REPUBLIC OF THE PHILIPPINES, Represented by the POLLUTION ADJUDICATIONBOARD (DENR) vs.

MARCOPPER MINING
CORPORATION

July 10, 2000

FACTS: Respondent MMC was issued a temporary permit to operate a tailings sea disposal system for the period from October
31, 1985 to October 21, 1986. Before it expired, MMC filed an application for the renewal thereof with the National Pollution
Control Commission (NPCC). On September 20, 1986, MMC received a telegraphic order from the NPCC directing the former
to "(i)mmediately cease and desist from discharging mine tailings into Calancan Bay." The directive was brought about through
the efforts of certain religious groups which had been protesting MMC’s tailings sea disposal system. MMC requested the NPCC
to refrain from implementing the aforesaid directive until its adoption of an alternative tailings disposal system.

The NPCC granted MMC’s request and called a conference to discuss possible alternative disposal systems. In the meantime, the
National Pollution Control Commission (NPCC) was abolished by EO No. 192dated June 10, 1987, and its powers and functions
were integrated into the Pollution Adjudication Board. On April 11, 1988, the DENR Secretary, in his capacity as Chairman of
the PAB, issued another order directing MMC to "cease and desist from discharging mine tailings into Calancan Bay." This was
appealed by the MMC with the Office of the President (OP), requesting for the issuance of a restraining order enjoining PAB
from enforcing its order.

The Office of the President granted MMC’s appeal; thus, Pollution Adjudication Board, are hereby enjoined from enforcing its
cease and desist order of April 15, 1988 pending resolution by this Office of respondent-appellant’s appeal from said orders. It is
further directed that the status quo obtaining prior to the issuance of said cease and desist order be maintained until further orders
from this Office.

It is understood, however that during the restraining order’s efficacy the Calancan Bay Rehabilitation Project (CBRP) was
created, and MMC is required to remit the undertaking of the amount of P30,000.00 a day, starting from May 13, 1988 to the
ETF thereof. MMC started paying until on June 30, 1991, it stopped from making further deposits in the ETF alleging by reason
of its stop in discharging its tailings in the Calancan Bay. On February 5, 1993, the Office of the President rendered a decision in
O.P. Case actually dismissing the appeal; affirming the cease and desist Order issued by the PAB; and lifting the TRO.

In a letter dated January 22, 199712 , Municipal Mayor Wilfredo A. Red of Sta. Cruz, Marinduque informed the PAB that MMC
stopped remitting the amount of 30,000.00 per day as of July 1, 1991 to the ETF of the CBRP. April 23, 1997, the PAB ruled that
the obligation of MMC to deposit P30,000.00 per day to the ETF of the CBRP subsists, as provided for in the Order of the Office
of the President dated May 13, 1988, during the "efficacy of said order restraining the PAB from enforcing its cease and desist
order against MMC".

Since the Order was lifted only on February 5, 1993, the obligation of MMC to remit was likewise extinguished only on said date
and not earlier as contended by MMC from the time it ceased dumping tailings into the Bay on July 1, 1991. MMC is hereby
ordered to pay the CBRP the amount of P30,000.00 per day, computed from the date Marcopper Mining Corporation stopped
paying on 01 July 1991, up to the formal lifting of the subject Order from the Office of the President on 05 February 1993.

MMC assailed the aforequoted Order dated April 23, 1997 of the PAB as null and void for having been issued without jurisdiction
or with grave abuse of discretion in a petition for Certiorari and Prohibition (with prayer for temporary restraining order and
preliminary injunction) before the Court of Appeals which was docketed as CA-G.R. No. SP-44656. The Court of Appeals ruled
in favor of MMC ratiocinating that PAB’s jurisdiction to try pollution cases is transferred to the mines regional director by virtue
of RA 7942 otherwise known as the Philippine Mining Act of 1995 amending the PAB’s jurisdiction given under PD 984.

ISSUE: WON the Pollution Adjudication Board has retained its jurisdiction over the issuance, renewal or denial of permits for
the discharge of mine tailings.
RULING: Yes.

PAB was created and granted under the same EO 192 broad powers to adjudicate pollution cases in general. Thus,

SEC. 19. Pollution Adjudication Board. – There is hereby created a Pollution Adjudication Board under the Office of the
Secretary. The Board shall be composed of the Secretary as Chairman, two (2) Undersecretaries as may be designated by the
Secretary, the Director of Environmental management, and three (3) others to be designated by the Secretary as members. The
Board shall assume the powers and functions of the Commission/Commissioners of the National Pollution Control Commission
with respect to the adjudication of pollution cases under Republic Act 3931 and Presidential Decree 984, particularly with respect
to Section 6 letters e, f, g, j, k, and p of P.D. 984. The Environmental Management Bureau shall serve as the Secretariat of the
Board. These powers and functions may be delegated to the regional offices of the Department in accordance with rules and
regulations to be promulgated by the Board.20

SEC. 6. Powers and Functions.

(f) Make, alter or modify orders requiring the discontinuance of pollution specifying the conditions and the time within which
such discontinuance must be accomplished.

(g) Issue, renew, or deny permits, under such conditions as it may determine to be reasonable, for the prevention and abatement
of pollution, for the discharge of sewage, industrial waste, or for the installation or operation of sewage works and industrial
disposal system or parts thereof: Provided, however, That the Commission, by rules and regulations, may require subdivisions,
condominium, hospitals, public buildings and other similar human settlements to put up appropriate central sewerage system and
sewage treatment works, except that no permits shall be required to any sewage works or changes to or extensions of existing
works that discharge only domestic or sanitary wastes from a singles residential building provided with septic tanks or their
equivalent. The Commission may impose reasonable fees and charges for the issuance or renewal of all permits required herein.

Section 7(a) of P.D. No. 984 further provides in part:

"Sec. 7(a) Public Hearing. – Public hearing shall be conducted by the Commissioner, Deputy Commissioner or any senior official
duly designated by the Commissioner prior to issuance or promulgation of any order or decision by the Commissioner requiring
the discontinuance of discharge of sewage, industrial wastes and other wastes into the water, air or land resources of the
Philippines as provided in the Decree: provided, that whenever the Commission finds a prima facie evidence that the discharged
sewage or wastes are of immediate threat to life, public health, safety or Welfare, or to animal or plant life, or exceeds the
allowable standards set by the Commission, the Commissioner may issue and ex-parte order directing the discontinuance of the
same or the temporary suspension or cessation of operation of the establishment or person generating such sewage or
wasteswithout the necessity of a prior public hearing. x x x . (underscoring supplied).

RA 7942 (Philippine Mining Act of 1995):

SEC. 67. Power to Issue Orders. – The mines regional director shall, in consultation with the Environmental Management
Bureau, forthwith or within such time as specified in his order, require the contractor to remedy any practice connected with
mining or quarrying operations, which is not in accordance with safety and anti-pollution laws and regulations. In case of
imminent danger to life or property, the mines regional director may summarily suspend the mining or quarrying operations until
the danger is removed, or appropriate measures are taken by the contractor or permittee.

There is no irreconcilable conflict between the two laws. Section 19 of EO 192 vested the PAB with the specific power to
adjudicate pollution cases in general. Sec. 2, par. (a) of PD 984 defines the term "pollution" as referring to any alteration of the
physical, chemical and biological properties of any water, air and/or land resources of the Philippines , or any discharge thereto
of any liquid, gaseous or solid wastes as will or is likely to create or to render such water, air and land resources harmful,
detrimental or injurious to public health, safety or welfare or which will adversely affect their utilization for domestic,
commercial, industrial, agricultural, recreational or other legitimate purposes.

On the other hand, the authority of the mines regional director is complementary to that of the PAB. Section 66 of RA 7942 gives
the mines regional director exclusive jurisdiction over the safety inspection of all installations, surface or underground in mining
operations. Section 67 thereof vests upon the regional director power to issue orders requiring a contractor to remedy any practice
connected with mining or quarrying operations which is not in accordance with safety and anti-pollution laws and regulations;
and to summarily suspend mining or quarrying operations in case of imminent danger to life or property.
 In addition, an environmental clearance certificate is required based on an environment impact assessment. The law also requires
contractors and permittees to rehabilitate the mined-out areas, and set up a mine rehabilitation fund. Significantly, the law allows
and encourages people’s organizations and non-governmental organizations to participate in ensuring that contractors/permittees
shall observe all the requirements of environmental protection.

From the foregoing, it readily appears that the power of the mines regional director does not foreclose PAB’s authority to
determine and act on complaints filed before it. The power granted to the mines regional director to issue orders requiring the
contractor to remedy any practice connected with mining or quarrying operations or to summarily suspend the same in cases of
violation of pollution laws is for purposes of effectively regulating and monitoring activities within mining operations and
installations pursuant to the environmental protection and enhancement program undertaken by contractors and permittees in
procuring their mining permit. While the mines regional director has express administrative and regulatory powers over mining
operations and installations, it has no adjudicative powers over complaints for violation of pollution control statutes and
regulations. There is no genuine conflict between RA 7942 and RA 3931 as amended by PD 984 that precludes their co-
existence.

in Laguna Lake Development Authority vs. Court of Appeals,23 this Court held that adjudication of pollution cases generally
pertains to the Pollution Adjudication Board (PAB) except where the special law provides for another forum. However, contrary
to the ruling of the Court of Appeals, RA 7942 does not provide for another forum inasmuch as RA 7942 does not vest quasi-
judicial powers in the Mines Regional Director. The authority is vested and remains with the PAB.

Ruling that PAB has jurisdiction however, the records reveal that witness for PAB, Mr. Edel Genato, who is the Technical
Resource person of the PAB for the project admitted that the funds in the ETF amounting to about Fourteen Million Pesos are
more than sufficient to cover the costs of rehabilitation. Hence, MMC must be declared not to have arrears in deposits as
admittedly, the ETF already has more than sufficient funds to undertake the rehabilitation of Calancan Bay.

G.R. No. 167994 January 22, 2007

JORGE GONZALES and PANEL OF ARBITRATORS, Petitioners,

vs.
CLIMAX MINING LTD., CLIMAX-ARIMCO MINING CORP., and AUSTRALASIAN PHILIPPINES MINING
INC.,Respondents.

Vs. HON. OSCAR B. PIMENTEL, in his capacity as PRESIDING JUDGE of BR. 148 of the REGIONAL TRIAL COURT
of MAKATI CITY, and CLIMAX-ARIMCO MINING CORPORATION, Respondents.

FACTS: This is a consolidation of two petitions rooted in the same disputed Addendum Contract entered into by the parties.

G.R. No. 167994. It stemmed from the petition to compel arbitration filed by respondent Climax-Arimco before the RTC of
Makati City on 31 March 2000 while the complaint of the GR 161957 for the nullification of the Addendum Contract was
pending before the DENR Panel of Arbitrators. On March 23, 2000 Climax-Arimco had sent Gonzales a Demand for Arbitration
pursuant to Clause 19.111 of the Addendum Contract and also in accordance with Sec. 5 of R.A. No. 876. The petition for
arbitration was subsequently filed before the RTC of Makaki City and Climax-Arimco sought an order to compel the parties to
arbitrate pursuant to the said arbitration clause.

April 14, 2000, Gonzales filed a motion to dismiss which he however failed to set for hearing. On 15 May 2000, he filed an Answer
with Counterclaim,12 questioning the validity of the Addendum Contract containing the arbitration clause. Gonzales alleged that
the Addendum Contract containing the arbitration clause is void in view of Climax-Arimco’s acts of fraud, oppression and violation
of the Constitution. Thus, the arbitration clause, Clause 19.1, contained in the Addendum Contract is also null and void ab initio and
legally inexistent. Gonzales RTC issued an order declaring Gonzales’s motion to dismiss moot and academic in view of the filing
of his Answer with Counterclaim.13

On 31 May 2000, Gonzales asked the RTC to set the case for pre-trial. on 7 July 2000, the RTC granted Gonzales’s motion and set
the case for pre-trial. Climax-Arimco then filed a motion to resolve its pending motion to compel arbitration. On 23 August 2000,
Climax-Arimco filed a motion for reconsideration of the 24 July 2000 Order. The RTC granted the motion and directed the parties
to arbitration. On 13 February 2001, Judge Pimentel issued the first assailed order requiring Gonzales to proceed with arbitration
proceedings and appointing retired CA Justice as a sole arbitrator. 20 Gonzales thus filed the Rule 65 petition assailing the Orders
dated 13 February 2001 and 7 March 2005 of Judge Pimentel. Gonzales contends that public respondent Judge Pimentel acted with
grave abuse of discretion in immediately ordering the parties to proceed with arbitration despite his proper, valid, and timely raised
argument in latter’s Answer with Counterclaim that the Addendum Contract, containing the arbitration clause, is null and void.
Gonzales sought a temporary restraining order to prevent the enforcement of the assailed orders directing the parties to arbitrate,
and to direct Judge Pimentel to hold a pre-trial conference and the necessary hearings on the determination of the nullity of the
Addendum Contract.

ISSUE: WON whether it was proper for the RTC, in the proceeding to compel arbitration under R.A. No. 876, to order the parties
to arbitrate even though the defendant therein has raised the twin issues of validity and nullity of the Addendum Contract and,
consequently, of the arbitration clause therein.

RULING: Yes. Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in our jurisdiction.
The Civil Code is explicit on the matter.33 R.A. No. 876 expressly authorizes such. The enactment of R.A. No. 9285 on 2 April
2004 further institutionalized the use of alternative dispute resolution systems, including arbitration, in the settlement of disputes.
Necessarily, a contract is required for arbitration to take place and to be binding. R.A. No. 876 recognizes the contractual nature of
the arbitration agreement.

Sec. 2. Persons and matters subject to arbitration.—Two or more persons or parties may submit to the arbitration of one or more
arbitrators any controversy existing, between them at the time of the submission and which may be the subject of an action, or the
parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between them. Such
submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as exist at law for the revocation of any
contract.

Thus, we held in Manila Electric Co. v. Pasay Transportation Co.35 that a submission to arbitration is a contract. A clause in a
contract providing that all matters in dispute between the parties shall be referred to arbitration is a contract,36 and in Del Monte
Corporation-USA v. Court of Appeals37 that "[t]he provision to submit to arbitration any dispute arising therefrom and the
relationship of the parties is part of that contract and is itself a contract. As a rule, contracts are respected as the law between the
contracting parties and produce effect as between them, their assigns and heirs."38

Sec. 6 of R.A. No. 876 recognizes the contractual nature of arbitration clauses or agreements. It provides:

Sec. 6. Hearing by court.—A party aggrieved by the failure, neglect or refusal of another to perform under an agreement in writing
providing for arbitration may petition the court for an order directing that such arbitration proceed in the manner provided for in
such agreement. Five days notice in writing of the hearing of such application shall be served either personally or by registered
mail upon the party in default. The court shall hear the parties, and upon being satisfied that the 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 the
terms of the agreement. If the making of the agreement or default be in issue the court shall proceed to summarily hear such issue.
If the finding be that no agreement in writing providing for arbitration was made, or that there is no 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 in proceeding thereunder, an order shall be made summarily directing the parties to proceed with the arbitration in
accordance with the terms thereof.

This special proceeding is the procedural mechanism for the enforcement of the contract to arbitrate. The jurisdiction of the courts
in relation to Sec. 6 of R.A. No. 876 as well as the nature of the proceedings therein was expounded upon in La Naval Drug
Corporation v. Court of Appeals.39 There it was 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."40 The cited
case also stressed that the proceedings are summary in nature.41

Implicit in the summary nature of the judicial proceedings is the separable or independent character of the arbitration clause or
agreement. This was highlighted in the cases of Manila Electric Co. v. Pasay Trans. Co. 44and Del Monte Corporation-USA v. Court
of Appeals.45

The separability of the arbitration agreement is especially significant to the determination of whether the invalidity of the main
contract also nullifies the arbitration clause. Indeed, the doctrine denotes that the invalidity of the main contract, also referred to as
the "container" 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. 47

There is reason, therefore, to rule against Gonzales when he alleges that Judge Pimentel acted with grave abuse of discretion in
ordering the parties to proceed with arbitration. Gonzales’s argument that the Addendum Contract is null and void and, therefore
the arbitration clause therein is void as well, is not tenable. First, the proceeding in a petition for arbitration under R.A. No. 876 is
limited only to the resolution of the question of whether the arbitration agreement exists. Second, the separability of the arbitration
clause from the Addendum Contract means that validity or invalidity of the Addendum Contract will not affect the enforceability
of the agreement to arbitrate. The validity of the contract containing the agreement to submit to arbitration does not affect 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 exactly the situation that the separability doctrine, as well as jurisprudence applying it, seeks
to avoid. Hence, Gonzales’s petition for certiorari should be dismissed.

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG, PA/AMERICAN INTERNATIONAL

UNDERWRITER (PHIL.) INC., petitioners,
vs.
STOLT-NIELSEN PHILIPPINES, INC. and COURT OF APPEALS, respondents.

FACTS:

The United Coconut Chemicals, Inc. (hereinafter referred to as SHIPPER) shipped 404.774 metric tons of distilled C6-C18 fatty
acid on board MT "Stolt Sceptre," a tanker owned by Stolt-Nielsen Philippines Inc. (hereinafter referred to as CARRIER), from
Bauan, Batangas, Philippines, consigned to "Nieuwe Matex" at Rotterdam, Netherlands, covered by Tanker Bill of Lading BL
No. BAT-1. The shipment was insured under a marine cargo policy with Petitioner National Union Fire Insurance Company of
Pittsburg (hereinafter referred to as INSURER), a non-life American insurance corporation. Upon receipt of the cargo by the
CONSIGNEE in the Netherlands, it was found to be discolored and totally contaminated. The claim filed by the SHIPPER-
ASSURED with the CARRIER having been denied, the INSURER indemnified the SHIPPER pursuant to the stipulation in the
marine cargo policy covering said shipment.

On April 21, 1986 as subrogee of the SHIPPER-ASSURED, the INSURER filed suit against the CARRIER, before the Regional
Trial Court of Makati, Branch 58 (RTC), for recovery of the sum of P1,619,469.21, with interest, representing the amount the
INSURER had paid the SHIPPER-ASSURED. The CARRIER moved to dismiss/suspend the proceedings on the ground that the
RTC had no jurisdiction over the claim the same being an arbitrable one. As subrogee of the SHIPPER-ASSURED, the
INSURER is subject to the provisions of the Bill of Lading, which includes a provision that the shipment is carried under and
pursuant to the terms of the Charter Party between the SHIPPER-ASSURED and the CARRIER providing for arbitration. The
INSURER opposed the dismissal/suspension of the proceedings on the ground that it was not legally bound to submit the claim
for arbitration inasmuch as the arbitration clause provided in the Charter Party was not incorporated into the Bill of Lading, and
that the arbitration clause is void for being unreasonable and unjust.

ISSUE:

WON the claim of the petitioner-insurer in this case against respondent-carrier is arbitrable.

RULING

Yes. The claim of petitioner against respondent is arbitrable.

The pertinent portion of the Bill of Lading in issue provides in part:

This shipment is carried under and pursuant to the terms of the Charter dated December 21st 1984 at Greenwich,
Connecticut, U.S.A. between Parcel Tankers. Inc. and United Coconut Chemicals, Ind. as Charterer and all the terms
whatsoever of the said Charter except the rate and payment of freight specified therein apply to and govern the rights
of the parties concerned in this shipment. Copy of the Charter may be obtained from the Shipper or Charterer.
(Emphasis supplied)

While the provision on arbitration in the Charter Party reads:

H. Special Provisions.

xxx xxx xxx

4. Arbitration. Any dispute arising from the making, performance or termination of this Charter Party shall be settled in
New York, Owner and Charterer each appointing an arbitrator, who shall be a merchant, broker or individual
experienced in the shipping business; the two thus chosen, if they cannot agree, shall nominate a third arbitrator who
 shall be an admiralty lawyer. Such arbitration shall be conducted in conformity with the provisions and procedure of
the United States arbitration act, and a judgment of the court shall be entered upon any award made by said arbitrator.
Nothing in this clause shall be deemed to waive Owner's right to lien on the cargo for freight, deed of freight, or
demurrage.

Clearly, the Bill of Lading incorporates by reference the terms of the Charter Party. As the respondent Appellate Court found, the
INSURER "cannot feign ignorance of the arbitration clause since it was already charged with notice of the existence of the
charter party due to an appropriate reference thereof in the bill of lading. The insurer’s postulate that it cannot be bound by the
Charter Party because, as insurer, it is subrogee only with respect to the Bill of Lading; that only the Bill of Lading should
regulate the relation among the INSURER, the holder of the Bill of Lading, and the CARRIER and that in order to bind it, the
arbitral clause in the Charter Party should have been incorporated into the Bill of Lading does not carry a meritorious
consideration because the charter may be made part of the contract under which the goods are carried by an appropriate reference
in the Bill of Lading. The entire contract must be read together and its clauses interpreted in relation to one another and not by
parts. By subrogation, it became privy to the Charter Party as fully as the SHIPPER before the latter was indemnified, because as
subrogee it stepped into the shoes of the SHIPPER-ASSURED and is subrogated merely to the latter's rights. It can recover only
the amount that is recoverable by the assured. And since the right of action of the SHIPPER-ASSURED is governed by the
provisions of the Bill of Lading, which includes by reference the terms of the Charter Party, necessarily, a suit by the INSURER
is subject to the same agreements. These include the provision on arbitration hence; the INSURER cannot avoid the binding
effect of the arbitration clause.

Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in our jurisdiction (Chapter 2,
Title XIV, Book IV, Civil Code). Republic Act No. 876 (The Arbitration Law) also expressly authorizes arbitration of domestic
disputes. Foreign arbitration as a system of settling commercial disputes of an international character was likewise recognized
when the Philippines adhered to the United Nations "Convention on the Recognition and the Enforcement of Foreign Arbitral
Awards of 1958," under the 10 May 1965 Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and allowing
enforcement of international arbitration agreements between parties of different nationalities within a contracting state. Thus, it
pertinently provides:

1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to
arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal
relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.

2. The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by
the parties or contained in an exchange of letters or telegrams.

3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an
agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration,
unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

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

In fine, referral to arbitration in New York pursuant to the arbitration clause, and suspension of the proceedings in Civil Case No.
13498 below, pending the return of the arbitral award, is, indeed called for.

PUROMINES, INC., petitioner, vs. COURT OF APPEAL and PHILIPP BROTHERS OCEANIC, INC., respondents.

FACTS:

Puromines, Inc. (Puromines for brevity) and Makati Agro Trading, Inc. (not a party in this case) entered into a contract with
private respondents Philipp Brothers Oceanic, Inc. for the sale of prilled Urea in bulk. The Sales Contract No. S151.8.01018
provided, among others an arbitration clause which states, thus:

"Any disputes arising under this contract shall be settled by arbitration in London in accordance with the Arbitration
Act 1950 and any statutory amendment or modification thereof. Each party is to appoint an Arbitrator, and should they be unable
to agree, the decision of an Umpire appointed by them to be final. The Arbitrators and Umpire are all to be commercial men and
resident in London. This submission may be made a rule of the High Court of Justice in England by either party." 2

On or about May 22, 1988, the vessel M/V "Liliana Dimitrova" loaded on board at Yuzhny, USSR a shipment of 15,500 metric
tons prilled Urea in bulk complete and in good order and condition for transport to Iloilo and Manila, to be delivered to petitioner.
Three bills of lading were issued by the ship-agent in the Philippines, Maritime Factors Inc.

Shipments covered by Bill of Lading Nos. 1 and 3 were discharged in Manila in bad order and condition, caked, hardened and
lumpy, discolored and contaminated with rust and dirt. Damages were valued and assessed at some amount.

Petitioner filed a complaint 3 with the trial court 4 for breach of contract of carriage against Maritime Factors Inc. (which was not
included as respondent in this petition) as ship-agent in the Philippines for the owners of the vessel MV "Liliana Dimitrova,"
while private respondent, Philipp Brothers Oceanic Inc., was impleaded as charterer of the said vessel and proper party to accord
petitioner complete relief. Philip Brothers Oceanic private respondent herein filed a motion to dismiss dated on the ground that
the petitioner, Puromines should comply with the arbitration clause in the sales contract. The motion to dismiss was opposed by
petitioner contending the inapplicability of the arbitration clause inasmuch as the cause of action did not arise from a violation of
the terms of the sales contract but rather for claims of cargo damages where there is no arbitration agreement.

ISSUE:

WON Puromines action for breach of contract of carriage against Maritime Factors and Puromines is subject to the arbitration
provided in the sales contract.

RULING:

Yes. The sales contract is comprehensive enough to include claims for damages arising from carriage and delivery of the goods.
Provision on arbitrations provided in the sales contract is applicable in action for damages arising from the breach of the contract
of carriage.

As a general rule the seller has the obligation to transmit the goods to the buyer, and concomitant thereto, the contracting of a
carrier to deliver the same. Art. 1523 of the Civil Code provides:

"Art. 1523. Where in pursuance of a contract of sale, the seller in authorized or required to send the goods to the buyer, delivery
of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is deemed to be a
delivery of the goods to the buyer, except in the cases provided for in article 1503, first, second and third paragraphs, or unless a
contrary intent appear.

"Unless otherwise authorized by the buyer, the seller must take such contract with the carrier on behalf of the buyer as may be
reasonable, having regard to the nature of the goods and the other circumstances of the case. X X X “

The disputed sales contact provides for conditions relative to the delivery of goods, such as date of shipment, demurrage, weight
as determined by the bill of lading at load port and more particularly other provisions.

Hence as argued by respondent on its motion to dismiss, "the (petitioner) derives his right to the cargo from the bill of lading
which is the contract of affreightment together with the sales contract. Puromines is therefore bound by the provisions and terms
of said bill of lading and of the arbitration clause incorporated in the sales contract."

Whether the liability of respondent should be based on the same contract or that of the bill of lading, the parties are nevertheless
obligated to respect the arbitration provisions on the sales contract and/or the bill of lading. Petitioner being a signatory and party
to the sales contract cannot escape from his obligation under the arbitration clause as stated therein.

Arbitration has been held valid and constitutional. Unless the agreement is such as absolutely to close the doors of the courts
against the parties, which agreement would be void, the courts will look with favor upon such amicable arrangements and will
only interfere with great reluctance to anticipate or nullify the action of the arbitrator. 17 "Since there obtains herein a written
provision for arbitration as well as failure on respondent's part to comply therewith, the court a quo should order the parties to
proceed to their arbitration in accordance with the terms of their agreement (Sec. 6 Republic Act 876). The reason for this case is
that Puromines’ arguments touching upon the merits of the dispute are improperly raised herein. They should be addressed to the
arbitrators first. Hence Puromines’ action is premature.