confirmation by the court.
provided by Article 15 of their contract — the arbitration clause. For an award rendered in a domestic, international arbitration, the period for filing an
Korea Tech initiated arbitration before the Korea Commercial Arbitration Board application to set it aside is not later than three (3) months from the date the applicant
[KCAB] in Seoul, Korea and, at the same time, commenced a civil action before the received the award, otherwise the court shall recognize and enforce it.
Regional Trial Court [the “trial court”] where it prayed that Pacific General be 3. Re: Enforcement of foreign arbitral award
restrained from dismantling the plant and equipment. Pacific General opposed the In an attempt to allay the fear by Pacific General of submitting its dispute to arbitration
application and argued that the arbitration clause was null and void, being contrary to in Seoul, South Korea under the rules of the Korea Commercial Arbitration Board, the
public policy as it ousts the local court of jurisdiction. Supreme Court said inobiter dictum:
The trial court denied the application for preliminary injunction and declared the In case a foreign arbitral body is chosen by the parties, the arbitral rules of our
arbitration agreement null and void. Korea Tech moved to dismiss the counterclaims domestic arbitration bodies would not be applied. As signatory to the Arbitration Rules
for damages. of the UNCITRAL Model Law on International Commercial Arbitration of the United
Korea Tech filed a petition for certiorari before the Court of Appeals [CA]. The court Nations Commission on International Trade Law [UNCITRAL] in the New York
dismissed the petition and held that an arbitration clause which provided for a final Convention on June 21, 1985, the Philippine committed itself to be bound by the
determination of the legal rights of the parties to the contract by arbitration was Model Law. We have even incorporated the Model Law in Republic Act No. 9285,
against public policy. Further appeal was made to the Supreme Court by way of a otherwise known as the Alternative Dispute Resolution Act of 2004.”
petition for review. x xxxxx
“Thus, while the RTC does not have jurisdiction over disputes governed by arbitration
mutually agreed upon by the parties, still the foreign arbitral award is subject to
Ruling:The Supreme Court (the “Court”) held: judicial review by the RTC which can set aside, reject or vacate it.”…. Chapter 7
1. Re:The validity of the arbitration clause. of RA 9285 has made it clear that all arbitral awards, whether domestic or
foreign, are subject to judicial review on specific grounds provided for.”
“The arbitration clause is valid. It has not been shown to be contrary to any law, or The Supreme Court finally held:
against morals, good customs, public order or public policy. The arbitration clause “While it (Pacific General) may have misgivings on the foreign arbitration done in
stipulates that the arbitration must be done in Seoul, Korea in accordance with the Korea by the KCAB, it has available remedies under RA 9285. Its interests are duly
Commercial Arbitration Rules of the KCAB, and that the award is final and binding. protected by the law which requires that the arbitral award that may be rendered by
This is not contrary to public policy.We find no reason why the arbitration clause KCAB must be confirmed here by the RTC before it can be enforced.”
should not be respected and complied with by both parties.”
This ruling, the Court said, is consonant with the declared policy in Section 2 of the
ADR Act that “the State (shall) actively promote party autonomy in the resolution of
disputes or the freedom of the parties to make their own arrangements to resolve
their disputes.” Citing Section 24 of the ADR Act, the Court said the trial court does
the appellate court dismissed the Petition for Certiorari. Subsequently, CNMEG filed a
12. China National Machinery v. Santamaria Motion for Reconsideration, which was denied by the CA in a Resolution dated 5
December 2008.
Facts: On 14 September 2002, petitioner China National Machinery & Equipment Petitioners Argument: Petitioner claims that the EXIM Bank extended financial
Corp. (Group) (CNMEG), represented by its chairperson, Ren Hongbin, entered into a assistance to Northrail because the bank was mandated by the Chinese government,
Memorandum of Understanding with the North Luzon Railways Corporation and not because of any motivation to do business in the Philippines, it is clear from the
(Northrail), represented by its president, Jose L. Cortes, Jr. for the conduct of a foregoing provisions that the Northrail Project was a purely commercial transaction.
feasibility study on a possible railway line from Manila to San Fernando, La Union (the
Northrail Project). Respondents Argument: respondents alleged that the Contract Agreement and the
Loan Agreement were void for being contrary to (a) the Constitution; (b) Republic Act
On 30 August 2003, the Export Import Bank of China (EXIM Bank) and the No. 9184 (R.A. No. 9184), otherwise known as the Government Procurement Reform
Department of Finance of the Philippines (DOF) entered into a Memorandum of Act; (c) Presidential Decree No. 1445, otherwise known as the Government Auditing
Understanding (Aug 30 MOU), wherein China agreed to extend Preferential Buyer’s Code; and (d) Executive Order No. 292, otherwise known as the Administrative Code.
Credit to the Philippine government to finance the Northrail Project. 3 The Chinese
government designated EXIM Bank as the lender, while the Philippine government Issues: Whether or not petitioner CNMEG is an agent of the sovereign People’s
named the DOF as the borrower. Under the Aug 30 MOU, EXIM Bank agreed to Republic of China.
extend an amount not exceeding USD 400,000,000 in favor of the DOF, payable in 20 Whether or not the Northrail contracts are products of an executive agreement
years, with a 5-year grace period, and at the rate of 3% per annum. between two sovereign states.

On 1 October 2003, the Chinese Ambassador to the Philippines, Wang Chungui Ruling: The instant Petition is DENIED. Petitioner China National Machinery &
(Amb. Wang), wrote a letter to DOF Secretary Jose Isidro Camacho (Sec. Camacho) Equipment Corp. (Group) is not entitled to immunity from suit, and the Contract
informing him of CNMEG’s designation as the Prime Contractor for the Northrail Agreement is not an executive agreement. CNMEG’s prayer for the issuance of a TRO
Project. and/or Writ of Preliminary Injunction is DENIED for being moot and academic.
On 30 December 2003, Northrail and CNMEG executed a Contract Agreement for the
construction of Section I, Phase I of the North Luzon Railway System from Caloocan The Court explained the doctrine of sovereign immunity in Holy See v.
to Malolos on a turnkey basis (the Contract Agreement). 7 The contract price for the Rosario, to wit:
Northrail Project was pegged at USD 421,050,000. There are two conflicting concepts of sovereign immunity, each widely held and firmly
On 26 February 2004, the Philippine government and EXIM Bank entered into a established. According to the classical or absolute theory, a sovereign cannot,
counterpart financial agreement – Buyer Credit Loan Agreement No. BLA 04055 (the without its consent, be made a respondent in the courts of another sovereign.
Loan Agreement). In the Loan Agreement, EXIM Bank agreed to extend Preferential According to the newer or restrictive theory, the immunity of the sovereign is
Buyer’s Credit in the amount of USD 400,000,000 in favor of the Philippine recognized only with regard to public acts or acts jure imperii of a state, but not
government in order to finance the construction of Phase I of the Northrail Project. with regard to private acts or acts jure gestionis. (Emphasis supplied; citations
omitted.)
On 13 February 2006, respondents filed a Complaint for Annulment of Contract and As it stands now, the application of the doctrine of immunity from suit has been
Injunction with Urgent Motion for Summary Hearing to Determine the Existence of restricted to sovereign or governmental activities (jure imperii). The mantle of state
Facts and Circumstances Justifying the Issuance of Writs of Preliminary Prohibitory immunity cannot be extended to commercial, private and proprietary acts (jure
and Mandatory Injunction and/or TRO against CNMEG, the Office of the Executive gestionis).
Secretary, the DOF, the Department of Budget and Management, the National
Economic Development Authority and Northrail. The case was filed before the Since the Philippines adheres to the restrictive theory, it is crucial to
Regional Trial Court, National Capital Judicial Region, Makati City, Branch 145 (RTC ascertain the legal nature of the act involved – whether the entity claiming immunity
Br. 145). In the Complaint, respondents alleged that the Contract Agreement and the performs governmental, as opposed to proprietary, functions. As held in United States
Loan Agreement were void for being contrary to (a) the Constitution; (b) Republic Act of America v. Ruiz
No. 9184 (R.A. No. 9184), otherwise known as the Government Procurement Reform
Act; (c) Presidential Decree No. 1445, otherwise known as the Government Auditing Admittedly, the Loan Agreement was entered into between EXIM Bank and
Code; and (d) Executive Order No. 292, otherwise known as the Administrative Code. the Philippine government, while the Contract Agreement was between Northrail and
On 15 May 2007, RTC Br. 145 issued an Omnibus Order denying CNMEG’s Motion CNMEG. Although the Contract Agreement is silent on the classification of the legal
to Dismiss and setting the case for summary hearing to determine whether the nature of the transaction, the foregoing provisions of the Loan Agreement, which is an
injunctive reliefs prayed for should be issued. CNMEG then filed a Motion for inextricable part of the entire undertaking, nonetheless reveal the intention of the parties
Reconsideration, which was denied by the trial court in an Order dated 10 March to the Northrail Project to classify the whole venture as commercial or proprietary in
2008. Thus, CNMEG filed before the CA a Petition for Certiorari with Prayer for the character.
Issuance of TRO and/or Writ of Preliminary Injunction dated 4 April 2008.
Thus, piecing together the content and tenor of the Contract Agreement, the
Memorandum of Understanding dated 14 September 2002, Amb. Wang’s letter dated
1 October 2003, and the Loan Agreement would reveal the desire of CNMEG to
construct the Luzon Railways in pursuit of a purely commercial activity performed in
the ordinary course of its business.