Law 160a Alternative Dispute Resolution PDF

LAW 160A
ALTERNATIVE DISPUTE RESOLUTION
Prof. Arthur Autea
Class Policies:
1) Final Exam – 40%
a) last day of our regular class – October
b) problem + objective
2) Class Participation – 60%
a) attendance – 2x
b) suprise quizzes
3) Final Exam 40%
Relevant Laws / Rules

1) RA 876 – Arbitration Law
2) EO No 1008 – CIA Law
3) RA 9285 - ADR Act of 2004
4) UNCITRAL Model Law
5) Special ADR Rules
6) UNCITRAL Arbitration Rules
7) ICC Arbitration Rules
Cases
1) Vega v. San Carlos Milling Co. Ltd, 51 Phil 908 (1924)
2) California & Hawaiian Sugar Co. v. Pioneer Insurance & Surety
Corp. 346 SCRA 214 (2000)
3) Associated Bank v. CA, 233 SCRA 137 (1994)
4) Bloomfield Academy v. CA, 237 SCRA 43 (1994)
5) Mindanao Portland Cement Corporation v. McDonough
Construction Co. of Florida, 90 SCRA 808 (1967)
6) Gonzales v. Climax Mining Ltd., 512 SCRA 148 (2007)
7) Oil & Natural Gas Commission v. CA, 293 SCRA 26 (1998)
8) Magellan Capital Mgt. Corp. v. Zosa, 355 SCRA 157 (2001)
9) BF Corporation v. CA, 288 SCRA 267 (1998)
10) Korea Technologies Co. Ltd. v. Lerma, 542 SCRA 1 (2008)
11) Luzon Development Bank v. Luzon Development Bank
Employees, 249 SCRA 162 (1995)
12) Toyota Motor Phils. Corp. V. CA, 216 SCRA 336
13) Heirs of Agusto L. Salas, Jr. v. Laperal Realty Corp., 302 SCRA
620
14) Del Monte Corp. USA v. CA, 351 SCRA 373 - WRONG
15) Homebankers Savings and Trust Co. v. CA, 318 SCRA 558
16) Chung Fu Industries Inc. V. CA, 206 SCRA ___
17) Adamson v. CA, 232 SCRA 602 (1994)
18) National Steel Corp. v. RTC of Lanao del Norte, 304 SCRA 595
(1999)
19) Asset Privatization Trust v. CA, 300 SCRA 579
20) China Chiang Jiang Energy Corp (Phils) v. Rosal Infrastructure
Builders, G.R. 125706, 30 September 1996
21) Hi Precision Steel, 228 SCRA 397
22) ABS CBN v. World, 544 SCRA 308
Law 160A – Alternative Dispute Resolution (Prof. A. Autea) 2
Salma F. Angkaya | AY 2010-2011, 1st semester
Special thanks to Krizelle Poblacion for her great digests!
Class Notes - June 11, 2010 challenge the Act

14 – Unable to Sec. 26 – Meaning of
perform “Appointing Authority”
18 – Conduct of Sec. 27 – What Functions
INTRODUCTION TO ALTERNATIVE MODES hearings May be Performed by
OF DISPUTE RESOLUTION 19 – Determination of Appointing Authority
rules Sec. 28 – Grant of Interim
ADR – alternative to conventional litigation 29 to 32 – Measure of Protection
Arbitration – only form of ADR that will result in a Termination of Sec. 29 – Further Authority
proceedings for Arbitrator to Grant Interim
final, binding and enforceable award
Measure of Protection
Mediation – facilitate communication, cannot Sec. 30 – Place of
impose resolution of the mediator Arbitration
Sec. 31 – Language of the
Conventional Arbitration Arbitration
Litigation
Judgment Award
Final Judgment Final Award ARBITRATION
Interlocutory Order Interim Award
P v. D / P v. R Claimant v. Arbitration v. Litigation {PALPVA}
Respondent
Stenographers Court Reporters Arbitration Litigation
Private & confidential Public
Arbitration clause – stipulation that parties wil Parties may select Parties cannot agree
submit dispute to arbitration arbitrator on presiding officer;
Judge is raffled
Request for Arbitration – arbitrable dispute Parties can select Philippine law governs
governing law that will
Legislative History: determine their
substantive rights
1) RA 876 (1953) – Arbitration Law Procedure depends on Rules of Court applies
2) New York Convention (1958) agreement
a) Convention on the recognition & Venue depends on Rules of Court
enforcement of foreign arbitral awards agremeent governs; Venue may
b) Need to prove authenticity only also depend on
e.g. NAIA 3 case agreement
3) RA 9285 (2004) – ADR Act of 2004 Consensual Not consensual
a) Covers domestic & international arbitration
b) Covers all forms of ADR Note: A voluntary arbitrator has the same status as
4) EO No. 1008 (1985) – CIAC an RTC judge.
a) Covers all disputes in the construction
industry What is the nature of ADR?
5) Special ADR Rules (October 13, 2009) Consensual – cannot be compelled to submit to
a) Clarified problems in RA 876 and RA 9285 arbitration; but once you agree, you’re bound by it
6) UNCITRAL MODEL LAW – part of Philippine
law What is an arbitration agreement?
a) Sec. 33 of ADR Act of 2004 Arbitration agreement – determines the rights,
obligations, procedure & rules;
Sec. 33 – Applicability to Domestic Arbitration - may be in a separate agreement or may be a
clause in a contract
Uncitral Model Law Preceding Ch. 4
8 – Arbitration Sec. 22 – Legal
1) Arbitration clause
Agreement + Representation in
Substantive Claim International Arbitration “Any dispute arising out of this contract shall be
10 – No. of arbitrators Sec. 23 – Confidentiality in resolved by arbitration.”
11 – Appointment Arbitration Proceedings
12 – Grounds for Sec. 24 – Referral to 2) Container contract
challenge Arbitration Contract containing the arbitration clause
13 – Procedure for Sec. 25 – Interpretation of
Note: Doctrine of separability applies. Sample arbitration clause:

“Any dispute arising out of this contract shall be
Rule 2.2. Policy on arbitration. XXX The Special ADR Rules resolved by arbitration under the ICC Rules of
recognize the principle of separability of the arbitration clause, Arbitration.”
which means that said clause shall be treated as an agreement
independent of the other terms of the contract of which it forms
part. A decision that the contract is null and void shall not entail Overview ICC Arbitration Rules / Principles:
ipso jure the invalidity of the arbitration clause. 1) Submit request for arbitration
2) Assessment of non-refundable fee + cost of
Domestic v. International Arbitration arbitration
1) Domestic – not International (RA 9285) a) Non-refundable fee - $2,500
2) International – Article 1.3 (UNCITRAL Model b) Arbitration cost
Law) i) Fees of arbitrators – professional fees
(1) 40% - chair
RA 9285, Sec. 32. Law Governing Domestic Arbitration. - (2) 30% - members
Domestic arbitration shall continue to be governed by Republic ii) Claimant – 1
Act No. 876, otherwise known as "The Arbitration Law" as
amended by this Chapter. The term "domestic arbitration" as
iii) Respondent – 1
used herein shall mean an arbitration that is not international iv) Appointee of Appointing Authority - 1
as defined in Article (3) of the Model Law. v) Administrative expenses
3) Highly confidential
Uncitral Model Law, Article 1 - xxx
3) An arbitration is international if:
4) Counsel in arbitration – does not have to be a
a) the parties to an arbitration agreement have at the time of the lawyer
conclusion of that agreement, their places of business in a) ADR Rates - $300 / hour
different States; or b) IBP Rates – P3,000 / appearance
b) one of the following places is situated outside the State in
which the parties have their places of business:
i) Senior - P7 to 10T / hour
i) the place of arbitration if determined in, or pursuant to, the ii) Associate – P1-1,500 / hour
arbitration agreement: 5) ICA – can modify the form of the award
ii) any place where a substantial part of the obligations of the
commercial relationship is to be performed or the place with
See provisions, page 31.
which the subject-matter of the dispute is most closely
connected; or
c) the parties have expressly agreed that the subject-matter of What is the principle of Party Autonomy?
the arbitration agreement relates to more than one country. Party autonomy – freedom of the parties to
4) For the purposes of paragraph (3) of this article:
a) if a party has more than one place of business, the place of
determine the rules / law governing the mode of
business is that which has the closest relationship to the resolving their dispute
arbitration agreement;
b) if a party does not have a place of business, reference is to be Rule 2.1. General policies. — It is the policy of the State to
made to his habitual residence. actively promote the use of various modes of ADR and to respect
party autonomy or the freedom of the parties to make their own
Institutional v. Adhoc Arbitration arrangements in the resolution of disputes with the greatest
cooperation of and the least intervention from the courts. To this
1) Adhoc arbitration - end, the objectives of the Special ADR Rules are to encourage
and promote the use of ADR, particularly arbitration and
2) Institutional – conducted under the auspices of mediation, as an important means to achieve speedy and efficient
an institution resolution of disputes, impartial justice, curb a litigious culture and
to de-clog court dockets.
Examples: RA 9285, Sec. 2 – Declaration of Policy

International Chamber of Commerce -To actively promote party autonomy in the resolution of disputes
CIAC or the freedom of the parties to make their own arrangements to
resolve their disputes
PDRCI -To encourage and actively promote the use of
Singapore International Arbitration Centre ADR to achieve speedy and impartial justice & de-clog court
Hongkong International Arbitration Centre dockets
ICSPI Disp.
Uncitral Model Law, Article 19 - [Determination of rules of
American Arbitration Association procedure]
Japan Commercial Arbitration 1) Subject to the provisions of this Law, the parties are free to
Kuala Lumpur RCA agree on the procedure to be followed by the arbitral tribunal in
KCAB conducting the proceedings.
2) Failing such agreement, the arbitral tribunal may, subject to the
ICC – International Court of Arbitration provisions of this Law, conduct the arbitration in such manner as it
ICA – not a court of adjudication considers appropriate. The power conferred upon the arbitral
tribunal includes the power to determine the admissibility, Next meeting:

relevance, materiality and weight of any evidence.
RA 876
Uncitral Model Law, Article 28 - [Rules applicable to RA 9285
substance of dispute] Special ADR Rules
1) The arbitral tribunal shall decide the dispute in accordance UNCITRAL Model Law
with such rules of law as are chosen by the parties as applicable
to the substance of the dispute. Any designation of the law or
legal system of a given State shall be construed, unless otherwise
expressed, as directly referring to the substantive law of that State Class Notes - June 18, 2010
and not to its conflict of laws rules.
2) Failing any designation by the parties, the arbitral tribunal shall
apply the law determined by the conflict of laws rules which it Appointment of Arbitrators (Domestic)
considers applicable. ADR Law – Sec. 5 & Sec. 8
3) The arbitral tribunal shall decide ex aequo et bono1 or as
amiable compositeur2 only if the parties have expressly
authorised it to do so. RA 876, Sec. 8 – Appointment of arbitrators
4) In all cases, the arbitral tribunal shall decide in accordance with
the terms of the contract and shall take into account the usages If, in the contract for arbitration or in the submission described in
of the trade applicable to the transaction. section two, provision is made for a method of naming or
appointing an arbitrator or arbitrators, such method shall be
Uncitral Arbitration Rules, Applicable law, amiable followed; but if no method be provided therein the Court of First
compositeur, Article 33 Instance shall designate an arbitrator or arbitrators.
1. The arbitral tribunal shall apply the law designated by the The Court of First Instance shall appoint an arbitrator or
parties as applicable to the substance of the dispute. Failing such arbitrators, as the case may be, in the following instances:
designation by the parties, the arbitral tribunal shall apply the law
determined by the conflict of laws rules which it considers (a) If the parties to the contract or submission are unable to
applicable. agree upon a single arbitrator; or
2. The arbitral tribunal shall decide as amiable compositeur or ex (b) If an arbitrator appointed by the parties is unwilling or unable
aequo et bono only if the parties have expressly authorised the to serve, and his successor has not been appointed in the manner
arbitral tribunal to do so and if the law applicable to the arbitral in which he was appointed; or
procedure permits such arbitration.
(c) If either party to the contract fails or refuses to name his
3. In all cases, the arbitral tribunal shall decide in accordance with arbitrator within fifteen days after receipt of the demand for
the terms of the contract and shall take into account the usages arbitration; or
of the trade applicable to the transaction.
(d) If the arbitrators appointed by each party to the contract, or
ICC Rules, Article 15: Rules Governing the Proceedings appointed by one party to the contract and by the proper Court,
shall fail to agree upon or to select the third arbitrator.
1. The proceedings before the Arbitral Tribunal shall be
governed by these Rules, and, where these Rules are silent, by (e) The court shall, in its discretion appoint one or three
any rules which the parties or, failing them, the Arbitral Tribunal arbitrators, according to the importance of the controversy
may settle on, whether or not reference is thereby made to the involved in any of the preceding cases in which the agreement is
rules of procedure of a national law to be applied to the silent as to the number of arbitrators.
arbitration.
(f) Arbitrators appointed under this section shall either accept or
2. In all cases, the Arbitral Tribunal shall act fairly and impartially decline their appointments within seven days of the receipt of their
and ensure that each party has a reasonable opportunity to appointments. In case of declination or the failure of an arbitrator
present its case. or arbitrators to duly accept their appointments the parties or the
court, as the case may be, shall proceed to appoint a substitute or
ICC Rules, Article 17: Applicable Rules of Law substitutes for the arbitrator or arbitrators who decline or failed to
accept his or their appointments.
1. The parties shall be free to agree upon the rules of law to be
applied by the Arbitral Tribunal to the merits of the dispute. In the
Sec. 9 – Appointment of add’nal arbitrators
absence of any such agreement, the Arbitral Tribunal shall apply
the rules of law which it determines to be appropriate.
Where a submission or contract provides that two or more
2. In all cases the Arbitral Tribunal shall take account of the arbitrators therein designated or to be thereafter appointed by the
provisions of the contract and the relevant trade usages. parties, may select or appoint a person as an additional arbitrator,
the selection or appointment must be in writing. Such additional
3. The Arbitral Tribunal shall assume the powers of an amiable arbitrator must sit with the original arbitrators upon the hearing.
compositeur or decide ex aequo et bono only if the parties have
agreed to give it such powers.
RULE 6: APPOINTMENT OF ARBITRATORS
1
Latin for "according to the right and good" or "from equity and Rule 6.1. When the court may act as Appointing Authority. — The
conscience" court shall act as Appointing Authority only in the following
2
Clauses in arbitration agreements allowing the arbitrators to act instances:
as "amiables compositeurs", permit the arbitrators to decide the
dispute according to the legal principles they believe to be just,
without being limited to any particular national law.
a. Where any of the parties in an institutional arbitration failed or Rule 6.6. Submission of list of arbitrators. — The court may, at its
refused to appoint an arbitrator or when the parties have failed to option, also require each party to submit a list of not less than
reach an agreement on the sole arbitrator (in an arbitration before three (3) proposed arbitrators together with their curriculum vitae.
a sole arbitrator) or when the two designated arbitrators have
failed to reach an agreement on the third or presiding arbitrator (in Rule 6.7. Court action. — After hearing, if the court finds merit in
an arbitration before a panel of three arbitrators), and the the petition, it shall appoint an arbitrator; otherwise, it shall
institution under whose rules arbitration is to be conducted fails or dismiss the petition.
is unable to perform its duty as appointing authority within a
reasonable time from receipt of the request for appointment; In making the appointment, the court shall have regard to such
considerations as are likely to secure the appointment of an
b. In all instances where arbitration is ad hoc and the parties independent and impartial arbitrator.
failed to provide a method for appointing or replacing an
arbitrator, or substitute arbitrator, or the method agreed upon is At any time after the petition is filed and before the court makes
ineffective, and the National President of the Integrated Bar of the an appointment, it shall also dismiss the petition upon being
Philippines (IBP) or his duly authorized representative fails or informed that the Appointing Authority has already made the
refuses to act within such period as may be allowed under the appointment.
pertinent rules of the IBP or within such period as may be agreed
upon by the parties, or in the absence thereof, within thirty (30) Rule 6.8. Forum shopping prohibited. — When there is a pending
days from receipt of such request for appointment; petition in another court to declare the arbitration agreement
inexistent, invalid, unenforceable, on account of which the
c. Where the parties agreed that their dispute shall be resolved respondent failed or refused to participate in the selection and
by three arbitrators but no method of appointing those arbitrators appointment of a sole arbitrator or to appoint a party-nominated
has been agreed upon, each party shall appoint one arbitrator arbitrator, the petition filed under this rule shall be dismissed.
and the two arbitrators thus appointed shall appoint a third
arbitrator. If a party fails to appoint his arbitrator within thirty (30) Rule 6.9. Relief against court action. — If the court appoints an
days of receipt of a request to do so from the other party, or if the arbitrator, the order appointing an arbitrator shall be immediately
two arbitrators fail to agree on the third arbitrator within a executory and shall not be the subject of a motion for
reasonable time from their appointment, the appointment shall be reconsideration, appeal or certiorari. An order of the court denying
made by the Appointing Authority. If the latter fails or refuses to the petition for appointment of an arbitrator may, however, be the
act or appoint an arbitrator within a reasonable time from receipt subject of a motion for reconsideration, appeal or certiorari.
of the request to do so, any party or the appointed arbitrator/s
may request the court to appoint an arbitrator or the third How do you commence arbitration? (domestic)
arbitrator as the case may be.
Rule 6.2. Who may request for appointment. — Any party to an Sec. 5 – Preliminary procedure
arbitration may request the court to act as an Appointing Authority
in the instances specified in Rule 6.1 above.
Arbitration Agreement Submission
Rule 6.3. Venue. — The petition for appointment of arbitrator may Agreement
be filed, at the option of the petitioner, in the Regional Trial Court (a) (c)
(a) where the principal place of business of any of the parties is (b) Default  (d) Neglect / Fail /
located, (b) if any of the parties are individuals, where those
individuals reside, or (c) in the National Capital Region. Refuse to arbitrate 
Follow (a) and (b)
Rule 6.4. Contents of the petition. —The petition shall state the
following:
RA 876, Sec. 5. Preliminary procedure. An arbitration
shall be instituted by:
a. The general nature of the dispute;
b. If the parties agreed on an appointment procedure, a
description of that procedure with reference to the agreement
(a) In the case of a contract to arbitrate future
where such may be found; controversies by the service by either party upon the other
c. The number of arbitrators agreed upon or the absence of any of a demand for arbitration in accordance with the
agreement as to the number of arbitrators; contract. Such demand shall be set forth the nature of the
d. The special qualifications that the arbitrator/s must possess, if controversy, the amount involved, if any, and the relief
any, that were agreed upon by the parties; sought, together with a true copy of the contract providing
e. The fact that the Appointing Authority, without justifiable for arbitration. The demand shall be served upon any party
cause, has failed or refused to act as such within the time either in person or by registered mail. In the event that the
prescribed or in the absence thereof, within a reasonable time,
from the date a request is made; and
contract between the parties provides for the appointment
f. The petitioner is not the cause of the delay in, or failure of, the of a single arbitrator, the demand shall be set forth a
appointment of the arbitrator. specific time within which the parties shall agree upon
such arbitrator. If the contract between the parties
Apart from other submissions, the petitioner must attach to the provides for the appointment of three arbitrators, one to be
petition (a) an authentic copy of the arbitration agreement, and (b) selected by each party, the demand shall name the
proof that the Appointing Authority has been notified of the filing of arbitrator appointed by the party making the demand; and
the petition for appointment with the court. shall require that the party upon whom the demand is
Rule 6.5. Comment/Opposition. — The comment/opposition must made shall within fifteen days after receipt thereof advise
be filed within fifteen (15) days from service of the petition. in writing the party making such demand of the name of
the person appointed by the second party; such notice
shall require that the two arbitrators so appointed must ie they can be finalised using arbitration or another
agree upon the third arbitrator within ten days from the process. Adjudication decisions are usually binding
date of such notice. on both parties by prior agreement.
(b) In the event that one party defaults in answering the In relation to construction contracts, adjudication is a
demand, the aggrieved party may file with the Clerk of the statutory procedure by which any party to the
Court of First Instance having jurisdiction over the parties, contract has a right to have a dispute decided by an
a copy of the demand for arbitration under the contract to adjudicator, normally used to ensure payment. It is
arbitrate, with a notice that the original demand was sent
intended to be quicker and more cost effective than
by registered mail or delivered in person to the party
against whom the claim is asserted. Such demand shall litigation or arbitration. The right arises by virtue of
set forth the nature of the controversy, the amount the Housing Grants Construction and Regeneration
involved, if any, and the relief sought, and shall be Act 1996.
accompanied by a true copy of the contract providing for
Adjudication is also sometimes used to describe a
arbitration.
non-specific alternative dispute resolution process in
(c) In the case of the submission of an existing which a third party makes a decision as to the best
controversy by the filing with the Clerk of the Court of First way to resolve the dispute. In this sense,
Instance having jurisdiction, of the submission agreement, ombudsmen, arbitrators and judges are all types of
setting forth the nature of the controversy, and the amount adjudicators.
involved, if any. Such submission may be filed by any
party and shall be duly executed by both parties. The aim of adjudication is to resolve disputed
issues in order to enable work to continue (either
(d) In the event that one party neglects, fails or refuses to
arbitrate under a submission agreement, the aggrieved indefinitely or while awaiting the decision of a
party shall follow the procedure prescribed in judge or arbitrator). Arbitration is a more formal
subparagraphs (a) and (b) of this section. process, and the arbitrator's decision is legally
binding.
Arbitration v. Adjudication
<insert notes here>
Sir thinks the difference is only in the terminology, FIDIC (Federacion Internationale Des Ingenieurs
until he saw the FIDIC. Conseil)
1) Dispute Adjudication Board
Arbitration - (d) "Arbitration" means a voluntary 2) Relevant in contract negotiation
dispute resolution process in which one or more 3) Different colors
arbitrators, appointed in accordance with the a) Red
agreement of the parties, or rules promulgated b) Blue
pursuant to this Act, resolve a dispute by rendering c) Green
an award (RA 9285) d) Pink
e) Silver
In arbitration an independent, impartial third party
i) 2 parties:
hears both sides in a dispute and makes a decision
(1) Project owner – employer
to resolve it. In most cases the arbitrator's decision
(2) Contractor
is legally binding on both sides, so it is not possible
ii) Contains an interesting provision saying
to go to court if you are unhappy with the decision.
that an employer would not be liable
Arbitration is in many ways an alternative form of even if wrong information was given
court with procedural rules which govern issues such iii) Contains an adjudication clause in the
as disclosure of documents and evidence. But following tenor: “Appeal from
arbitration is private rather than public. Hearings are adjudication may be taken to the
less formal than court hearings, and some forms of arbitrational panel under ICC Rules.”
arbitration do not involve hearings but are decided iv) Three levels:
on the basis of documents only. (1) Amicable settlement
(2) Adjudication
(3) Arbitration
Adjudication - Adjudication involves an
independent third party considering the claims of
both sides and making a decision. The adjudicator is
usually an expert in the subject matter in dispute.
Adjudicators are not bound by the rules of litigation
or arbitration. Their decisions are often interim ones,
MINI-TRIAL
Principle of confidentiality in mediation
What is a Mini-Trial? Extends to admissions made in mediation
"Mini-Trial" means a structured dispute resolution
Sec. 9 - Confidentiality of Information
method in which the merits of a case are argued
before a panel comprising senior decision makers Information obtained through mediation proceedings shall be
with or without the presence of a neutral third person subject to the following principles and guidelines:
after which the parties seek a negotiated settlement
(a) Information obtained through mediation shall be privileged
(RA 9285, Sec. 3(u))
and confidential.
Note: (b) A party, a mediator, or a nonparty participant may refuse to

Senior decision makers meet, negotiated settlement disclose and may prevent any other person from disclosing a
mediation communication.
(c) Confidential Information shall not be subject to discovery and

EARLY NEUTRAL EVALUATION shall be inadmissible if any adversarial proceeding, whether
judicial or quasi-judicial, However, evidence or information that
is otherwise admissible or subject to discovery does not become
What is Early Neutral Evaluation? inadmissible or protected from discovery solely by reason of its
"Early Neutral Evaluation" means an ADR process use in a mediation.
wherein parties and their lawyers are brought
together early in a pre-trial phase to present (d) In such an adversarial proceeding, the following persons
involved or previously involved in a mediation may not be
summaries of their cases and receive a nonbinding compelled to disclose confidential information obtained during
assessment by an experienced, neutral person, with mediation: (1) the parties to the dispute; (2) the mediator or
expertise in the subject in the substance of the mediators; (3) the counsel for the parties; (4) the nonparty
dispute participants; (5) any persons hired or engaged in connection
with the mediation as secretary, stenographer, clerk or
assistant; and (6) any other person who obtains or possesses
Note: confidential information by reason of his/her profession.
Similar to a “pre-trial”; before the filing of the
complaint (e) The protections of this Act shall continue to apply even of a
mediator is found to have failed to act impartially.
MEDIATION (f) a mediator may not be called to testify to provide information

gathered in mediation. A mediator who is wrongfully subpoenaed
How are mediated-settlements enforced? shall be reimbursed the full cost of his attorney's fees and related
expenses.
By depositing in court (RA 9285, Sec. 17)
Sec. 10 – Waiver of Confidentiality
Court-Annexed Mediation v. Court-Ordered
Mediation A privilege arising from the confidentiality of information may be
waived in a record, or orally during a proceeding by the mediator
"Court-Annexed Mediation" means any mediation and the mediation parties.
process conducted under the auspices of the court,
after such court has acquired jurisdiction of the A privilege arising from the confidentiality of information may
likewise be waived by a nonparty participant if the information is
dispute (RA 9285, Sec. 3 (l)) provided by such nonparty participant.
Note: governed by SC issuances
A person who discloses confidential information shall be
Court-Referred Mediation" means mediation precluded from asserting the privilege under Section 9 of this
Chapter to bar disclosure of the rest of the information
ordered by a court to be conducted in accordance
necessary to a complete understanding of the previously
with the Agreement of the Parties when as action is disclosed information. If a person suffers loss or damages in a
prematurely commenced in violation of such judicial proceeding against the person who made the disclosure.
agreement (RA 9285, Sec. 3 (m))
A person who discloses or makes a representation about a
mediation is preclude from asserting the privilege under Section
Notes: 9, to the extent that the communication prejudices another
- ground for stay of civil action person in the proceeding and it is necessary for the person
- related to Art. 1159 CC prejudiced to respond to the representation of disclosure.
Sec. 11 – Exceptions to Privilege {RPTCPM}

Art. 1159. Obligations arising from contracts have the force of law
between the contracting parties and should be complied with in (a) There is no privilege against disclosure under Section 9 if
good faith. mediation communication is:
or witness who disclosed or who was compelled to disclose

(1) in an agreement evidenced by a record authenticated by all information relative to the subject of ADR under circumstances
parties to the agreement; that would create a reasonable expectation, on behalf of the
source, that the information shall be kept confidential has the right
(2) available to the public or that is made during a session of a to prevent such information from being further disclosed without
mediation which is open, or is required by law to be open, to the the express written consent of the source or the party who
public; made the disclosure.
(3) a threat or statement of a plan to inflict bodily injury or Rule 10.2. When request made.—A party may request a
commit a crime of violence; protective order at anytime there is a need to enforce the
confidentiality of the information obtained, or to be obtained, in
(4) internationally used to plan a crime, attempt to commit, or ADR proceedings.
commit a crime, or conceal an ongoing crime or criminal activity;
Rule 10.3. Venue. — A petition for a protective order may be
(5) sought or offered to prove or disprove abuse, neglect, filed with the Regional Trial Court where that order would be
abandonment, or exploitation in a proceeding in which a implemented.
public agency is protecting the interest of an individual protected
by law; but this exception does not apply where a child protection If there is a pending court proceeding in which the information
matter is referred to mediation by a court or a public agency obtained in an ADR proceeding is required to be divulged or is
participates in the child protection mediation; being divulged, the party seeking to enforce the confidentiality of
the information may file a motion with the court where the
(6) sought or offered to prove or disprove a claim or complaint proceedings are pending to enjoin the confidential information
of professional misconduct or malpractice filed against from being divulged or to suppress confidential information.
mediator in a proceeding; or
Rule 10.4. Grounds. — A protective order may be granted only if
(7) sought or offered to prove or disprove a claim of complaint it is shown that the applicant would be materially prejudiced by
of professional misconduct of malpractice filed against a an unauthorized disclosure of the information obtained, or to be
party, nonparty participant, or representative of a party based obtained, during an ADR proceeding.
on conduct occurring during a mediation.
Rule 10.5. Contents of the motion or petition. — The petition or
(b) There is no privilege under Section 9 if a court or motion must state the following:
administrative agency, finds, after a hearing in camera, that the
party seeking discovery of the proponent of the evidence has a. That the information sought to be protected was obtained, or
shown that the evidence is not otherwise available, that there is would be obtained, during an ADR proceeding;
a need for the evidence that substantially outweighs the b. The applicant would be materially prejudiced by the
interest in protecting confidentiality, and the mediation disclosure of that information;
communication is sought or offered in: c. The person or persons who are being asked to divulge the
confidential information participated in an ADR proceedings; and
(1) a court proceeding involving a crime or felony; or d. The time, date and place when the ADR proceedings took
place.
(2) a proceeding to prove a claim or defense that under the law is
sufficient to reform or avoid a liability on a contract arising out of Apart from the other submissions, the movant must set the motion
the mediation. for hearing and contain a notice of hearing in accordance with
Rule 15 of the Rules of Court.
(c) A mediator may not be compelled to provide evidence of a
mediation communication or testify in such proceeding. Rule 10.6. Notice. — Notice of a request for a protective order
made through a motion shall be made to the opposing parties in
(d) If a mediation communication is not privileged under an accordance with Rule 15 of the Rules of Court.
exception in subsection (a) or (b), only the portion of the
communication necessary for the application of the exception for Rule 10.7. Comment/Opposition. — The comment/opposition
nondisclosure may be admitted. The admission of particular must be filed within fifteen (15) days from service of the petition.
evidence for the limited purpose of an exception does not The opposition or comment may be accompanied by written proof
render that evidence, or any other mediation communication, that (a) the information is not confidential, (b) the information
admissible for any other purpose. was not obtained during an ADR proceeding, (c) there was a
waiver of confidentiality, or (d) the petitioner/movant is precluded
Sec. 12 – Prohibited Mediator Reports from asserting confidentiality.
A mediator may not make a report, assessment, evaluation,
recommendation, finding, or other communication regarding a Rule 10.8. Court action. — If the court finds the petition or motion
mediation to a court or agency or other authority that make a meritorious, it shall issue an order enjoining a person or persons
ruling on a dispute that is the subject of a mediation, except: from divulging confidential information.
(a) Where the mediation occurred or has terminated, or where a In resolving the petition or motion, the courts shall be guided by
settlement was reached. the following principles applicable to all ADR proceedings:
Confidential information shall not be subject to discovery
(b) As permitted to be disclosed under Section 13 of this and shall be inadmissible in any adversarial proceeding,
Chapter. whether judicial or quasi judicial. However, evidence or
information that is otherwise admissible or subject to
RULE 10: CONFIDENTIALITY/PROTECTIVE ORDERS discovery does not become inadmissible or protected from
discovery solely by reason of its use therein.
Rule 10.1. Who may request confidentiality. — A party, counsel

For mediation proceedings, the court shall be further guided by rules promulgated pursuant to this Act, resolve a
the following principles:
dispute by rendering an award (Sec. 3d, RA 9285)
a. Information obtained through mediation shall be privileged
and confidential. What distinguishes Arbitration from other forms
b. A party, a mediator, or a nonparty participant may refuse of ADR?
to disclose and may prevent any other person from disclosing a “Final, binding and enforceable” through the
mediation communication. following procedures:
c. In such an adversarial proceeding, the following persons
involved or previously involved in a mediation may not be 1) Confirmation of award
compelled to disclose confidential information obtained during the 2) “Judgment” is capable of enforcement
mediation: (1) the parties to the dispute; (2) the mediator or
mediators; (3) the counsel for the parties: (4) the nonparty
participants; (5) any persons hired or engaged in connection
with the mediation as secretary, stenographer; clerk or
assistant; and (6) any other person who obtains or possesses PROCESS OF ARBITRATION
confidential information by reason of his/ her profession.
d. The protection of the ADR Laws shall continue to apply even
if a mediator is found to have failed to act impartially. Arbitration agreement
e. A mediator may not be called to testify to provide |
information gathered in mediation. A mediator who is Dispute
wrongfully subpoenaed shall be reimbursed the full cost of his
|
attorney fees and related expenses.
Selection of arbitrators
Rule 10.9. Relief against court action. — The order enjoining a |
person or persons from divulging confidential information shall be Conduct of arbitration proceedings
immediately executory and may not be enjoined while the
|
order is being questioned with the appellate courts.
Arbitral Award
If the court declines to enjoin a person or persons from divulging |
confidential information, the petitioner may file a motion for Confirmation &/or Enforcement
reconsideration or appeal.
Rule 10.10. Consequence of disobedience. — Any person who

disobeys the order of the court to cease from divulging FIRST PART: ARBITRATION AGREEMENT
confidential information shall be imposed the proper sanction by
the court. Arbitration Agreement v. Submission Agreement
Arbitration Agreement Submission

No Class - June 25, 2010 Agreement
Before occurence of Agreement to submit
Class Notes - July 2, 2010 dispute dispute to arbitration; no
previous arbitration
clause
ARBITRATION A party may invoke this May be entered into at
at any time before pre- any time, even after pre-
What is ADR? trial, after which, both trial
"Alternative Dispute Resolution System" means any parties must invoke it
process or procedure used to resolve a dispute or
controversy, other than by adjudication of a Petition for Enforcement of Arbitration
presiding judge of a court or an officer of a Agreement (See end)
government agency, as defined in this Act, in which
a neutral third party participates to assist in the
resolution of issues, which includes arbitration, Notice Requirements
mediation, conciliation, early neutral evaluation,
mini-trial, or any combination thereof (Sec. 3a, RA Depends on whether or not the petition / motion filed
9285) is covered by Summary Procedure.
What is Arbitration? Covered by Summary Procedure:

"Arbitration" means a voluntary dispute resolution
process in which one or more arbitrators, appointed 1) Judicial Relief Involving the Issue of Existence,
in accordance with the agreement of the parties, or Validity or Enforceability of the Arbitration
Agreement;
2) Referral to ADR;
3) Interim Measures of Protection; General Rule: the arbitral tribunal
4) Appointment of Arbitrator; Except: the court, in the following instances:
5) Challenge to Appointment of Arbitrator; 1) Before commencement of arbitration
6) Termination of Mandate of Arbitrator; 2) After arbitration is commenced, but before the
7) Assistance in Taking Evidence; constitution of the arbitral tribunal;
8) Confidentiality/Protective Orders; and 3) After the constitution of the arbitral and at any
9) Deposit and Enforcement of Mediated time during arbitral proceedings but, at this
Settlement Agreements. stage, only to the extent that the arbitral tribunal
has no power to act or is unable to act
Not Covered by Summary Procedure: effectively.
1) Confirmation, Correction or Vacation of Award in RA 876, Sec. 14 xxx “The arbitrator or arbitrators shall have the
Domestic Arbitration power at any time, before rendering the award, without prejudice
to the rights of any party to petition the court to take measures to
2) Recognition and Enforcement or Setting Aside safeguard and/or conserve any matter, which is the subject of the
of an Award in International Commercial dispute in arbitration.”
Arbitration
3) Recognition and Enforcement of a Foreign RA 9285, Sec. 28 – Grant of Interim Measure of Protection
(a) It is not incompatible with an arbitration agreement for a party
Arbitral Award to request, before constitution of the tribunal, from a Court an
interim measure of protection and for the Court to grant such
Notes: measure. After constitution of the arbitral tribunal and during
*Petition to correct / vacate does not touch upon the arbitral proceedings, a request for an interim measure of
protection or modification thereof, may be made with the arbitral
merits of the award. tribunal or to the extent that the arbitral tribunal has no power to
*Petition to vacate (domestic) – depends on grounds act or is unable to act effectively, the request may be made with
to vacate the Court. The arbitral tribunal is deemed constituted when the
*Petition to set aside (international) – See sole arbitrator or the third arbitrator who has been nominated, has
accepted the nomination and written communication of said
UNCITRAL A.34 & 36 nomination and acceptance has been received by the party
making request.
(b) The following rules on interim or provisional relief shall be

Pop Quiz - July 9, 2010 observed:
Petition to Enforce Arbitation Agreement using the (1) Any party may request that provision relief be granted against
case of Mindanao Portland Cement Corporation v. the adverse party:
McDonough Construction Co. of Florida, 90 SCRA (2) Such relief may be granted:
808 (1967)
(i) to prevent irreparable loss or injury:
(ii) to provide security for the performance of any obligation;

Class Notes - July 16, 2010
(iii) to produce or preserve any evidence; or
(iv) to compel any other appropriate act or omission.

THIRD PART:
COMMENCEMENT OF ARBITRATION & (3) The order granting provisional relief may be conditioned upon
CONSTITUTION OF ARBITRAL TRIBUNAL the provision of security or any act or omission specified in the
order.
How do you commence arbitration? (4) Interim or provisional relief is requested by written application
1) Adhoc – by a demand to arbitrate transmitted by reasonable means to the Court or arbitral tribunal
2) Institutional - very similar to a demand to arbitrate, as the case may be and the party against whom the relief is
sought, describing in appropriate detail the precise relief, the party
addressed to the institution; called a Request for against whom the relief is requested, the grounds for the relief,
Arbitration or Notice of Arbitration and evidence supporting the request.
What is the significance of filing a Request for (5) The order shall be binding upon the parties.
Arbitration or Notice of Arbitration? (6) Either party may apply with the Court for assistance in
Whether conventional litigation or ADR, the filing of Implementing or enforcing an interim measure ordered by an
the initiatory complaint / request for arbitration is arbitral tribunal.
significant in the area of interim measures of
(7) A party who does not comply with the order shall be liable for
protection. It could be obtained from: all damages resulting from noncompliance, including all
expenses, and reasonable attorney's fees, paid in obtaining the 3) Inform the prospective respondent that a Request
order's judicial enforcement.
for Arbitration was received
RA 9285, Sec. 29 – Further Authority for Arbitrator to Grant 4) Prospective respondent answers
Interim Measure of Protection 5) Assess the fees
Unless otherwise agreed by the parties, the arbitral tribunal may,
at the request of a party, order any party to take such interim Period for rendering an Award:
measures of protection as the arbitral tribunal may consider
necessary in respect of the subject matter of the dispute following 1) Stipulation
the rules in Section 28, paragraph 2. Such interim measures may 2) To be determined by the arbitral tribunal during
include but shall not be limited to preliminary injuction directed the preliminary conference
against a party, appointment of receivers or detention,
preservation, inspection of property that is the subject of the
dispute in arbitration. Either party may apply with the Court for Less than 60 days – Summary (ADR Rules)
assistance in implementing or enforcing an interim measures 15 days from service to file Comment/Opposition
ordered by an arbitral tribunal. 1 hearing day, only for the purpose of clarifications
Uncitral Model Law, Article 17 - [Power of arbitral tribunal to
Resolution 30 days from the time the petition is
order interim measures] submitted for resolution
Unless otherwise agreed by the parties, the arbitral tribunal may,
at the request of a party, order any party to take such interim 10 days - ADR Law
measure of protection as the arbitral tribunal may consider
necessary in respect of the subject-matter of the dispute. The
arbitral tribunal may require any party to provide appropriate Four courses of action by the Court
security in connection with such measure. Determine existence of AA
If no, dismiss (1)
Uncitral Arbitration Rules, Interim measures of protection,
Article 26
If yes, determine if there was default or not in the
compliance with the Arbitration Agreement (2)
1. At the request of either party, the arbitral tribunal may take any If there is no default, (dismiss)
interim measures it deems necessary in respect of the subject- If there was default, Court to
matter of the dispute, including measures for the conservation of
the goods forming the subject-matter in dispute, such as ordering
their deposit with a third person or the sale of perishable goods. Challenge of arbitrator
If a party renews his challenge in Court – arbitration
2. Such interim measures may be established in the form of an proceedings are suspended
interim award. The arbitral tribunal shall be entitled to require
security for the costs of such measures.
But under Special ADR Rules – proceed
3. A request for interim measures addressed by any party to a International Bar Association (IBA) Rules of
judicial authority shall not be deemed incompatible with the Evidence
agreement to arbitrate, or as a waiver of that agreement.
Green List – list of factors that may or may not be
ICC Rules, Article 23, Conservatory and Interim Measures disclosed but will not affect the fitness of
1. Unless the parties have otherwise agreed, as soon as the file Red List – list of prohibited factors
has been transmitted to it, the Arbitral Tribunal may, at the
request of a party, order any interim or conservatory measure it
deems appropriate. The Arbitral Tribunal may make the granting
Long Quiz - July 23, 2010
of any such measure subject to appropriate security being
furnished by the requesting party. Any such measure shall take Coverage: Class notes from start to latest.
the form of an order, giving reasons, or of an Award, as the
Arbitral Tribunal considers appropriate.
2. Before the file is transmitted to the Arbitral Tribunal, and in
appropriate circumstances even thereafter, the parties may apply Class Notes – July 30, 2010
to any competent judicial authority for interim or conservatory
measures. The application of a party to a judicial authority for
such measures or for the implementation of any such measures
ordered by an Arbitral Tribunal shall not be deemed to be an FOURTH PART:
infringement or a waiver of the arbitration agreement and shall not CONDUCT OF ARBITRATION PROCEEDINGS
affect the relevant powers reserved to the Arbitral Tribunal. Any
such application and any measures taken by the judicial authority
must be notified without delay to the Secretariat. The Secretariat
shall inform the Arbitral Tribunal thereof. CONFIDENTIALITY
Why is there no publication of awards of arbitral

Upon receipt: tribunals?
1) WON a dispute is arbitable – the first thing that an Because of the principle of confidentiality of
institution should determine arbitration proceedings (Sec. 23, RA 9285).
2) Assess an non-refundable fee of $2500.
Sec. 23 – Confidentiality in Arbitration There arises a policy of judicial restraint, such that
Proceedings the finding of the court on the jurisdiction of the
The arbitration proceedings, including the records, arbitral tribunal is at best prima facie.
evidence and the arbitral award, shall be considered
confidential and shall not be published except (1) Note:
with the consent of the parties, or (2) for the limited There is a before AT, after AT’s finding, and after-
purpose of disclosing to the court of relevant after.
documents in cases where resort to the court is
allowed herein. Provided, however, that the court in Does the “prima facie finding” of the court mean
which the action or the appeal is pending may issue that the arbitral tribunal can still be formed?
a protective order to prevent or prohibit disclosure of Yes. If the court finds that the arbitration agreement
documents or information containing secret is null and void, inoperative or incapable of being
processes, developments, research and other performed, a party may nevertheless commence
information where it is shown that the applicant shall arbitration and constitute the arbitral tribunal.
be materially prejudiced by an authorized disclosure
thereof. So where does “prima facie finding” of the court
come in? How is it prima facie?
Exception to confidentiality: This means that the same issue may be passed
1) Application for Interim Measure of Protection upon by the arbitral tribunal, which has the effect of
2) Appoint Arbitrator superseding the previous of the court. (This is the
3) Challenge Arbitrator “AFTER” ruling.)
4) Ask to Vacate / Modify Award
5) Ask to Enforce the Award What about the “after-after” ruling?
The same issue may be passed upon in an action to
What is the consequence of breach of vacate or set aside the arbitral award (Rule 3.11) In
confidentiality? this case, it is no longer a prima facie determination
Claim for damages. of such issue or issues, but shall be a FULL
REVIEW of such issue or issues with due regard,
Where do you file the action for damanges however, to the standard of review for arbitral
arising from breach of confidentiality? awards.
RTC, not arbitral tribunal. Because the jurisdiction of
the arbitral tribunal over issues is defined by the But how may arbitration commence if it the court
arbitration agreement. Issue of breach of has made a prima facie finding that ithe
confidentiality is usually involved in other causes of arbitration agreement is found null and void,
actions or pending actions. e.g. transactions with 3rd inoperative or incapable of being performed?
persons. Will the other party who got the favorable ruling
of the court participate / cooperate?
Note: Get an appointment of arbitrator - sole arbitrator, ad-
Breach of confidentiality covers mere disclosure of hoc, institutional.
fact of pendency of arbitration proceedings.
COMPETENCE-COMPETENCE PRINCIPLE Illustration:
It’s possible for A to get a ruling from the court that
What is the “Competence-Competence the arbitration agreement is null and void, and B
Principle”? may commence arbitration in an institution in
Power of arbitral tribunal to initially rule on the another country. B now asked to appoint arbitrator
question of its jurisdiction over a dispute including for A contesting the arbitration agreement.
any objections with respect to the existence or
validity of the arbitration agreement or any condition What is the remedy of A?
precedent to the filing of a request of arbitration. a) Get an injunction from RTC Philippines. Next step
is contempt. (Although the exercise of a legal right is
Restatement of the Rule: not contemptuous) There may also be problem in
Before the arbitral tribunal is constituted, the regular getting injunction. Plus there’s a provision in Special
courts have jurisdiction to determine the issue of ADR Rules prohibiting injunction against arbitration.
competence of a tribunal. The moment the arbitral Finally, A can later on file a petition to set aside the
tribunal is constituted, the arbitral tribunal has award.
jurisdiction. b) Challenge jurisdiction of arbitral tribunal
constituted by institution in foreign country.
A party may ask that the ruling of the arbitral tribunal

UNCITRAL: on a preliminary question upholding or declining its
1) Petition to Set Aside jurisdiction be declared null and void, inexistent or
2) Petition to Refuse Recognition unenforceable. This is premised on the fact that the
jurisdiction of the arbitral tribunal is defined by the
What is the Principle of Separability? arbitration agreement. The determination of the
Arbitration clause is treated as an agreement court is no longer a prima facie finding.
independent of the other terms of the contract of
which it forms part. A decision that the contract is But would that not violate the Competence-
null and void shall not entail ipso jure the invalidity of Competence Principle?
the arbitration clause. (Uncitral Model Law, Sec. The determination of the court after the
16(1); Special ADR Rules 2.2) commencement of arbitration proceedings
What is the effect of multiple actions and Illustration

parties? August 6 – Commencement of Arbitration
Rule 4.7.
Scenario A:
Would Rule 4.7 result in multiplicity of suits? On May 6, the determination of the court is merely
Yes. But this does not prevent arbitration from being prima facie and the parties may still commence
commenced. arbitration.
Scenario B:
Cases for next meeting (August 6, 2010): On November 6, the determination of the court is no
1) Vega v. San Carlos Milling Co. Ltd, 51 Phil 908 longer prima facie. What would be the remedy of the
(1924) – no digest claimant?
2) California & Hawaiian Sugar Co. v. Pioneer
Insurance & Surety Corp. 346 SCRA 214 (2000) Not final – may still be reviewed by MR, appeal,
3) Associated Bank v. CA, 233 SCRA 137 (1994) certiorari.
4) Bloomfield Academy v. CA, 237 SCRA 43
(1994) Rule 3.19
5) Mindanao Portland Cement Corporation v. 1) MR - yes
McDonough Construction Co. of Florida, 90 2) Certiorari – yes
SCRA 808 (1967) a) Affirming AT’s jurisdiction – not subject to
6) Gonzales v. Climax Mining Ltd., 512 SCRA 148 certiorari
(2007) b) AT has no jurisdiction – certiorari available
7) Oil & Natural Gas Commission v. CA, 293 SCRA
26 (1998) Note: How many days?
8) Magellan Capital Mgt. Corp. v. Zosa, 355 SCRA 3) Appeal – yes daw
157 (2001)
9) BF Corporation v. CA, 288 SCRA 267 (1998) Vega v. San Carlos Milling Co. Ltd, 51 Phil 908
10) Korea Technologies Co. Ltd. v. Lerma, 542 (1924)
SCRA 1 (2008) Petitioners: Teodoro Vega
11) Luzon Development Bank v. Luzon Respondent: San Carlos Milling Co., Ltd.
Development Bank Employees, 249 SCRA 162
(1995) – In re: multiplicity Facts:
Defendant-appellant contends that Sec. 23 of the

Class Notes - August 6, 2010 Mill’s covenant and Sec. 14 of the Planter’s
covenant, as such stipulations on arbitration are
Is there a counterpart of the principle of valid, and constitute a condition precedent, to
confidentiality in Sec. 23 RA 9285 in RA 876? which the plaintiff should have resorted before
Sec. 14? (UNANSWERED) applying to the courts, as he prematurely did.3
What is the Judicial Relief After Commencement 3

Said STIPULATIONS TO ARBITRATE are as follows:
of Arbitration (Rule 3, Special ADR Rules)? "23 (Mill’s covenant). That it (the Mill—Party of the first part)
will submit any and all differences that may arise between the
Mill and the Planters to the decision of arbitrators, two of
This, more so, if these two provisions are read with "Submission as Condition Precedent to Suit. —
the reciprocal covnenant in Sec. 7 of the Mill’s Clauses in insurance and other contracts providing
covenant.4 for arbitration in case of disagreement are very
It is an admitted fact that the differences which later dissimilar, and the question whether submission to
arose between the parties, and which are the arbitration is a condition precedent to a suit upon the
subject of the present litigation have not been contract depends upon the language employed in
submitted to arbitration provided for in the above each particular stipulation. Where by the same
quoted clauses. agreement which creates the liability, the
Plaintiff filed an action for the recovery of 32,959 ascertainment of certain facts by arbitrators is
kilos of centrifugal sugar, or its value, P6,252, plus expressly made a condition precedent to a right
the payment of P500 damages and the costs. of action thereon, suit cannot be brought until
The lower court decided in favor of the plaintiff. the award is made. But the courts generally will
Issue: not construe an arbitration clause as ousting
WON the lower court erred in having held itself with them of their jurisdiction unless such
jurisdiction to take cognizance of and render construction is inevitable, and consequently
judgment in the cause when the arbitration clause is not made a
Held: NO. condition precedent by express words or
Ratio: necessary implication, it will be construed as
1) The defendant is right in contending that merely collateral to the liability clause, and so no
clause 23 of the Mill's covenant and clause bar to an action in the courts without an award."
14 of the Planter's Covenant on arbitration are (2 R. C. L., 362, 363.)
valid, but they are not for that reason a bar to 2) Neither does the reciprocal covenant No. 7
judicial action, in view of the way they are of the Mill’s covenant expressly or impliedly
expressed: establish the arbitration as a condition
"An agreement to submit to arbitration, not precedent.
consummated by an award, is no bar to a suit at The expression "subject to the provisions as to
law or in equity concerning the subject matter arbitration, hereinbefore appearing" does not declare
submitted. And the rule applies both in respect of such to be a condition precedent. This phrase does
agreements to submit existing differences and not read "subject to the arbitration," but "subject
agreements to submit differences which may to the provisions as to arbitration hereinbefore
arise in the future." (5 C. J., 42.) appearing." And, which are these "provisions as to
And in view of the terms in which the said covenants arbitration hereinbefore appearing?" Undoubtedly
on arbitration are expressed, it cannot be held that in clauses 23 and 14 quoted above, which do not
agreeing on this point, the parties proposed to make arbitration a condition precedent.
establish the arbitration as a condition precedent to Disposition. Affirmed.
judicial action, because these clauses quoted do not
create such a condition either expressly or by Separate Opinions
necessary inference.
AVANCEÑA, J., concurring:
1) Inasmuch as clause 23 of the Mill's Covenants,

whom shall be chosen by the Mill and two by the Planters, who in and clause 14 of the Planter's Covenants provide
case of inability to agree shall select a fifth arbitrator, and to
that the parties should respect and abide by the
respect and abide by the decision of said arbitrators, or any
three of them, as the case may be." decision of the arbitrators, they bar judicial
"14 (Planter’s covenant). That they (the Planters—Parties of intervention and consequently are null and void in
the second part) will submit any and all differences that may accordance with the ruling of this court in the case of
arise between the parties of the first part and the parties of the Wahl and Wahl vs. Donaldson, Sims & Co. (2 Phil.,
second part to the decision of arbitrators, two of whom shall be 301).
chosen by the said parties of the first part and two by the said
party of the second part, who in case of inability to agree, shall 2) Clause 7 of the Mutual Covenants, naming the
select a fifth arbitrator, and will respect and abide by the
Court of First Instance of Iloilo as the one with
decision of said arbitrators, or any three of them, as the case
may be." jurisdiction to try such cases as might arise from the
parties' contractual relations, by the very fact that it
4
Said RECIPROCAL COVENANT No. 7, reads: was made subject to the arbitration clauses previously
"7. Subject to the provisions as to arbitration, mentioned, does not render such arbitration
hereinbefore appearing, it is mutually agreed that the courts of merely a condition precedent to judicial action,
the City of Iloilo shall have jurisdiction of any and all judicial nor does it change its scope, as clearly indicated by
proceedings that may arise out of the contractual relations herein its wording and the intention of the parties. Said
between the party of the first and the parties of the second part."
clause 7 was doubtless added in case it became
necessary to resort to the courts for the purpose articles of the Civil Code, namely, articles 1820
of compelling the parties to accept the arbitrators' and 1821, were given up to the subject of
decision in accordance with the contract, and not in arbitration, and expressly confirmed this method of
settling differences.
order to submit anew to the courts what had
c) It was plainly the solemn purpose of the
already been decided by the arbitrators, whose
parties to settle their controversies amicably
decision the contracting parties had bound
if possible before resorting to the courts.
themselves to abide by and respect.
They provided for themselves by mutual
consent a method which was speedier and
MALCOLM, J., dissenting:
less expensive for all concerned and less
1) Defendant is not bound to furnish cars free of
likely to breed that ill-feeling which is often
charge for use on the plaintiff's portable railway
the consequence of hotly contested litigation.
tracks, in relation with its corollary, that the letter
All this was done by the Planters on the one hand
written by the manager of the defendant's mill on
and by the Milling Company on the other, to the
March 18, 1916, does not estop the defendant from
end that justice might guide them and possible
demanding compensation for the future use of the
differences be quickly adjusted.
cars.
d) It is clear, by paragraph 7 of the Mutual
2) The parties having formally agreed to submit their
Covenants, that these parties did not intend
differences to arbitrators, while recognizing the
that the decision of the arbitrators should
jurisdiction of the courts, arbitration has been made a
prevent resort to the courts, for they
condition precedent to litigation, and should be held
expressly agreed to carry litigation between
valid and enforceable.
them to the courts of Iloilo. Acting under legal
rules, even in their most restrictive form, disputes
a) In the Philippines fortunately, the attitude of the
arising out of the contract, were to be referred to
courts toward arbitration agreements is
arbitration so that the damages sustained by a
slowly crystallizing into definite and workable
breach of the contract, could be ascertained by
form. The doctrine announced in Wahl and Wahl
specified arbitrators before any right of action
vs. Donaldsono. ([1903], 2 Phil., 301), was that a
arose; but the matters in dispute were not to be
clause in a contract providing that all matters in
dispute shall be referred to arbitrators and to referred to arbitrators and to them alone, to the
utter exclusion of the courts. It is exactly correct
them alone, is contrary to public policy and
to state that the clauses of the Covenants
cannot oust the courts of jurisdiction. But the rule
hereinbefore quoted, were meant as a condition
now is that unless the agreement is such as
precedent to litigation, which accordingly should
absolutely to close the doors of the courts
be given effect.
against the parties, which agreement would be
void, the courts will look with favor upon such
amicable arrangements and will only with STUDY NOTES
great reluctance interfere to anticipate or
Rule 2.2. Policy on arbitration.— (A) Where the parties have
nullify the action of the arbitrator. agreed to submit their dispute to arbitration, courts shall refer
b) The new point of the judiciary in the progressive the parties to arbitration pursuant to Republic Act No. 9285
jurisdiction of Pennsylvania, in England, and bearing in mind that such arbitration agreement is the law
under the Civil Law, is also worthy of our serious between the parties and that they are expected to abide by it in
consideration. good faith. Further, the courts shall not refuse to refer parties
i) It is the rule in Pennsylvania that when the to arbitration for reasons including, but not limited to, the
persons making an executory contract stipulate in following:
it that all disputes and differences between them, a. The referral tends to oust a court of its jurisdiction
present or prospective, in reference to such d. The arbitration proceeding has not commenced
contract or any sum payable under it, shall be
submitted to the arbitrament of a named individual,
or specifically designated persons, they are
effectually bound irrevocably by that
stipulation, and precluded from seeking CLASS NOTES
redress elsewhere until the arbiter or arbiters 1) Court was already talking about arbitration
agreed upon have rendered an award or
otherwise been discharged. agreement, etc. as early as 1924.
ii) In England, the view seems now to prevail that a 2) Malcolm dissent:
contractual stipulation for a general arbitration,
constitutes a condition precedent to the 3 jurisdictions:
institution of judicial proceedings for the
enforcement of the contract.
*Pensylvannia – irrevocably bound by stipulation,
iii) Finally, it is within our knowledge that the Spanish precluded from seeking redress to the courts; but
civil law wisely contains elaborate provisions makes a distinction between (a) did not name
looking to the amicable adjustment of arbitrator; (b)
controversies out of court. Litigation by means
of friendly adjusters was formerly well known. The
*England – even a general reference to arbitration is
procedure in this kind of litigation was minutely a condition precedent (liberal)
outlined in the Ley de Enjuiciamiento Civil. Two
*Spain (Ley de Enjuiciamiento Civil) – detailed

amicable settlement + arbitration
- Respect solemn purpose of the parties Class Notes - August 13, 2010
- Not null and void for absolutely ousts the courts of
jurisdiction. Can you be bound by an arbitration clause by
subrogation?
Is an arbitration agreement a condition See California & Hawaiian Sugar Co. v. Pioneer
precedent to the filing of an action in court? Insurance & Surety Corp (2000)
Rule 16.1 (j) of the Rules of Court – MTD on the
ground of failure to comply with a condition California & Hawaiian Sugar Co. v. Pioneer
precedent Insurance & Surety Corp., 346 SCRA 214 (2000)
Is this an absolute rule? Petitioners: California Hawaiian Sugar Company,
Pacific Gulf Marine Inc and CF Sharp and Co
No. It can be waived.
Respondent: Pioneer Insurance and Surety
R.A. 9285, Sec. 24. Referral to Arbitration. - A court before
Corporation
which an action is brought in a matter which is the subject matter
of an arbitration agreement shall, if at least one party so requests Facts:
not later that the pre-trial conference, or upon the request of On November 27, 1990, the vessel MV “SUGAR
both parties thereafter, refer the parties to arbitration unless it
finds that the arbitration agreement is null and void, inoperative or
ISLANDER” arrived at the port of Manila carrying a
incapable of being performed. cargo of soybean meal in bulk consigned to several
consignees, one of which was the Metro Manila
Sec. 7 – Stay of civil action Feed Millers Association. Discharging of cargo
Relate to Referral to ADR (Special Rules)
Depends on the request of a party, because party may decide not
from vessel to barges commenced. From the
to undergo ADR barges, the cargo was allegedly offloaded,
- Related to Section 24 of RA 9285 rebagged and reloaded on consignee’s delivery
trucks.
If any suit or proceeding be brought upon an issue arising out of
an agreement providing for the arbitration thereof, the court in
Respondent, however, claims that when the cargo
which such suit or proceeding is pending, upon being satisfied was weighed on a licensed truck scale a shortage
that the issue involved in such suit or proceeding is referable to of 255.051 metric tons valued at P1,621,171.16 was
arbitration, shall stay the action or proceeding until an arbitration discovered. The shipment was insured with
has been had in accordance with the terms of the agreement:
Provided, That the applicant, for the stay is not in default in
Pioneer against all risk in the amount of
proceeding with such arbitration. P19,976,404.00.
Due to the alleged refusal of petitioners to settle
Rule 4.2. When to make request. — (A) Where the arbitration their respective liabilities, respondent, as insurer,
agreement exists before the action is filed. — The request for
referral shall be made not later than the pre-trial conference.
paid the consignee Metro Manila Feed Miller’s
After the pre-trial conference, the courthuj will only act upon the Association.
request for referral if it is made with the agreement of all parties to Pioneer filed a complaint for damages against
the case. petitioners. Petitioners filed a Motion to Dismiss
the complaint on the ground that respondent’s claim
Conclusion: An arbitration clause is NOT a is premature, the same being arbitrable.
condition precedent such that it is a ground for The RTC ordered to defer the hearing of the MTD
dismissal, because it is an alternative mode of and directed petitioners to file their Answer.
dispute resolution. Hence, a party goes to court Petitioners filed their answer with counterclaim and
not to pass upon the merits or to have resolve it crossclaim alleging that Pioneer did not comply
resolved, but for other reasons, such as to have the with the arbitration clause.
arbitration agreement enforced, modified, set aside, Petitioners filed a Motion to Defer Pre-Trial and
etc. It is a ground to STAY civil action (Sec. 7, RA Motion to Set for Preliminary Hearing the
876; Sec. 24, RA 9285), not to dismiss it. Affirmative Defense of Lack of Cause of Action
for Failure to comply with Arbitration Clause,
Malcolm: Condition precedent if it is more of a fact- respectively.
finding task. The RTC denied.
The CA affirmed. It ruled that petitioner cannot set
the case for preliminary hearing as an MTD was
filed. Also, the arbitration clause in the charter party
did not bind Pioneer. The right of Pioneer to file a
complaint against petitioners is not dependent b. Not all of the parties to the civil action are bound by the
upon the charter party, nor does it grow out of arbitration agreement and referral to arbitration would result in
multiplicity of suits;
any privity contract. It accrues simply upon c. The issues raised in the civil action could be speedily and
payment. efficiently resolved in its entirety by the court rather than in
Citing Pan Malayan Insurance Corporation v. CA, arbitration;
d. Referral to arbitration does not appear to be the most prudent
the CA ruled that the right of respondent insurance action; or
company as subrogee was not based on the e. The stay of the action would prejudice the rights of the
charter party or any other contract; rather, it parties to the civil action who are not bound by the
accrued upon the payment of the insurance claim arbitration agreement.
The court may, however, issue an order directing the inclusion
by private respondent to the insured consignee. in arbitration of those parties who are not bound by the
Issue: WON the arbitration clause was binding upon arbitration agreement but who agree to such inclusion
Pioneer provided those originally bound by it do not object to their
Held: YES inclusion.
Ratio: The CA erred when it held that the arbitration
clause was not binding on Pioneer. CLASS NOTES
There was nothing in Pan Malayan, however, that
prohibited the applicability of the arbitration Can you be bound by an arbitration clause in
clause to the subrogee. That case merely subrogation?
discussed, inter alia, the accrual of the right of No express ruling in California & Hawaiian Sugar
subrogation and the legal basis therefor. This Co. v. Pioneer Insurance & Surety Corp (2000),
issue is completely different from that of the citing Pan Malayan, saying that a subrogee is
consequences of such subrogation; that is, the bound. There’s only the accrual of the right of
rights that the insurer acquires from the insured subgrogation and the legal basis therefor.
upon payment of the indemnity.
(Pan Malayan: The right of subrogation is not Was there consent on the part of the insurance
dependent upon, nor does it grow out of, any privity company?
of contract or upon written assignment of claim. It Yes, on the basis of the principle of subrogation and
accrues simply upon payment of the insurance claim its effects.
by the insurer.)
As to the preliminary hearing: True, Section 6, Rule Will Article 1311 of the Civil Code apply here?
16 specifically provides that a preliminary hearing on
the affirmative defenses may be allowed only when Art. 1311. Contracts take effect only between the parties, their
no motion to dismiss has been filed. Section 6, assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or
however, must be viewed in the light of Section 3 by stipulation or by provision of law. The heir is not liable beyond
which requires courts to resolve a motion to dismiss the value of the property he received from the decedent.
and prohibits them from deferring its resolution on
the ground of indubitability. Section 6 disallows a If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he communicated
preliminary hearing of affirmative defenses once a his acceptance to the obligor before its revocation. A mere
motion to dismiss has been filed because such incidental benefit or interest of a person is not sufficient. The
defense should have already been resolved. In the contracting parties must have clearly and deliberately conferred a
present case, however, the trial court did not favor upon a third person.
categorically resolve petitioners’ Motion to Dismiss,
but merely deferred resolution thereof. Can “Assignment” in A1311 be equated with
Subrogation?
STUDY NOTES No. The right of subrogation is not dependent upon,
Rule 2.2. Policy on arbitration.— (A) Where the parties have nor does it grow out of, any privity of contract or
agreed to submit their dispute to arbitration, courts shall refer the upon written assignment of claim. It accrues simply
parties to arbitration pursuant to Republic Act No. 9285 bearing in
mind that such arbitration agreement is the law between the upon payment of the insurance claim by the insurer.
parties and that they are expected to abide by it in good faith. (Pan Malayan)
Further, the courts shall not refuse to refer parties to arbitration
for reasons including, but not limited to, the following: c.f.
c. The referral would result in multiplicity of suits;
Art. 2207. If the plaintiff's property has been insured, and he has
received indemnity from the insurance company for the injury or
Rule 4.7. Multiple actions and parties. — The court shall not
loss arising out of the wrong or breach of contract complained of,
decline to refer some or all of the parties to arbitration for any of
the insurance company shall be subrogated to the rights of the
the following reasons:
insured against the wrongdoer or the person who has violated the
a. Not all of the disputes subject of the civil action may be
contract. If the amount paid by the insurance company does not
referred to arbitration;
fully cover the injury or loss, the aggrieved party shall be entitled
to recover the deficiency from the person causing the loss or resulting increase in tuition fees allowed by RA 6728
injury.
were discussed at length.
Can a party be bound by the Arbitration Clause The DECS however affirmed the tuition fee
by statutory provision? increase.
Xam: Analogous to “heirs” in the sense that the
subrogee acquires the transmissible rights of the The court issued an order enjoining petitioners
original party. (UNANSWERED). and Secretary Cariño and/or their agents,
representatives or persons acting in their behalf
See however, Bloomfield Academy – Sec. 10 on from implementing the increase in tuition fees, and
Consultation of RA 6728, also commonly known as not withholding their release of the report cards
"An Act Providing Government Assistance to and/or other papers necessary for the students
Students and Teachers in Private Education, And desiring to transfer to other schools until further
Appropriating Funds Therefor" orders from the court. The application for injunction
was set for hearing on April 19, 1990 at 2:00 p.m.
Xam: See also, Associated Bank case – Sec. 3 Answer to the complaint was filed by petitioners on
(Agreement to the PCHC Rules) in relation to Sec. April 19, 1990. On the same date, the court
36 on Arbitration. conducted the first hearing on the application for
a writ of preliminary injunction which hearing was
followed by settings on April 25, 26 and 27, 1990.
Bloomfield Academy v. CA, 237 SCRA 43 (1994) The court thereafter issued an order granting the
writ of preliminary injunction.
Petitioners: Bloomfield Academy and Rodolfo On certiorai, the CA affirmed and ruled that the
Lagera grant or denial of an injunction rests upon the sound
Respondents: CA, Bloomfield Academy Parents discretion of the court.
Advisory Association Inc, et al
Issue: WON the court erred in granting the
Facts: injunction
The petition originated in a complaint for injunction Held:

filed on April 6, 1990 by private respondent, the
association of parents and guardians of students Ratio: The pertinent provisions RA 6728, also
enrolled in petitioner. One of the defendants in the commonly known as "An Act Providing Government
case is petitioner which is a non-stock, non-profit Assistance to Students and Teachers in Private
educational institution. What is being disputed Education, And Appropriating Funds Therefor,"
before the court is the increase in tuition fee. The provide:
petitioners contend that the increase is essential due Sec. 9. Further Assistance To Students in Private
to the increase of the minimum wage under RA Colleges and Universities. — . . . .
6727. (b) For students enrolled in schools charging above
one thousand five hundred pesos (P1,500.00) per
Private respondents alleged that the 21.22% year in tuition and other fees during the school year
increase was made without prior consultation 1988-1989 or such amount in subsequent years as
with the parents required by law and that, in any may be determined from time to time by the State
case, the approved increase was exorbitant (at Assistance Council, no assistance for tuition fees
21.22%). shall be granted by the Government: Provided,
however, That the schools concerned may raise
They sent a letter to the DECS Secretary their tuition fees subject to Section 10 hereof.
complaining that the tuition fee increase was xxx xxx xxx
without valid basis already, after both parties Sec. 10. Consultation. — In any proposed
agreed on 50% of the increase which was increase in the rate of tuition fee, there shall be
implemented and paid by the students during the appropriate consultations conducted by the school
school year with the clear understanding that the administration with the duly organized parents and
other 50% is waived by the defendant. teachers associations and faculty associations with
respect to secondary schools, and with students
Petitioners, on their part, contended that the parties governments or councils, alumni and faculty
did, in fact, hold consultations at which the wage associations with respect to colleges. For this
increase for teachers mandated by RA6727 and the purpose, audited financial statements shall be made
available to authorized representatives of these the matter has not been raised by the parties, it is an
sectors. Every effort shall be exerted to reconcile aspect, nevertheless, in our view, that could have
possible differences. In case of disagreement, well been explored by them instead of
the alumni association of the school or any other immediately invoking, such as they apparently
impartial body of their choosing shall act as did, the administrative and judicial relief to
arbitrator. resolve the controversy.
xxx xxx xxx All told, we hold that the court a quo has been bereft
Sec. 14. Program Administration/Rules and of jurisdiction in taking cognizance of private
Regulations. — The State Assistance Council shall respondent's complaint. We see no real justification,
be responsible for policy guidance and direction, on the basis of the factual and case settings here
monitoring and evaluation of new and existing obtaining, to permit a deviation from the long
programs, and the promulgation of rules and standing rule that the issue of jurisdiction may be
regulations, while the Department of Education, raised at any time even on appeal.
Culture and Sports shall be responsible for the
day to day administration and program
implementation. Likewise, it may engage the CLASS NOTES
services and support of any qualified government or
private entity for its implementation. Take Note of Sec. 10:
The judicial action initiated by private “In case of disagreement, the alumni association of
respondent before the court appears to us to be the school or any other impartial body of their
an inappropriate recourse. It remains undisputed choosing shall act as arbitrator”
that the DECS Secretary has, in fact, taken
cognizance of the case for the tuition fee increase Is Sec. 10 an effective arbitration clause? Is the
and has accordingly acted thereon. We can only designation of the alumni association in Sec. 10
assume that in so doing the DECS Secretary has an appointment of arbitrator? Statutory
duly passed upon the relevant legal and factual arbitration clause?
issues dealing on the propriety of the matter. In the A republic act meddled with the legal relationship.
decision process, the DECS Secretary has verily
acted in a quasi-judicial capacity. Sir, too broad, too vague. Consent is absent.
The remedy from that decision is an appeal.
Conformably with BP 129, the exclusive appellate If yes, party may move to stay civil action.
jurisdiction to question that administrative action lies If not, there’s no arbitrable dispute and there’s no
with the CA, not with the court a quo. If we were to basis to stay civil action.
consider, upon the other hand, the case for
injunction filed with the court a quo to be a ordinary Take Note of the the ff. provisions:
action solely against herein petitioner (with DECS R.A. 9285, Sec. 24. Referral to Arbitration. - A
being then deemed to be merely a nominal party), it court before which an action is brought in a matter
would have meant the court's taking cognizance which is the subject matter of an arbitration
over the case in disregard of the doctrine of agreement shall, if at least one party so requests not
primary jurisdiction. later that the pre-trial conference, or upon the
Neither can we treat the case as a special civil request of both parties thereafter, refer the parties to
action for certiorari or prohibition as the arbitration unless it finds that the arbitration
complaint filed by private respondent with the court a agreement is null and void, inoperative or incapable
quo, contains no allegation of lack, or grave abuse in of being performed.
the exercise, of jurisdiction on the part of DECS nor
has there been any finding made to that effect by Sec. 7 – Stay of civil action
either the court a quo or the appellate court that Relate to Referral to ADR (Special Rules)
could warrant the extraordinary remedy. A special Depends on the request of a party, because party
civil action, either for certiorari or prohibition, can be may decide not to undergo ADR
grounded only on either lack of jurisdiction or grave - Related to Section 24 of RA 9285
abuse of discretion.
In passing, we also observe that the parties have If any suit or proceeding be brought upon an issue
both remained silent on the provisions of arising out of an agreement providing for the
Republic Act No. 6728 to the effect that in case arbitration thereof, the court in which such suit or
of disagreement on tuition fee increases (in this proceeding is pending, upon being satisfied that the
instance by herein private parties), the issue issue involved in such suit or proceeding is referable
should be resolved through arbitration. Although to arbitration, shall stay the action or proceeding
until an arbitration has been had in accordance with contractors' progress and fiscal requests for
the terms of the agreement: Provided, That the payment.
applicant, for the stay is not in default in proceeding
with such arbitration. Alterations in the plans and specifications were
subsequently made during the progress of the
Rule 4.2. When to make request. — (A) Where the construction. Due to this and to other causes
arbitration agreement exists before the action is deemed sufficient by Turnbull, Inc., extensions of
filed. — The request for referral shall be made not time for the termination of the project, initially
later than the pre-trial conference. After the pre- agreed to be finished on December 17, 1961, were
trial conference, the courthuj will only act upon the granted.
request for referral if it is made with the agreement
of all parties to the case. Respondent finally completed the project on
October 22, 1962. Differences later arose.
Take Note of the SC Ruling: Petitioner claimed from respondent damages in the
Although the matter has not been raised by the amount of more than P2,000,000 allegedly
parties, it is an aspect, nevertheless, in our view, occasioned by the delay in the project's completion.
that could have well been explored by them
instead of immediately invoking, such as they Respondent in turn asked for more than P450,000
apparently did, the administrative and judicial from petitioner for alleged losses due to cost of
relief to resolve the controversy. extra work and overhead as of April 1962.
Remedies available:
1) Move to dismiss A conference was held between petitioner and
2) Ground to stay Turnbull, Inc., on one hand, and respondent on the
other, to settle the differences, but no satisfactory
Can the Court proceed to decide the case on the results were reached.
merits in the interest of justice?
Petitioner sent respondent written invitations to
No, This proceeding [Petition for Enforcement of arbitrate, invoking a provision in their contract
Agreement to Arbitrate] is merely a summary regarding arbitration of disputes. Instead of
remedy to enforce the agreement to arbitrate. The answering said invitations, respondent, with
duty of the court in this case is not to resolve the Turnbull's approval, submitted to petitioner for
merits of the parties' claims but only to determine if payment its final statement of work accomplished,
they should proceed to arbitration or not. (Mindanao asking for P403,700 as unpaid balance of the
Portland Cement Corporation v. McDonough consideration of the contract.
Construction Co. of Florida, 90 SCRA 808 (1967)).
Petitioner filed the present action in the CFI of
Manila to compel respondent to arbitrate with it
concerning alleged disputes arising from their
Mindanao Portland Cement Corporation v. contract.5 It averred inter alia that deletions and
McDonough Construction Co. of Florida, 90 additions to the plans and specifications were
SCRA 808 (1967) agreed upon during the progress of the
construction; that disagreement arose between them
Petitioner – appellee: Mindanao Portland Cement as to the cost of the additional or extra work
Corporation done, and respondent's deviation from some
Respondent – appellant: McDonough Construction
5
The provision of the contract on "Arbitration of
Facts: Disagreements" (par. 39) says:
Petitioner and respondent McDonough executed a 39. In the event of disagreement between the Owner and the
contract for the construction by the respondent Contractor in respect of the rights or obligations of either of the
parties hereunder except the interpretation of the plans and
for the petitioner of a dry portland, cement plant at specifications and questions concerning the sufficiency of
Iligan City. In a separate contract, Turnbull, Inc. — materials, the time, sequence and method of performing the
the "engineer"— was engaged to design and work, which questions are to be finally determined by the
manage the construction of the plant, supervise the Engineer, they shall submit the matter to arbitration, the
Owner choosing one arbitrator, the Contractor one, and the two
construction, schedule deliveries and the so chosen shall select a third. The decision of such arbitrators or
construction work as well as check and certify ill a majority of them shall be made in writing to both parties and
when so made shall be binding upon the parties thereto.
agreed specifications; that petitioner claims having materials; and (3) the time, sequence and
overpaid respondent by P33,810.81; that petitioner method of performing the work.
further claims to have suffered damages due to
respondent's delay in finishing the project; that The disputes involved here, on the other hand, are
respondent, on the other hand, still claims an on (1) the proper computation of the total
unpaid balance of about P403,700; that these contract price, including the cost of additional or
matters fall under the general arbitration clause extra work; and (2) the liability for alleged delay in
of their contract; and that respondent has failed to completing the project and for alleged losses due to
proceed to arbitration despite several requests change in the plans and specifications.
therefor.
a) Now from the contract itself We can
The court ruled that the matter should be submitted determine the scope of the exceptions
to arbitration. aforementioned.
Issue: WON the dispute should be submitted to Thus, pars. 19 to 22 of its General Conditions deal
arbitration with the subject "Interpretation of Plans and
Specifications". And thereunder, the engineer is
Respondent, contends that: empowered to correct all discrepancies, errors or
1) There is no showing of disagreement; and omissions in the plans and specifications; to explain
2) If there is, the same falls under the exception, all doubts that may arise thereon; and to furnish
to be resolved by the engineer. further plans and specifications as may be required.
No mention is made therein as to the cost of the
Held: project; this matter is covered by the engineering
Ratio: contract, under which Turnbull, Inc.'s function is
limited to making estimates of costs only.
1) As to the first point, the fact of disagreement
has been determined by the court below "Sufficiency of materials" and "method of
upon the stipulation of facts and performing the work" — under the second and
documentary evidence submitted. In this third exceptions above-mentioned — are treated in
appeal involving pure questions of law, the pars. 2 to 6 of the General Conditions under the
above finding should not be disturbed. heading "QUALITY OF WORKS AND MATERIALS".
Furthermore, the existence of disagreement is Turnbull, Inc., is therein empowered to determine
plainly shown in the record. Respondent the land fitness of the several kinds of work and
admits the existence of petitioner's claim but materials furnished and to reject or condemn many
denies its merit. It likewise admits that petitioner of them which, in its opinions, does not fully conform
has refused to pay its claim for the unpaid to the terms of the contract. In the present case, the
balance of the price of the contract. Paragraph dispute is not as to the quality of the materials or of
86 of the stipulation of facts shows the the kind of work done.
dispute of the parties regarding their mutual
claims and that said dispute remained "Time" and "Sequence of Work" are covered by
unsettled. pars. 9 to 17 of the General Conditions under the
heading "SCHEDULING." Neither would the
2) Regarding the second point, the parties agreed disputes fall under these exceptions. Turnbull, Inc.'s
by way of exception that disagreements with power here is to schedule the deliveries and
respect to the following matters shall be finally construction work and expedite the same so that the
resolved by the engineer, instead of being project can be finished on time. It is also authorized,
submitted to arbitration: (1) The interpretation under par. 15, to determine whether any eventuality
of plans and specifications; (2) sufficiency of is sufficient enough to warrant in extension of time
and if so, to determine the period of such extension.
The delay envisioned here is one that occurs during
6
8. That on or about May 29, 1962, a conference was held the progress of the work which disturbs the pre-
between petitioner and Turnbill, Inc., on the one hand, and scheduling plan, thus necessitating an extension of
respondent, on the other, to settle their differences involving the the over-all deadline precisely to prevent respondent
claim for damages of petitioner in the amount of more than from going beyond the same. Turnbull, Inc.'s
P2,000,000, occasioned by the delay in the completion of the
project, and the claim of respondent for losses due to the cost of function goes no further than to calculate and fix the
extra plant and overhead in the amount of more than P450,000, period of extension. But the delay petitioner alleged
— as of April, 1962, but no satisfactory results were reached
is different; it is delay beyond the last date of Further, the courts shall not refuse to refer parties to arbitration for
reasons including, but not limited to, the following:
extension fixed by Turnbull, Inc. Clearly, the
question of liability therefor, is not embraced in the
b. The court is in a better position to resolve the dispute subject
exception. of arbitration;
To none of the exceptions then do the

disagreements in question belong, the rule of CLASS NOTES:
arbitration therefore applies. The parties in fact
also stipulated in their contract, under "EXTRA What is a “pathological arbitration clause”?
WORK", that the cost of extra work to be paid shall An arbitration clause that’s vague or unclear, such
be subject to negotiations. This negates the that instead of facilitating the arbitration of the case,
proposition that Turnbull, Inc.'s cost estimates it delays it.
appearing in Addenda 2, 3 and 7 are final and
conclusive. Mindanao Portland case contains a pathological
arbtiration clause, thus: Some are referrable to
b) The reason, moreover, for the exceptions arbitration, others are referrable to the engineer.
— interpretation of plans and specifications;
sufficiency of materials; sequence, time and Note:
method of performing the work — is the Respondent McDonough contended in the case that:
need to decide these matters 1) There is no showing of disagreement (merely
immediately, since the progress of the a problem in computation); and
work would await their determination. 2) If there is, the same falls under the exception,
The same is not true as to matters relating to be resolved by the engineer.
to the liability for delay in the project's
completion; these are questions that the Whereas Petition Mindanao Portland insisted that
engineer does not have to resolve before there was a dispute and that it is referrable to
the project can go on. Consequently, We arbitration.
view that it is not included in the exceptions,
as indeed the related provisions of their Problem is that McDonough started to argue the
agreement indicate. case on its merits.
Since there obtains herein a written provision for Court: It’s wrong.
arbitration as well as failure on respondent's part to
comply therewith, the court a quo rightly ordered the What is the duty of the Court when confronted
parties to proceed to arbitration in accordance with with the issue of the arbitrability of the dispute?
the terms of their agreement (Sec. 6, Republic Act (Most common mistake of courts)
876). Respondent's arguments touching upon The duty of the court in this case is not to resolve
the merits of the dispute are improperly raised the merits of the parties' claims but only to determine
herein. They should be addressed to the arbitrators. if they should proceed to arbitration or not
This proceeding is merely a summary remedy to
enforce the agreement to arbitrate. The duty of
the court in this case is not to resolve the merits Associated Bank v. CA, 233 SCRA 137 (1994)
of the parties' claims but only to determine if
they should proceed to arbitration or not. And
although it has been ruled that a frivolous or patently Petitioner: Associated Bank
baseless claim should not be ordered to arbitration, Respondents: CA,Visitacion Flores, Asuncion Flores
it is also recognized that the mere fact that a PCIB, Far East Bank, Security Bank and Citytrust
defense exists against a claim does not make it Bank
frivolous or baseless.
Facts:
STUDY NOTES:
In a complaint for Violation of the NIL and
Rule 2.2. Policy on arbitration.— (A) Where the parties have Damages, Visitacion and Asuncion Flores seek the
agreed to submit their dispute to arbitration, courts shall refer the recovery of the amount of P900,913.60 which
parties to arbitration pursuant to Republic Act No. 9285 bearing in petitioner charged against their current account
mind that such arbitration agreement is the law between the
by virtue of the 16 checks drawn by them despite
parties and that they are expected to abide by it in good faith.
the apparent alterations therein with respect to the
name of the payee, that is, the name Filipinas Shell Ratio: The Clearing House Rules and Regulations
was erased and substituted with Ever Trading and on Arbitration of the Philippine Clearing House
DBL Trading by their supervisor Jeremias Cabrera, Corporation are clearly applicable to petitioner
without their knowledge and consent. and private respondents. Petitioner’s third party
complaint in the trial court was one for
Petitioner claimed that the subject checks appeared reimbursement, contribution and indemnity
to have been regularly issued and free from any against PCIB, FarEast, Security Bank, and CityTrust,
irregularity which would excite or arouse any in connection with petitioner’s having honored
suspicion or warrant their dishonor when the same sixteen checks which said banks supposedly
were negotiated and honored by it. endorsed to the former for collection in 1989.
Petitioner filed a TPC against PCIB, Far East Bank Under the rules and regulations of the PCHC, the
and City Trust for reimbursement, contribution, mere act of participation of the parties
indemnity for being the collecting banks of the concerned in its operations in effect amounts to
subject checks and by virtue of their bank guarantee a manifestation of agreement by the parties to
for all checks sent for clearing to the Philippine abide by its rules and regulations. As a
Clearing House Corporation (PCHC), as provided for consequence of such participation, a party cannot
in Section 17, (PCHC), as provided for in Section 17, invoke the jurisdiction of the courts over
PCHC Clearing House Rules and Regulations. disputes and controversies which fall under the
PCHC Rules and Regulations without first going
Citytrust and PCIB claimed that the checks were through the arbitration processes laid out by the
complete and regular on their face. A Motion To body. Since claims relating to the regularity of
Dismiss was filed by Security Bank on the checks cleared by banking institutions are among
grounds that petitioner failed to resort to those claims which should first be submitted for
arbitration as provided for in Section 36 of the resolution by the PCHC’s Arbitration Committee,
Clearing House Rules and Regulations of the petitioner, having voluntarily bound itself to abide by
Philippine Clearing House Corporation. such rules and regulations, is estopped from
seeking relief from the RTC on the coattails of a
Petitioner maintains that this Court has private claim and in the guise of a third party
jurisdiction over the suit as the provisions of the complaint without first having obtained a decision
Clearing House Rules and Regulations are adverse to its claim from the said body. It cannot
applicable only if the suit or action is between bypass the arbitration process on the basis of its
participating member banks, whereas the averment that its third party complaint is inextricably
Floreses are private persons and the third-party linked to the original complaint in the RTC.
complaint between participating member banks
is only a consequence of the original action Pursuant to PCHC’s function involving the clearing
initiated by the plaintiffs. of checks and other clearing items, the PCHC has
adopted rules and regulations designed to
The trial court dismissed the TPC for lack of provide member banks with a procedure
jurisdiction citing Section 36 of the Clearing whereby disputes involving the clearance of
House Rules and Regulations of the PCHC checks and other negotiable instruments
providing for settlement of disputes and undergo a process of arbitration prior to
controversies involving any check or item submission to the courts below. This procedure
cleared through the body with the PCHC. It ruled (1) ensures a uniformity of rulings relating to
— citing the Arbitration Rules of Procedure — that factual disputes involving checks and other
the decision or award of the PCHC through its negotiable instruments (2) provides a mechanism
arbitration committee/arbitrator is appealable only for settling minor disputes among participating
on questions of law to any of the Regional Trial and member banks which would otherwise go
Courts in the National Capital Region where the directly to the trial courts.
head office of any of the parties is located. The CA
affirmed While the PCHC Rules and Regulations allow
appeal to the Regional Trial Courts only on
Issue: WON the case should be dismissed for questions of law, this does not preclude our
failure to arbitrate lower courts from dealing with questions of fact
already decided by the PCHC arbitration when
Held: Yes warranted and appropriate.
In Banco de Oro Savings and Mortgage Banks vs. obligation to first seek redress of their disputes and
Equitable Banking Corporation this Court had the grievances with the PCHC before going to the trial
occasion to rule on the validity of these rules as court.
well as the jurisdiction of the PCHC as a forum for
resolving disputes and controversies involving Finally, the contention that the third party complaint
checks and other clearing items when it held that should not have been dismissed for being a
"the participation of two banks. . . in the Clearing necessary and inseparable offshoot of the main
Operations of the PCHC (was) a manifestation of its case over which the court a quo had already
submission to its jurisdiction." exercised jurisdiction misses the fundamental point
about such pleading. A third party complaint is a
Under the PCHC Rules and Regulations,7 not mere procedural device which under the Rules of
only do the parties manifest by mere Court is allowed only with the court’s
participation their consent to these rules, but permission. It is an action "actually independent
such participation is deemed (their) written and of, separate and distinct from the plaintiffs’
subscribed consent to the binding effect of complaint" (s)uch that, were it not for the Rules of
arbitration agreements under the PCHC rules. Court, it would be necessary to file the action
Moreover, a participant subject to the Clearing separately from the original complaint by the
House Rules and Regulations of the PCHC may go defendant against the third party.
on appeal to any of the Regional Trial Courts in the
National Capital Region where the head office of any STUDY NOTES
of the parties is located only after a decision or
award has been rendered by the arbitration Rule 2.2. Policy on arbitration.— (A) Where the parties have
committee or arbitrator on questions of law. agreed to submit their dispute to arbitration, courts shall refer the
parties to arbitration pursuant to Republic Act No. 9285 bearing in
Clearly therefore, petitioner, by its voluntary parties and that they are expected to abide by it in good faith.
participation and its consent to the arbitration Further, the courts shall not refuse to refer parties to arbitration for
reasons including, but not limited to, the following:
rules cannot go directly to the RTC when it finds f. One or more of the issues are legal and one or more of
it convenient to do so. The jurisdiction of the the arbitrators are not lawyers;
PCHC under the rules and regulations is clear,
undeniable and is particularly applicable to all the CLASS NOTES:
parties in the third party complaint under their
Xam: See also, Associated Bank case – Sec. 3
7
The applicable PCHC provisions on the question of jurisdiction (Agreement to the PCHC Rules) in relation to Sec.
provide:
1) Sec. 3 — AGREEMENT TO THESE RULES 36 on Arbitration.
It is the general agreement and understanding, that any
participant in the PCHC MICR clearing operations, by the mere Participation in the PCHC clearing process is
act of participation, thereby manifests its agreement to these equivalent to a WRITTEN and SUBSCRIBED
Rules and Regulations, and its subsequent amendments.
2) Sec. 36 — ARBITRATION consent to be bound by the PCHC Rules and
a) 36.1 Any dispute or controversy between two or Regulations, including the provision on arbitration.
more clearing participants involving any check/item
cleared thru PCHC shall be submitted to the
Arbitration Committee, upon written complaint of any
involved participant by filing the same with the PCHC Luzon Development Bank v. Luzon Development
serving the same upon the other party or parties, who Bank Employees, 249 SCRA 162 (1995) – In re:
shall within fifteen (15) days after receipt thereof, file multiplicity
with the Arbitration Committee its written answer to
such written complaint and also within the same period
serve the same upon the complaining participant. This Petitioner: Luzon Development Bank
period of fifteen (15) days may be extended by the Respondent: Association of Luzon Development
Committee not more than once for another period of
Bank Employees and Atty. Ester Garcia
fifteen (15) days, but upon agreement in writing of the
complaining party, said extension may be for such
period as the latter may agree to. Facts: The following issue arose between petitioner
b) Section 36.6 is even more emphatic: and respondent: Whether or not the company has
36.6 The fact that a bank participates in the clearing
operations of PCHC shall be deemed its written and
violated the CBA provision and the MOA dated April
subscribed consent to the binding effect of this 1994, on promotion. The parties agreed on the
arbitration agreement as if it had done so in submission of their respective Position Papers on
accordance with Section 4 of the Republic Act No. 876 December 1-15, 1994. Atty. Ester S. Garcia
otherwise known as the Arbitration Law.
(Voluntary Arbitrator) received ALDBE's Position
Paper on January 18, 1995. LDB failed to submit its parties to a CBA shall name and designate therein a
Position Paper despite a letter from the Voluntary voluntary arbitrator or a panel of arbitrators, or
Arbitrator reminding them to do so. The Voluntary include a procedure for their selection, preferably
Arbitrator rendered a decision finding that the Bank from those accredited by the NCMB. Article 261 LC
has not adhered to the CBA provision nor the MOA accordingly provides for exclusive original
on promotion. jurisdiction of such voluntary arbitrator or panel of
arbitrators over (1) the interpretation or
Hence, this petition for certiorari and prohibition implementation of the CBA and (2) the interpretation
seeking to set aside the decision of the Voluntary or enforcement of company personnel policies.
Arbitrator and to prohibit her from enforcing the Article 262 authorizes them, but only upon
same. agreement of the parties, to exercise jurisdiction
over other labor disputes.
Issue: WON direct resort to the SC is warranted
On the other hand, a labor arbiter under Article 217
Held: No LC has jurisdiction over the following enumerated
cases: (1) Unfair labor practice cases; (2)
Ratio: In labor law context, arbitration is the Termination disputes; (3) If accompanied with a
reference of a labor dispute to an impartial third claim for reinstatement, those cases that workers
person for determination on the basis of evidence may file involving wages, rates of pay, hours of work
and arguments presented by such parties who have and other terms and conditions of employment; (4)
bound themselves to accept the decision of the Claims for actual, moral, exemplary and other forms
arbitrator as final and binding. of damages arising from the employer-employee
relations; (5) Cases arising from any violation of
Arbitration may be classified, on the basis of the Article 264 of this Code, including questions
obligation on which it is based, as either compulsory involving the legality of strikes and lockouts; (6)
or voluntary. Compulsory arbitration is a system Except claims for Employees Compensation, Social
whereby the parties to a dispute are compelled by Security, Medicare and maternity benefits, all other
the government to forego their right to strike and are claims, arising from employer-employee relations,
compelled to accept the resolution of their dispute including those of persons in domestic or household
through arbitration by a third party. The essence of service, involving an amount exceeding P5,000.00
arbitration remains since a resolution of a dispute is regardless of whether accompanied with a claim for
arrived at by resort to a disinterested third party reinstatement.
whose decision is final and binding on the parties,
but in compulsory arbitration, such a third party is It will thus be noted that the jurisdiction conferred by
normally appointed by the government. Under law on a voluntary arbitrator or a panel of such
voluntary arbitration referral of a dispute by the arbitrators is quite limited compared to the original
parties is made, pursuant to a voluntary arbitration jurisdiction of the labor arbiter and the appellate
clause in their collective agreement, to an impartial jurisdiction of the NLRC for that matter. The state of
third person for a final and binding resolution. our present law relating to voluntary arbitration
Ideally, arbitration awards are supposed to be provides that "(t)he award or decision of the
complied with by both parties without delay, such Voluntary Arbitrator . . . shall be final and executory
that once an award has been rendered by an after ten (10) calendar days from receipt of the copy
arbitrator, nothing is left to be done by both parties of the award or decision by the parties," 5 while the
but to comply with the same. After all, they are "(d)ecision, awards, or orders of the Labor Arbiter
presumed to have freely chosen arbitration as the are final and executory unless appealed to the
mode of settlement for that particular dispute. Commission by any or both parties within ten (10)
Pursuant thereto, they have chosen a mutually calendar days from receipt of such decisions,
acceptable arbitrator who shall hear and decide their awards, or orders." Hence, while there is an express
case. Above all, they have mutually agreed to de mode of appeal from the decision of a labor arbiter,
bound by said arbitrator's decision. RA 6715 is silent with respect to an appeal from the
decision of a voluntary arbitrator.
In the Philippine context, the parties to a CBA are
required to include therein provisions for a Yet, past practice shows that a decision or award of
machinery for the resolution of grievances arising a voluntary arbitrator is, more often than not,
from the interpretation or implementation of the CBA elevated to the SC itself on a petition for certiorari,
or company personnel policies. For this purpose, in effect equating the voluntary arbitrator with the
NLRC or the CA. In the view of the Court, this is The voluntary arbitrator no less performs a state
illogical and imposes an unnecessary burden upon function pursuant to a governmental power
it. delegated to him under the provisions in the Labor
Code and he falls, therefore, within the
In Volkschel Labor Union, et al. v. NLRC, et al., 8 on contemplation of the term "instrumentality" in Sec. 9
the settled premise that the judgments of courts and of B.P. 129. The fact that his functions and powers
awards of quasi-judicial agencies must become final are provided for in the Labor Code does not place
at some definite time, this Court ruled that the him within the exceptions to said Sec. 9 since he is a
awards of voluntary arbitrators determine the rights quasi-judicial instrumentality as contemplated
of parties; hence, their decisions have the same therein. It will be noted that, although the Employees
legal effect as judgments of a court Compensation Commission is also provided for in
the Labor Code, Circular No. 1-91, which is the
Section 9 of B.P. Blg. 129, as amended by Republic forerunner of the present Revised Administrative
Act No. 7902, provides that the CA shall exercise: Circular No. 1-95, laid down the procedure for the
(B) Exclusive appellate jurisdiction over all final appealability of its decisions to the CA under the
judgments, decisions, resolutions, orders or awards foregoing rationalization, and this was later adopted
of Regional Trial Courts and quasi-judicial agencies, by Republic Act No. 7902 in amending Sec. 9 of
instrumentalities, boards or commissions, including B.P. 129.
the Securities and Exchange Commission, the
Employees Compensation Commission and the Civil A fortiori, the decision or award of the voluntary
Service Commission, except those falling within the arbitrator or panel of arbitrators should likewise be
appellate jurisdiction of the Supreme Court in appealable to the CA, in line with the procedure
accordance with the Constitution, the Labor Code of outlined in Revised Administrative Circular No. 1-95,
the Philippines under Presidential Decree No. 442, just like those of the quasi-judicial agencies, boards
as amended, the provisions of this Act, and of and commissions enumerated therein.
subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section This would be in furtherance of, and consistent with,
17 of the Judiciary Act of 1948. the original purpose of Circular No. 1-91 to provide a
uniform procedure for the appellate review of
Assuming that the voluntary arbitrator or the panel of adjudications of all quasi-judicial entities not
voluntary arbitrators may not strictly be considered expressly excepted from the coverage of Sec. 9 of
as a quasi-judicial agency, board or commission, still B.P. 129 by either the Constitution or another
both he and the panel are comprehended within the statute. Nor will it run counter to the legislative
concept of a "quasi-judicial instrumentality." It may intendment that decisions of the NLRC be
even be stated that it was to meet the very situation reviewable directly by the Supreme Court since,
presented by the quasi-judicial functions of the precisely, the cases within the adjudicative
voluntary arbitrators here, as well as the subsequent competence of the voluntary arbitrator are excluded
arbitrator/arbitral tribunal operating under the CIAC, from the jurisdiction of the NLRC or the labor arbiter.
that the broader term "instrumentalities" was
purposely included in the provision. In the same vein, it is worth mentioning that under
Section 22 of RA 876, also known as the Arbitration
An "instrumentality" is anything used as a means or Law, arbitration is deemed a special proceeding of
agency. Thus, the terms governmental "agency" or which the court specified in the contract or
"instrumentality" are synonymous in the sense that submission, or if none be specified, the RTC for the
either of them is a means by which a government province or city in which one of the parties resides or
acts, or by which a certain government act or is doing business, or in which the arbitration is held,
function is performed. The word "instrumentality," shall have jurisdiction. A party to the controversy
with respect to a state, contemplates an authority to may, at any time within one (1) month after an award
which the state delegates governmental power for is made, apply to the court having jurisdiction for an
the performance of a state function. An individual order confirming the award and the court must
person, like an administrator or executor, is a judicial grant such order unless the award is vacated,
instrumentality in the settling of an estate, in the modified or corrected.
same manner that a sub-agent appointed by a
bankruptcy court is an instrumentality of the court, In effect, this equates the award or decision of the
and a trustee in bankruptcy of a defunct corporation voluntary arbitrator with that of the regional trial
is an instrumentality of the state. court. Consequently, in a petition for certiorari from
that award or decision, the CA must be deemed to Is it “any other misbehavior"?

have concurrent jurisdiction with the Supreme Court.
As a matter of policy, this Court shall henceforth Not a ground for appeal.
remand to the CA petitions of this nature for proper
disposition. 1) The arbitral tribunal is defective.
CLASS NOTES: 2) Ground for termination of mandate.
If an arbitrator and an RTC judge are of the same

level, how come a party can ask an RTC judge to Rule 8.1. Who may request termination and on what grounds.—
vacate an award made by an arbitrator? Any of the parties to an arbitration may request for the termination
of the mandate of an arbitrator where an arbitrator becomes de
jure or de facto unable to perform his function or for other reasons
The explanation is found in assigned cases and in fails to act without undue delay and that arbitrator, upon request
the Special ADR Rules. of any party, fails or refuses to withdraw from his office.
Is it because the RTC does not rule on the merits In termination of mandate, a substitute is appointed
but on the validity of the arbitration proceedings? according to the manner in which the arbitrator
Is it because the equality presupposes the replaced was appointed.
competence of the arbitral tribunal?
Is it because the equality extends to the award not Notes:
the body or tribunal? - Cannot ask for a commitment not to get an
Xam: Upon the rendition of the award, the injunction in the Philippines. Jurisdiction over the
jurisdiction of the arbitral tribunal over the dispute issue is defined by the arbitration clause. (Mindanao
ends. There is no jurisdiction over its enforcement. Portland)
What the RTC is doing is enforcing the award, not 3) Sec. 14 – All arbitrators should be present in all
exercising its power of review. hearings.
4) In commercial arbitration – ground for setting
Yet the law cannot simply grant the right to the aside (if arbitration not conducted according to
courts to simply enforce the award without the agreement of the parties).
summarily looking into the extrinsic validity of the
award. “Bundle of documents” – starting point in
preliminary conference, to enable the parties to
Cases for next meeting (August 6, 2010): know what the evidence at issue. Also include
12) Toyota Motor Phils. Corp. V. CA, 216 SCRA 336 witness statement (judicial affidavit).
13) Heirs of Agusto L. Salas, Jr. v. Laperal Realty
Corp., 302 SCRA 620 No formal offer.
14) Del Monte Corp. USA v. CA, 351 SCRA 373
15) Homebankers Savings and Trust Co. v. CA, 318 Gonzales v. Climax Mining Ltd., 512 SCRA 148
SCRA 558 (2007)
Petitioners: Pedro Gonzales – alleges nullity

Class Notes - August 20, 2010 and Panel of Arbitrators
Respondents: Climax Mining Ltd, Climax Arimco
What is the legal significance if one of the Mining Corp and Australasian Philippines Mining –
arbitrators has been absent for an unreasonable wants to arbitrate
length of time?
Facts:
Leeway not to confirm the award
This is a consolidation of two petitions rooted in the
Not a ground for vacation. same disputed Addendum Contract entered into by
the parties.
Is it a ground for vacation for evident partiality? No,
it’s not evident. The first case arose from COMPLAINT FOR THE
ANNULMENT OF THE ADDENDUM CONTRACT
on grounds of fraud and violation of the Constitution Climax-Arimco mentions that the special civil action
filed by Gonzales before the DENR Panel of for certiorari employed by Gonzales is available only
Arbitrators. The SC held that the DENR Panel of where there is no appeal or any plain, speedy, and
Arbitrators had no jurisdiction over the complaint adequate remedy in the ordinary course of law
and that the action should have been brought against the challenged orders or acts. Climax-
before the regular courts as it involved judicial Arimco then points out that R.A. No. 876 provides
issues. for an appeal from such orders. Climax-Arimco
adds that an application to compel arbitration under
Sec. 6 of R.A. No. 876 confers on the trial court
Gonzales avers in his MR that the Court erred in only a limited and special jurisdiction, i.e., a
holding that the DENR Panel of Arbitrators was jurisdiction solely to determine (a) whether or
bereft of jurisdiction, reiterating its argument that the not the parties have a written contract to
case involves a mining dispute that properly falls arbitrate, and (b) if the defendant has failed to
within the ambit of the Panel’s authority. comply with that contract. Climax-Arimco further
notes that Gonzales’s attack on or repudiation of the
Respondents filed their Partial MR seeking Addendum Contract also is not a ground to deny
reconsideration of that part of the Decision holding effect to the arbitration clause in the Contract. The
that the case should not be brought for arbitration agreement is separate and severable
arbitration under RA. 876. Respondents argue that from the contract evidencing the parties’
the arbitration clause in the Addendum Contract commercial or economic transaction, it stresses.
should be treated as an agreement independent Climax-Arimco emphasizes that the summary
of the other terms of the contract, and that a proceeding to compel arbitration under Sec. 6 of
claimed rescission of the main contract does not R.A. No. 876 should not be confused with the
avoid the duty to arbitrate. procedure in Sec. 24 of R.A. No. 9285.
The second case, on the other hand, stemmed Sec. 6 of R.A. No. 876 refers to an application to
from the PETITION TO COMPEL ARBITRATION compel arbitration where the court’s authority is
filed by respondent before the RTC of Makati City limited to resolving the issue of whether there is or
while the complaint for the nullification of the there is no agreement in writing providing for
Addendum Contract was pending before the arbitration.
DENR Panel of Arbitrators.
Sec. 24 of R.A. No. 9285 refers to an ordinary action
Climax-Arimco had sent Gonzales a Demand for which covers a matter that appears to be
Arbitration pursuant to Clause 19.1 of the arbitrable or subject to arbitration under the
Addendum Contract and also in accordance with arbitration agreement.
Sec. 5 of R.A. No. 876. The petition for arbitration
was subsequently filed and Climax-Arimco sought Issue: WON it is proper for the RTC to order the
an order to compel the parties to arbitrate pursuant parties to arbitrate even though the defendant has
to the said arbitration clause. raised the twin issues of the validity and nullity
of the Addendum Contract
Gonzales filed an Answer with Counterclaim
questioning the validity of the Addendum Held: YES
Contract containing the arbitration clause. He
alleged that the contract is void in view of Climax- 1) PETITION TO COMPEL ARBITRATION - SC
Arimco’s acts of fraud, oppression and violation ruled against Gonzales when he alleges that
of the Constitution. Thus, the arbitration clause, Judge Pimentel acted with grave abuse of
Clause 19.1, contained in the Addendum Contract is discretion in ordering the parties to proceed with
also null and void ab initio and legally inexistent. arbitration. Gonzales’s argument that the
Addendum Contract is null and void and,
Climax-Arimco then filed a motion to resolve its therefore the arbitration clause therein is void as
pending motion to compel arbitration. The RTC well, is not tenable.
denied the same. RTC required Gonzales to
proceed with arbitration proceedings and a) First, the proceeding in a petition for
appointing retired CA Justice Jorge Coquia as sole arbitration under R.A. No. 876 is limited
arbitrator. only to the resolution of the question of
whether the arbitration agreement exists.
b) Second, the separability of the arbitration The jurisdiction of the courts in relation to Sec. 6
clause from the Addendum Contract of R.A. No. 876 as well as the nature of the
means that validity or invalidity of the proceedings therein was expounded upon in La
Addendum Contract will not affect the Naval Drug Corporation v. CA. There it was held that
enforceability of the agreement to R.A. No. 876 explicitly confines the court's
arbitrate. Thus, Gonzales’s petition for authority only to the determination of whether or
certiorari should be dismissed. not there is an agreement in writing providing for
arbitration. In the affirmative, the statute ordains
REMEDIAL LAW that the court shall issue an order "summarily
We address the Rule 65 petition in Petition to directing the parties to proceed with the
Compel Arbitration first from the remedial law arbitration in accordance with the terms thereof."
perspective. It deserves to be dismissed on If the court, upon the other hand, finds that no such
procedural grounds, as it was filed in lieu of agreement exists, "the proceeding shall be
appeal which is the prescribed remedy and at that dismissed." The cited case also stressed that the
far beyond the reglementary period. There is no proceedings are summary in nature.
merit to Gonzales’s argument that the use of the
permissive term "may" in Sec. 29, R.A. No. 876 in SEPARABILITY
the filing of appeals does not prohibit nor discount Implicit in the summary nature of the judicial
the filing of a petition for certiorari under Rule 65. proceedings is the separable or independent
Proper interpretation of the aforesaid provision character of the arbitration clause or agreement.
of law shows that the term "may" refers only to This was highlighted in the cases of Manila Electric
the filing of an appeal, not to the mode of review Co. v. Pasay Trans. Co. and Del Monte Corporation-
to be employed. USA v. CA: The doctrine of separability, or
severability as other writers call it, enunciates
that an arbitration agreement is independent of
CONSENSUAL NATURE the main contract. The arbitration agreement is to
Arbitration, as an alternative mode of settling be treated as a separate agreement and the
disputes, has long been recognized and arbitration agreement does not automatically
accepted in our jurisdiction. Disputes do not go to terminate when the contract of which it is part
arbitration unless and until the parties have agreed comes to an end.
to abide by the arbitrator’s decision. Necessarily, a
contract is required for arbitration to take place
and to be binding. R.A. No. 876 recognizes the The separability of the arbitration agreement is
contractual nature of the arbitration agreement especially significant to the determination of
(Section 2). whether the invalidity of the main contract also
nullifies the arbitration clause. Indeed, the
CONTRACTUAL NATURE doctrine denotes that the invalidity of the main
Thus, we held in Manila Electric Co. v. Pasay contract, also referred to as the "container" contract,
Transportation Co. that a submission to arbitration does not affect the validity of the arbitration
is a contract. A clause in a contract providing agreement. Irrespective of the fact that the main
that all matters in dispute between the parties contract is invalid, the arbitration clause/agreement
shall be referred to arbitration is a contract. In still remains valid and enforceable.
Del Monte Corporation-USA v. CA we held that that
"the provision to submit to arbitration any The separability of the arbitration clause is
dispute arising therefrom and the relationship of confirmed in Art. 16(1) of the UNCITRAL Model
the parties is part of that contract and is itself a Law and Art. 21(2) of the UNCITRAL Arbitration
contract. As a rule, contracts are respected as the Rules.
law between the contracting parties and produce
effect as between them, their assigns and heirs." 2) ANNULMENT OF ADDENDUM CONTRACT:
The adjudication of the petition arising from the
SPECIAL PROCEEDING Petition to Compel Arbitration effectively
The special proceeding under Sec. 6 of R.A. No. modifies part of the Decision arising from the
876 recognizes the contractual nature of Annulment case. Hence, we now hold that the
arbitration clauses or agreements. validity of the contract containing the
agreement to submit to arbitration does not
JURISDICTION & COURT ACTION affect the applicability of the arbitration
clause itself. We add that when it was declared parties to arbitration pursuant to Republic Act No. 9285 bearing in
in the first case that the case should not be mind that such arbitration agreement is the law between the
brought for arbitration, it should be clarified that Further, the courts shall not refuse to refer parties to arbitration for
the case referred to is the case actually filed reasons including, but not limited to, the following:
by Gonzales before the DENR Panel of
Arbitrators, which was for the nullification of the b. The court is in a better position to resolve the dispute subject
main contract on the ground of fraud, as it had of arbitration
f. One or more of the issues are legal and one or more of the
already been determined that the case arbitrators are not lawyers
should have been brought before the regular
courts involving as it did judicial issues. (B) Where court intervention is allowed under ADR Laws or the
Special ADR Rules, courts shall not refuse to grant relief, as
provided herein, for any of the following reasons:
The MR of Gonzales in the first case should also
be denied. These are the same issues that a. Prior to the constitution of the arbitral tribunal, the court finds
Gonzales raised in his Rule 45 petition in the first that the principal action is the subject of an arbitration agreement;
case which were already resolved against him. The or
question of whether Gonzales had ceded his claims b. The principal action is already pending before an arbitral
tribunal.
over the mineral deposits in the Addendum Area of
Influence is a factual question which is not proper The Special ADR Rules recognize the principle of separability
for determination before this Court. The CA likewise of the arbitration clause, which means that said clause shall be
found that Gonzales’s complaint alleged fraud but treated as an agreement independent of the other terms of the
contract of which it forms part. A decision that the contract is null
did not provide any particulars to substantiate it. As and void shall not entail ipso jure the invalidity of the arbitration
to the issue of prescription, Gonzales’s claims of clause.
fraud and misrepresentation attending the execution
of the Addendum Contract are grounds for the
annulment of a voidable contract under the Civil CLASS NOTES:
Code. Under Art. 1391 of the Code, an action for 1) Take note of the facts of the case – illustrates
annulment shall be brought within four years, in the realities in arbitration.
case of fraud, beginning from the time of the 2) Special proceeding of arbitration in the case
discovery of the same. However, the time of the (read original) – citing Sec. 6, thus NO pre-trial
discovery of the alleged fraud is not clear from
the allegations of Gonzales’s complaint.
Oil & Natural Gas Commission v. CA, 293 SCRA
STUDY NOTES: 26 (1998)
Rule 2.4. Policy implementing competence-competence principle.
— The arbitral tribunal shall be accorded the first opportunity or Petitioner: Oil and Natural Gas Commission - India
competence to rule on the issue of whether or not it has the Respondents: CA and Pacific Cement Company Inc
competence or jurisdiction to decide a dispute submitted to it for - Phils
decision, including any objection with respect to the existence or
validity of the arbitration agreement. When a court is asked to rule
upon issue/s affecting the competence or jurisdiction of an arbitral Facts:
tribunal in a dispute brought before it, either before or after the
arbitral tribunal is constituted, the court must exercise judicial The parties entered into a contract where private
restraint and defer to the competence or jurisdiction of the arbitral
tribunal by allowing the arbitral tribunal the first opportunity to rule
respondent undertook to supply the petitioner
upon such issues. 4300 metric tons of oil well cement. In
consideration, petitioner bound itself to pay the
Where the court is asked to make a determination of whether the amount of $477,300. The oil well cement was loaded
arbitration agreement is null and void, inoperative or incapable of
being performed, under this policy of judicial restraint, the court
on board the ship MV Surutana Nava at Surigao.
must make no more than a prima facie determination of that However, due to a dispute between the shipowner
issue. and the private respondent, the cargo was held
up in Bangkok. Notwithstanding the fact that the
Unless the court, pursuant to such prima facie determination,
concludes that the arbitration agreement is null and void,
private respondent had already received payment
inoperative or incapable of being performed, the court must and despite several demands made by the
suspend the action before it and refer the parties to arbitration petitioner, the private respondent failed to deliver
pursuant to the arbitration agreement. the oil well cement.
Rule 2.2. Policy on arbitration.— (A) Where the parties have

Negotiations ensued and they agreed that private
agreed to submit their dispute to arbitration, courts shall refer the respondent will replace the oil well cement with
Class G cement cost free. However, said cement The RTC dismissed the complaint for lack of a
did not conform to the parties specifications. The valid cause of action. It found the referral of the
petitioner informed private respondent that it was dispute between the parties to the arbitrator
referring its claim to an arbitrator pursuant to under Clause 16 of their contract erroneous.
Clause 16 of their contract8. According to the contract, all questions, disputes
and differences, arising under out of or in
The chosen arbitrator, Shri N.N. Malhotra, resolved connection with this supply order, shall be
the dispute in petitioner's favor. Petitioner filed subject to the EXCLUSIVE JURISDICTION OF THE
before the Court of Civil Judge in Dehra Dun, India COURT, within the local limits of whose
for the execution of the award. Subsequently, the jurisdiction and the place from which this supply
said court directed the private respondent to pay order is situated." The RTC characterized the
the filing fees in order that the latter's objections erroneous submission of the dispute to the arbitrator
could be given consideration. Instead of paying the as a "mistake of law or fact amounting to want of
required filing fees, the private respondent sent jurisdiction". The CA affirmed.
the following communication addressed to the
Civil judge of Dehra Dun inquiring as to the amount Issue: WON the arbitrator had jurisdiction over the
of filing fees. The foreign court refused to admit dispute between the parties
private respondent’s objections for non failure of
filing fees and ruled in favor of petitioner. Held: NO
Petitioner filed a complaint with the RTC of Ratio: The dispute between the parties had its
Surigao City for the enforcement of the origin in the non-delivery of the 4,300 metric tons of
judgment. oil well cement to the petitioner.
Private respondent moved to dismiss the complaint First of all, the petitioner has misquoted the said
on the following grounds: (1) plaintiffs lack of legal phrase, shrewdly inserting a comma between the
capacity to sue; (2) lack of cause of action; and words "supply order/contract" and "design" where
(3) plaintiffs claim or demand has been waived, none actually exists.
abandoned, or otherwise extinguished.
The petitioner also insists that the non-delivery of
the cargo is not only covered by the foregoing
phrase but also by the phrase, ". . . or otherwise
8
Except where otherwise provided in the supply concerning the materials or the execution or failure
order/contract all questions and disputes, relating to the to execute the same during the stipulated/extended
meaning of the specification designs, drawings and
instructions herein before mentioned and as to quality of period or after completion/abandonment thereof . .
workmanship of the items ordered or as to any other .".
question, claim, right or thing whatsoever, in any way arising
out of or relating to the supply order/contract (NO COMMA!!!) According to the maxim noscitur a sociis, where a
design, drawing, specification, instruction or these conditions or
otherwise concerning the materials or the execution or particular word or phrase is ambiguous in itself
failure to execute the same during stipulated/extended period or is equally susceptible of various meanings, its
or after the completion/abandonment thereof shall be referred correct construction may be made clear and
to the sole arbitration of the persons appointed by Member of the specific by considering the company of the
Commission at the time of dispute. It will be no objection to any
such appointment that the arbitrator so appointed is a words in which it is found or with which it is
Commission employer (sic) that he had to deal with the matter to associated, or stated differently, its obscurity or
which the supply or contract relates and that in the course of his doubt may be reviewed by reference to associated
duties as Commission's employee he had expressed views on all words.
or any of the matter in dispute or difference.
The arbitrator to whom the matter is originally referred being
transferred or vacating his office or being unable to act for any A close examination of Clause 16 reveals that it
reason the Member of the Commission shall appoint another covers three matters which may be submitted to
person to act as arbitrator in accordance with the terms of the
contract/supply order. Such person shall be entitled to proceed
arbitration namely,
with reference from the stage at which it was left by his
predecessor. Subject as aforesaid the provisions of the Arbitration (1) all questions and disputes, relating to the
Act, 1940, or any Statutory modification or re-enactment there of meaning of the specification designs, drawings
and the rules made there under and for the time being in force
shall apply to the arbitration proceedings under this clause.
and instructions herein before mentioned and as
The arbitrator may with the consent of parties enlarge the time, to quality of workmanship of the items ordered;
from time to time, to make and publish the award. or
The venue for arbitration shall be at Dehra dun.
(2) any other question, claim, right or thing arbitration to be the sole means of settling
whatsoever, in any way arising out of or relating disputes.
to the supply order/contract design, drawing,
specification, instruction or these conditions; or The petitioner then asseverates that granting, for the
sake of argument, that the non-delivery of the oil
(3) otherwise concerning the materials or the well cement is not a proper subject for arbitration,
execution or failure to execute the same during the failure of the replacement cement to conform to
stipulated/extended period or after the the specifications of the contract is a matter clearly
completion/abandonment thereof. falling within the ambit of Clause 16. In this
contention, we find merit. When the 4,300 metric
The first and second categories unmistakably refer tons of oil well cement were not delivered to the
to questions and disputes relating to the design, petitioner, an agreement was forged between the
drawing, instructions, specifications or quality of latter and the private respondent that Class "G"
the materials of the supply/order contract. cement would be delivered to the petitioner as
replacement. Upon inspection, however, the
In accordance with the doctrine of noscitur a sociis, replacement cement was rejected as it did not
this reference to the supply order/contract must conform to the specifications of the contract. Only
be construed in the light of the preceding words with after this latter circumstance was the matter brought
which it is associated, meaning to say, as being before the arbitrator. Undoubtedly, what was
limited only to the design, drawing, instructions, referred to arbitration was no longer the mere non-
specifications or quality of the materials of the delivery of the cargo at the first instance but also
supply order/contract. the failure of the replacement cargo to conform
to the specifications of the contract, a matter
The non-delivery of the oil well cement is clearly within the coverage of Clause 16.
definitely not in the nature of a dispute arising
from the failure to execute the supply order/contract What inspires credulity is not that the replacement
design, drawing, instructions, specifications or was done in the spirit of liberality but that it was
quality of the materials. undertaken precisely because of the private
respondent's recognition of its duty to do so under
That Clause 16 should pertain only to matters the supply order/contract, Clause 16 of which
involving the technical aspects of the contract is remains in force and effect until the full execution
but a logical inference considering that the thereof.
underlying purpose of a referral to arbitration is
for such technical matters to be deliberated Issue: WON the judgment of the foreign court is
upon by a person possessed with the required enforceable in the Philippines
skill and expertise which may be otherwise
absent in the regular courts. Held: Yes
This Court agrees with the appellate court in its Ratio: As specified in the order of the Civil Judge
ruling that the non-delivery of the oil well cement is a of Dehra Dun, "Award Paper No. 3/B-1 shall be a
matter properly cognizable by the regular courts part of the decree". This is a categorical declaration
as stipulated by the parties in Clause 15. that the foreign court adopted the findings of facts
and law of the arbitrator as contained in the latter's
The provisions of a contract should not be read Award Paper. Award Paper No. 3/B-1, contains an
in isolation from the rest of the instrument but, exhaustive discussion of the respective claims and
on the contrary, interpreted in the light of the defenses of the parties, and the arbitrator's
other related provisions. The whole and every evaluation of the same. Inasmuch as the foregoing
part of a contract must be considered in fixing is deemed to have been incorporated into the
the meaning of any of its harmonious whole. foreign court's judgment the appellate court was in
error when it described the latter to be a
The petitioner's interpretation that Clause 16 is of "simplistic decision containing literally, only the
such latitude as to contemplate even the non- dispositive portion".
delivery of the oil well cement would in effect render
Clause 15 a mere superfluity. A perusal of Clause The constitutional mandate that no decision shall be
16 shows that the parties did not intend rendered by any court without expressing therein
dearly and distinctly the facts and the law on which it
is based does not preclude the validity of 2) Assessment of the Arbitration Clause
"memorandum decisions" which adopt by reference a) Valid
the findings of fact and conclusions of law contained b) Void
in the decisions of inferior tribunals. 3) Issues
a) Contract of Adhesion
Hence, even in this jurisdiction, incorporation by b) Consensuality – whether or not this was met
reference is allowed if only to avoid the c) Article 2045 – giving one party more power
cumbersome reproduction of the decision of the in the appointment of the arbitrator
lower courts, or portions thereof, in the decision
of the higher court. This is particularly true when
the decision sought to be incorporated is a lengthy What if the place of international arbitration were the
and thorough discussion of the facts and Philippines?
conclusions arrived at, as in this case, where Award
Paper No. 3/B-1 consists of eighteen (18) single What if the place of international arbitration were
spaced pages. still India, but the applicable law is Philippine
law, how do you enforce the award (India: apply
Furthermore, the recognition to be accorded a civil court)?
foreign judgment is not necessarily affected by the Party: File a petition for recognition and enforcement
fact that the procedure in the courts of the country in under
which such judgment was rendered differs from that Judge: Would you enforce the award?
of the courts of the country in which the judgment is
relied on. This Court has held that matters of Can Philippines refuse on the ground of public
remedy and procedure are governed by the lex policy?
fori or the internal law of the forum.
In the instant case, the private respondent does not How do you assail an award?
deny the fact that it was notified by the foreign court Domestic – grounds for vacate
to file its objections to the petition, and International Award – grounds for setting aside
subsequently, to pay legal fees in order for its
objections to be given consideration. Instead of When is it proper to set aside, when is it proper
paying the legal fees, however, the private to refuse recognition?
respondent sent a communication to the foreign Possible finals question.
court inquiring about the correct amount of fees to
be paid. On the pretext that it was yet awaiting the Sec. 42. Application of the New York Convention
The New York Convention shall govern the recognition and
foreign court's reply, almost a year passed without enforcement of arbitral awards covered by the said Convention.
the private respondent paying the legal fees. We
cannot subscribe to the private respondent's The recognition and enforcement of such arbitral awards shall be
claim that the foreign court violated its right to filled with regional trial court in accordance with the rules of
procedure to be promulgated by the Supreme Court. Said
due process when it failed to reply to its queries
procedural rules shall provide that the party relying on the award
nor when the latter rejected its objections for a or applying for its enforcement shall file with the court the original
clearly meritorious ground. or authenticated copy of the award and the arbitration agreement.
If the award or agreement is not made in any of the official
languages, the party shall supply a duly certified translation
STUDY NOTES:
thereof into any of such languages.
Rule 2.2. Policy on arbitration.— (A) Where the parties have The applicant shall establish that the country in which foreign
agreed to submit their dispute to arbitration, courts shall refer the arbitration award was made is a party to the New York
parties to arbitration pursuant to Republic Act No. 9285 bearing in Convention.
parties and that they are expected to abide by it in good faith. If the application for rejection or suspension of enforcement of an
Further, the courts shall not refuse to refer parties to arbitration for award has been made, the regional trial court may, if it considers
reasons including, but not limited to, the following: it proper, vacate its decision and may also, on the application of
b. The court is in a better position to resolve the dispute subject the party claiming recognition or enforcement of the award, order
of arbitration; the party to provide appropriate security.
e. The place of arbitration is in a foreign country
Sec. 43. Recognition and Enforcement of Foreign Arbitral
Class Notes: Awards Not Covered by the New York Convention. - The
recognition and enforcement of foreign arbitral awards not
covered by the New York Convention shall be done in accordance
1) International Arbitration with procedural rules to be promulgated by the Supreme Court.
The Court may, grounds of comity and reciprocity, recognize and a) at the request of the party against whom it is invoked, if that
enforce a nonconvention award as a convention award. party furnishes to the competent court where recognition or
enforcement is sought proof that:
Sec. 44. Foreign Arbitral Award Not Foreign Judgment. - A i) a party to the arbitration agreement referred to in article 7 was
foreign arbitral award when confirmed by a court of a foreign under some incapacity; or the said agreement is not valid under
country, shall be recognized and enforced as a foreign arbitral the law to which the parties have subjected it or, failing any
award and not a judgment of a foreign court. indication thereon, under the law of the country where the award
was made; or
A foreign arbitral award, when confirmed by the regional trial ii) the party against whom the award is invoked was not given
court, shall be enforced as a foreign arbitral award and not as a proper notice of the appointment of an arbitrator or of the arbitral
judgment of a foreign court. proceedings or was otherwise unable to present his case; or
iii) the award deals with a dispute not contemplated by or not
A foreign arbitral award, when confirmed by the regional trial falling within the terms of the submission to arbitration, or it
court, shall be enforced in the same manner as final and contains decisions on matters beyond the scope of the
executory decisions of courts of law of the Philippines. submission to arbitration, provided that, if the decisions on
matters submitted to arbitration can be separated from those not
Article 35 - [Recognition and enforcement] so submitted, that part of the award which contains decisions on
1) An arbitral award, irrespective of the country in which it was matters submitted to arbitration may be recognised and enforced;
made, shall be recognised as binding and, upon application in or
writing to the competent court, shall be enforced subject to the iv) the composition of the arbitral tribunal or the arbitral procedure
provisions of this article and of article 36. was not in accordance with the agreement of the parties or, failing
2) The party relying on an award or applying for its enforcement such agreement, was not in accordance with the law of the
shall supply the duly authenticated original award or a duly country where the arbitration took place; or
certified copy thereof, and the original arbitration agreement v) the award has not yet become binding on the parties or has
referred to in article 7 or a duly certified copy thereof. If the award been set aside or suspended by a court of the country in which, or
or agreement is not made in an official language of this State, the under the law of which, that award was made; or
party shall supply a duly certified translation thereof into such b) if the court finds that:
language. i) the subject-matter of the dispute is not capable of settlement by
arbitration under the law of this State; or
Article 33 - [Correction and interpretation of award; ii) the recognition or enforcement of the award would be contrary
additional award] to the public policy of this State.
1) Within thirty days of receipt of the award, unless another period 2) If an application for setting aside or suspension of an award
of time has been agreed upon by the parties: has been made to a court referred to in paragraph (1)(a)(v) of this
a) a party, with notice to the other party, may request the arbitral article, the court where recognition or enforcement is sought may,
tribunal to correct in the award any errors in computation, any if it considers it proper, adjourn its decision and may also, on the
clerical or typographical errors or any errors of similar nature; application of the party claiming recognition or enforcement of the
b) if so agreed by the parties, a party, with notice to the other award, order the other party to provide appropriate security.
party, may request the arbitral tribunal to give an interpretation of
a specific point or part of the award. Article 34 - [Application for setting side as exclusive
If the arbitral tribunal considers the request to be justified, it shall recourse against arbitral award]
make the correction or give the interpretation within thirty days of 1) Recourse to a court against an arbitral award may be made
receipt of the request. The interpretation shall form part of the only by an application for setting aside in accordance with
award. paragraphs (2) and (3) of this article.
2) The arbitral tribunal may correct any error of the type referred 2) An arbitral award may be set aside by the court specified in
to in paragraph 1)a) of this article on its own initiative within thirty article 6 only if:
days of the date of the award. a) the party making the application furnishes proof that:
3) Unless otherwise agreed by the parties a party with notice to i) a party to the arbitration agreement referred to in article 7 was
the other party, may request, within thirty days of receipt of the under some incapacity; or the said agreement is not valid under
award, the arbitral tribunal to make an additional award as to the law to which the parties have subjected it or, failing any
claims presented in the arbitral proceedings but omitted from the indication thereon, under the law of this State; or
award. If the arbitral tribunal considers the request to be justified, ii) the party making the application was not given proper notice of
it shall make the additional award within sixty days. the appointment of an arbitrator or of the arbitral proceedings or
4) The arbitral tribunal may extend, if necessary, the period of was otherwise unable to present his case; or
time within which it shall make a correction, interpretation or an iii) the award deals with a dispute not contemplated by or not
additional award under paragraph (1) or (3) of this article. falling within the terms of the submission to arbitration, or contains
5) The provisions of article 31 shall apply to a correction or decisions on matters beyond the scope of the submission to
interpretation of the award or to an additional award. arbitration, provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted, only
Sec. 45. Rejection of a Foreign Arbitral Award. - A party to a that part of the award which contains decisions on matters not
foreign arbitration proceeding may oppose an application for submitted to arbitration may be set aside; or
recognition and enforcement of the arbitral award in accordance iv) the composition of the arbitral tribunal or the arbitral procedure
with the procedural rules to be promulgated by the Supreme was not in accordance with the agreement of the parties, unless
Court only on those grounds enumerated under Article V of the such agreement was in conflict with a provision of this Law from
New York Convention. Any other ground raised shall be which the parties cannot derogate, or, failing such agreement,
disregarded by the regional trial court. was not in accordance with this Law; or
b) the court finds that:
Article 36 - [Grounds for refusing recognition or i) the subject-matter of the dispute is not capable of settlement by
enforcement] arbitration under the law of this State; or,
1) Recognition or enforcement of an arbitral award, irrespective of ii) the award is in conflict with the public policy of this State.
the country in which it was made, may be refused only: 3) An application for setting aside may not be made after three
months have elapsed from the date on which the party making
that application had received the award or, if a request had been a. The party making the application furnishes proof that:
made under article 33, from the date on which that request had
been disposed of by the arbitral tribunal. (i). A party to the arbitration agreement was under some
4) The court, when asked to set aside an award, may where incapacity, or the said agreement is not valid under the law to
appropriate and so requested by a party, suspend the setting which the parties have subjected it or, failing any indication
aside proceedings for a period of time determined by it in order to thereof, under Philippine law; or
give the arbitral tribunal an opportunity to resume the arbitral
proceedings or to take such other action as in the arbitral (ii). The party making the application to set aside or resist
tribunal's opinion will eliminate the grounds for setting aside. enforcement was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was otherwise unable to
Rule 13.4. Governing law and grounds to refuse recognition and present his case; or
enforcement. — The recognition and enforcement of a foreign
arbitral award shall be governed by the 1958 New York (iii). The award deals with a dispute not contemplated by or not
Convention on the Recognition and Enforcement of Foreign falling within the terms of the submission to arbitration, or contains
Arbitral Awards (the “New York Convention”) and this Rule. The decisions on matters beyond the scope of the submission to
court may, upon grounds of comity and reciprocity, recognize and arbitration; provided that, if the decisions on matters submitted to
enforce a foreign arbitral award made in a country that is not a arbitration can be separated from those not so submitted, only
signatory to the New York Convention as if it were a Convention that part of the award which contains decisions on matters not
Award. submitted to arbitration may be set aside or only that part of the
award which contains decisions on matters submitted to
A Philippine court shall not set aside a foreign arbitral award but arbitration may be enforced; or
may refuse it recognition and enforcement on any or all of the
following grounds: (iv). The composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
a. The party making the application to refuse recognition and parties, unless such agreement was in conflict with a provision of
enforcement of the award furnishes proof that: Philippine law from which the parties cannot derogate, or, failing
such agreement, was not in accordance with Philippine law;
(i). A party to the arbitration agreement was under some b. The court finds that:
incapacity; or the said agreement is not valid under the law to
which the parties have subjected it or, failing any indication (i). The subject-matter of the dispute is not capable of
thereof, under the law of the country where the award was made; settlement by arbitration under the law of the Philippines; or
or (ii). The recognition or enforcement of the award would be
contrary to public policy.
(ii). The party making the application was not given proper
notice of the appointment of an arbitrator or of the arbitral In deciding the petition, the Court shall disregard any other
proceedings or was otherwise unable to present his case; or ground to set aside or enforce the arbitral award other than those
enumerated above.
(iii). The award deals with a dispute not contemplated by or not
falling within the terms of the submission to arbitration, or contains The petition to set-aside or a pleading resisting the enforcement
decisions on matters beyond the scope of the submission to of an arbitral award on the ground that a party was a minor or an
arbitration; provided that, if the decisions on matters submitted to incompetent shall be filed only on behalf of the minor or
arbitration can be separated from those not so submitted, only incompetent and shall allege that (a) the other party to arbitration
that part of the award which contains decisions on matters not had knowingly entered into a submission or agreement with such
submitted to arbitration may be set aside; or minor or incompetent, or (b) the submission to arbitration was
made by a guardian or guardian ad litem who was not authorized
(iv). The composition of the arbitral tribunal or the arbitral to do so by a competent court.
procedure was not in accordance with the agreement of the
parties or, failing such agreement, was not in accordance with the
law of the country where arbitration took place; or
(v). The award has not yet become binding on the parties or has Magellan Capital Mgt. Corp. v. Zosa, 355 SCRA
been set aside or suspended by a court of the country in which 157 (2001)
that award was made; or
b. The court finds that: Petitioners: Magellan Capital Management

Corporation and Magellan Capital Holdings
(i). The subject-matter of the dispute is not capable of Corporation
settlement or resolution by arbitration under Philippine law; or Respondents: Rolando Zosa and Hon. Jose
(ii). The recognition or enforcement of the award would be
contrary to public policy. Soberano Jr
The court shall disregard any ground for opposing the recognition Facts:
and enforcement of a foreign arbitral award other than those Under a management agreement, Magellan Capital
enumerated above.
Holdings Corporation [MCHC] appointed Magellan
Capital Management Corporation [MCMC] as
Rule 12.4. Grounds to set aside or resist enforcement. — The manager for the operation of its business and
court may set aside or refuse the enforcement of the arbitral affairs. MCMC, and M. Zosa entered into an
award only if:
"Employment Agreement" designating Zosa as
President and CEO of MCHC. Under the the arbitration provision can only be determined
"Employment Agreement", the term of Zosa's after trial on the merits; and (2) the amount of
employment shall be co-terminous with the damages claimed, which is over P100,000.00, falls
management agreement, unless sooner terminated within the jurisdiction of the RTC. The RTC issued
pursuant to the provisions of the Employment a pre-trial order designating only one issue: WON
Agreement. The grounds for termination of the Arbitration Clause was void. Petitioners filed a
employment are also provided in the Employment Motion Ad Cautelam for the clarification of the
Agreement. pretrial order, as well as another on the validity of
the clause. The RTC denied.
The majority of MCHC's Board of Directors decided
not to re-elect Zosa as President and CEO of Petitioners filed a petition for certiorari and
MCHC on account of loss of trust and confidence prohibition before the CA. The CA gave due course
arising from alleged violation of the resolution issued to the petition. Petitioners filed a motions for partial
by MCHC's board of directors and of the non- reconsideration of the CA decision praying (1) for
competition clause of the Employment Agreement. the dismissal of the case in the trial court, on the
Nevertheless, Zosa was elected to a new position ground of lack of jurisdiction, and (2) that the parties
as MCHC's Vice-Chairman/Chairman for New be directed to submit their dispute to arbitration in
Ventures Development. accordance with the Employment Agreement dated
Zosa communicated his resignation from the March 1994. The CA denied the motion for partial
position of Vice-Chairman under paragraph 7 of the reconsideration for lack of merit.
Employment Agreement on the ground that said
position had less responsibility and scope than The RTC later declared the arbitration clause as
President and CEO. He demanded that he be given partially void and of no effect insofar as it concerns
termination benefits. MCHC did not accept the the composition of the panel of arbitrators.
resignation but instead informed him that the
Employment Agreement is being terminated on Issue: WON the SEC has jurisdiction over the case
acountr of breach thereof.
Zosa invoked the Arbitration Clause of the Held: No
Employment Agreement9. He designated his brother,
Atty. Francis Zosa as his representative in the Ratio: The controversy does not in anyway involve
arbitration panel. MCHC designated Atty. Inigo S. the election/appointment of officers of petitioner
Fojas and MCMC nominated Atty. Enrique I. MCHC, as claimed by petitioners in their assignment
Quiason as their representatives l. However, instead of errors. Zosa's amended complaint focuses heavily
of submitting the dispute to arbitration, Zosa filed an on the illegality of the Employment Agreement's
action for damages against petitioners before the "Arbitration Clause" initially invoked by him in
RTC of Cebu to enforce his benefits under the seeking his termination benefits under Section 8 of
Employment Agreement. the employment contract. And under RA 876, it is
the regional trial court which exercises jurisdiction
Petitioners filed an MTD. The RTC denied the MTD over questions relating to arbitration.
on the ground that (1) the validity and legality of "The determination and validity of the agreement is
not a matter intrinsically connected with the
regulation and internal affairs of corporations; it is
9
"23. Arbitration. In the event that any dispute, controversy or rather an ordinary case to be decided in accordance
claim arises out of or under any provisions of this Agreement,
then the parties hereto agree to submit such dispute, controversy with the general laws, and do not require any
or claim to arbitration as set forth in this Section and the particular expertise or training to interpret and
determination to be made in such arbitration shall be final and apply.”
binding. Arbitration shall be effected by a panel of three Furthermore, the decision of the CA affirming the
arbitrators. The Manager, Employee and Corporation shall
designate one (1) arbitrator who shall, in turn, nominate and elect trial court's assumption of jurisdiction over the case
who among them shall be the chairman of the committee. Any has become the "law of the case" which now binds
such arbitration, including the rendering of an arbitration award, the petitioners. The "law of the case" doctrine has
shall take place in Metro Manila. The arbitrators shall interpret this been defined as "a term applied to an established
Agreement in accordance with the substantive laws of the
Republic of the Philippines. The arbitrators shall have no power to rule that when an appellate court passes on a
add to, subtract from or otherwise modify the terms of Agreement question and remands the cause to the lower court
or to grant injunctive relief of any nature. Any judgment upon the for further proceedings, the question there settled
award of the arbitrators may be entered in any court having becomes the law of the case upon subsequent
jurisdiction thereof, with costs of the arbitration to be borne
equally by the parties, except that each party shall pay the fees appeal."
and expenses of its own counsel in the arbitration."
Issue: WON the composition of arbitrators is valid giving one of the parties power to choose more
arbitrators than the other is void and of no effect"
Held: (Article 2045, Civil Code).
"The dispute or controversy between the defendants
Ratio: The Court finds the trial court's observations (MCMC and MCHC) [herein petitioners] and the
on why the composition of the panel of arbitrators plaintiff [herein defendant] should be settled in the
should be voided, incisively correct so as to merit arbitration proceeding in accordance with the
our approval. Thus, Employment Agreement, but under the panel of
three (3) arbitrators, one (1) arbitrator to represent
"From the memoranda of both sides, the Court is of the plaintiff, one (1) arbitrator to represent both
the view that the defendants [petitioner] MCMC and defendants (MCMC and MCHC) [herein petitioners]
MCHC represent the same interest. There is no and the third arbitrator to be chosen by the plaintiff
quarrel that both defendants are entirely two [defendant Zosa] and defendants
different corporations with personalities distinct and [petitioners].
separate from each other and that a corporation has
a personality distinct and separate from those In this connection, petitioners' attempt to put
persons composing the corporation as well as from respondent in estoppel in assailing the arbitration
that of any other legal entity to which it may be clause must be struck down. For one, this issue of
related. estoppel, as likewise noted by the CA, found its way
for the first time only on appeal. Well-settled is the
"But as the defendants [herein petitioner] represent rule that issues not raised below cannot be resolved
the same interest, it could never be expected, in the on review in higher courts. Secondly, employment
arbitration proceedings, that they would not protect agreements such as the one at bar are usually
and preserve their own interest, much less, would contracts of adhesion. Any ambiguity in its
both or either favor the interest of the plaintiff. The provisions is generally resolved against the party
arbitration law, as all other laws, is intended for the who drafted the document. Thus, in the relatively
good and welfare of everybody. In fact, what is being recent case of Phil. Federation of Credit
challenged by the plaintiff herein is not the law itself Cooperatives, Inc. (PFCCI) and Fr. Benedicto
but the provision of the Employment Agreement Jayoma vs. NLRC and Victoria Abril, we had the
based on the said law, which is the arbitration clause occasion to stress that "where a contract of
but only as regards the composition of the panel of employment, being a contract of adhesion, is
arbitrators. ambiguous, any ambiguity therein should be
construed strictly against the party who prepared it."
"From the arbitration clause, it appears that the two And, finally, Zosa never submitted himself to
(2) defendants [petitioners] (MCMC and MCHC) arbitration proceedings (as there was none yet)
have one (1) arbitrator each to compose the panel of before bewailing the composition of the panel of
three (3) arbitrators. As the defendant MCMC is the arbitrators. He in fact, lost no time in assailing the
Manager of defendant MCHC, its decision or vote in "arbitration clause" upon realizing the inequities that
the arbitration proceeding would naturally and may mar the arbitration proceedings if the existing
certainly be in favor of its employer and the line-up of arbitrators remained unchecked.
defendant MCHC would have to protect and Arbitration proceedings are designed to level the
preserve its own interest; hence, the two (2) votes of playing field among the parties in pursuit of a
both defendants (MCMC and MCHC) would certainly mutually acceptable solution to their conflicting
be against the lone arbitrator for the plaintiff [herein claims. Any arrangement or scheme that would give
defendant]. Hence, apparently, plaintiff [defendant] undue advantage to a party in the negotiating table
would never get or receive justice and fairness in the is anathema to the very purpose of arbitration and
arbitration proceedings from the panel of arbitrators should, therefore, be resisted.
as provided in the aforequoted arbitration clause. In
fairness and justice to the plaintiff [defendant], the BF Corporation v. CA, 288 SCRA 267 (1998)
two defendants (MCMC and MCHC) [herein Parties executed an “Agreement for the Execution of
petitioners] which represent the same interest Builder’s Work for the EDSA Plaza Project”
should be considered as one and should be entitled BF filed Complaint for collection
to only one arbitrator to represent them in the SPI filed MTS
arbitration proceedings. Accordingly, the arbitration TC denied – too late
clause, insofar as the composition of the panel of CA annulled TC order
arbitrators is concerned should be declared void and 1) Certiorari proper – QoL (jurisdiction); QoF
of no effect, because the law says, "Any clause (existence or arbitration clause) – CA annulled
RTC order saying that invoking the arbitration they entered into an agreement defining their rights
clause was too late and obligations in undertaking the project.
2) Arbitration clause exists, even if the parties did
not sign the Conditions of Contract, since they Thereafter, upon a finding that an arbitration clause
signed the Articles of Agreement indeed exists, the lower court denied the motion to
3) No default in invoking the provisions of the suspend proceedings as the Conditions of Contract
arbitration clause – “within a reasonable time was not duly executed or signed by the parties, and
after the dispute has arisen and attempts to the failure of the defendants to submit any signed
settle amicably have failed.” copy of the said document,.
The lower court then ruled that, assuming that the

BF Corporation v. CA, 288 SCRA 267 (1998) arbitration clause was valid and binding, still, it was
"too late in the day for defendants to invoke
arbitration. Considering the fact that under the
BF Corp vs CA supposed Arbitration Clause invoked by defendants,
Date: March 27, 1998 it is required that "Notice of the demand for
Petitioner: BF Corporation arbitration of a dispute shall be filed in writing with
Respondents: CA, Shangri-la Properties Inc, Rufo the other party . . . . in no case . . . . later than the
Colayco, Alfredo Ramos, Maximo Licauco, et al time of final payment . . . "which apparently, had
elapsed because defendants have failed to file any
written notice of any demand for arbitration during
Facts: the said long period of one year and eight months.
Petitioner and respondent Shangri-la Properties, Inc. The CA annulled the orders of the RTC.
entered into an agreement whereby the latter
engaged the former to construct the main structure Issue: WON a petition for certiorari is proper
of the "EDSA Plaza Project," a shopping mall
complex in Mandaluyong. Petitioner incurred delay Held: Yes
in the construction work that SPI considered as
"serious and substantial." On the other hand, Ratio: The rule that the special civil action of
according to petitioner, the construction works certiorari may not be invoked as a substitute for the
"progressed in faithful compliance with the First remedy of appeal. The Court has likewise ruled that
Agreement until a fire broke out damaging Phase I" "certiorari will not be issued to cure errors in
of the Project. Hence, SPI proposed the re- proceedings or correct erroneous conclusions of law
negotiation of the agreement between them. or fact. As long as a court acts within its jurisdiction,
Petitioner and SPI entered into a written agreement any alleged errors committed in the exercise of its
denominated as "Agreement for the Execution of jurisdiction will amount to nothing more than errors
Builder's Work for the EDSA Plaza Project." Said of judgment which are reviewable by timely appeal
agreement would cover the construction work on and not by a special civil action of certiorari."
said project as of May 1, 1991 until its eventual
completion. According to SPI, petitioner "failed to The question of jurisdiction, which is a question of
complete the construction works and abandoned the law depends on the determination of the existence
project." This resulted in disagreements between the of the arbitration clause, which is a question of fact.
parties as regards their respective liabilities under In the instant case, the lower court found that there
the contract. exists an arbitration clause. However, it ruled that in
contemplation of law, said arbitration clause does
Petitioner filed with the RTC of Pasig a complaint for not exist. It is that mode of appeal taken by private
collection of the balance due under the construction respondents before the CA that is being questioned
agreement. SPI and its co-defendants filed a motion by the petitioners before this Court. But at the heart
to suspend proceedings instead of filing an answer. of said issue is the question of whether there exists
The motion was anchored on defendants' allegation an Arbitration Clause because if an Arbitration
that the formal trade contract for the construction of Clause does not exist, then private respondents took
the project provided for a clause requiring prior the wrong mode of appeal before the CA.
resort to arbitration before judicial intervention could
be invoked in any dispute arising from the contract. For this Court to be able to resolve the question of
Petitioner opposed said motion claiming that there whether private respondents took the proper mode
was no formal contract between the parties although of appeal, which, incidentally, is a question of law,
then it has to answer the core issue of whether there representatives of both parties and duly notarized.
exists an Arbitration Clause which, admittedly, is a The failure of the private respondent's representative
question of fact. to initial the "Conditions of Contract" would therefor
not affect compliance with the formal requirements
Moreover, where a rigid application of the rule that for arbitration agreements because that particular
certiorari cannot be a substitute for appeal will result portion of the covenants between the parties was
in a manifest failure or miscarriage of justice, the included by reference in the Articles of Agreement.
provisions of the Rules of Court which are technical
rules may be relaxed. As we shall show hereunder, Petitioner's contention that there was no arbitration
had the CA dismissed the petition for certiorari, the clause because the contract incorporating said
issue of whether or not an arbitration clause exists in provision is part of a "hodge-podge" document, is
the contract would not have been resolved in therefore untenable. A contract need not be
accordance with evidence extant in the record of the contained in a single writing. It may be collected
case. Consequently, this would have resulted in a from several different writings which do not conflict
judicial rejection of a contractual provision agreed by with each other and which, when connected, show
the parties to the contract. the parties, subject matter, terms and consideration,
as in contracts entered into by correspondence. 13 A
In the same vein, this Court holds that the question contract may be encompassed in several
of the existence of the arbitration clause in the instruments even though every instrument is not
contract between petitioner and private respondents signed by the parties, since it is sufficient if the
is a legal issue that must be determined in this unsigned instruments are clearly identified or
petition for review on certiorari. referred to and made part of the signed instrument
or instruments. Similarly, a written agreement of
Issue: WON an arbitration clause exists which there are two copies, one signed by each of
the parties, is binding on both to the same extent as
Held: though there had been only one copy of the
agreement and both had signed it.
Ratio: Petitioner denies the existence of the
arbitration clause primarily on the ground that the The flaw in petitioner's contentions therefore lies in
representatives of the contracting corporations did its having segmented the various components of the
not sign the "Conditions of Contract" that contained whole contract between the parties into several
the said clause. Its other contentions, specifically parts. This notwithstanding, petitioner ironically
that insinuating fraud as regards the alleged admits the execution of the Articles of Agreement.
insertion of the arbitration clause, are questions of Notably, too, the lower court found that the said
fact that should have been threshed out below. Articles of Agreement "also provides that the
'Contract Documents' therein listed 'shall be deemed
Court may as well proceed to determine whether an integral part of this Agreement,' and one of the
the arbitration clause does exist in the parties' said documents is the 'Conditions of Contract' which
contract. Republic Act No. 876 provides for the contains the Arbitration Clause.'" It is this Articles of
formal requisites of an arbitration. The formal Agreement that was duly signed by Rufo B. Colayco,
requirements of an agreement to arbitrate are president of private respondent SPI, and Bayani F.
therefore the following: (a) it must be in writing and Fernando, president of petitioner corporation. The
(b) it must be subscribed by the parties or their same agreement was duly subscribed before notary
representatives. There is no denying that the parties public Nilberto R. Briones. In other words, the
entered into a written contract that was submitted in subscription of the principal agreement effectively
evidence before the lower court. To "subscribe" covered the other documents incorporated by
means to write underneath, as one's name; to sign reference therein.
at the end of a document. That word may
sometimes be construed to mean to give consent to This Court likewise does not find that the CA erred in
or to attest. ruling that private respondents were not in default in
invoking the provisions of the arbitration clause
The Court finds that, upon a scrutiny of the records which states that "(t)he demand for arbitration shall
of this case, these requisites were complied with in be made within a reasonable time after the dispute
the contract in question. The Articles of Agreement, has arisen and attempts to settle amicably had
which incorporates all the other contracts and failed." Under the factual milieu, SPI should have
agreements between the parties, was signed by paid its liabilities tinder the contract in accordance
with its terms. However, misunderstandings Arbitration clause in a Container Clause – merely
appeared to have cropped up between the parties initialed by one party. Held: Valid. The main
ostensibly brought about by either delay in the agreement, the articles of agreement, was signed by
completion of the construction work or by force the CEO.
majeure or the fire that partially gutted the project.
The almost two-year delay in paying its liabilities It did not contain arb clause.
may not therefore be wholly ascribed to private
respondent SPI. What it included are references to ____, “conditions
of contract.”
Besides, SPI's initiative in calling for a conference
between the parties was a step towards the agreed What did Shangrila file in the RTC after DS filed
resort to arbitration. However, petitioner posthaste the action for specific performance?
filed the complaint before the lower court. Thus, Motion to Suspend, based on RA 876, Sec.7 (Stay
while SPI's request for arbitration might appear an of civil action); RA 9285, Sec. 24, not later than pre-
afterthought as it was made after it had filed the trial.
motion to suspend proceedings, it was because
petitioner acted hastily in order to resolve the What if this place was an international arbitration
controversy through the courts. and the place of arbitration is the Philippines?
Would you have arrived at the same answer?
The arbitration clause provides for a "reasonable
time" within which the parties may avail of the relief Article 8 - [Arbitration agreement and substantive claim
under that clause. "Reasonableness" is a relative before court]
1) A court before which an action is brought in a matter which is
term and the question of whether the time within the subject of an arbitration agreement shall, if a party so
which an act has to be done is reasonable depends requests not later than when submitting his first statement on the
on attendant circumstances. This Court finds that substance of the dispute, refer the parties to arbitration unless it
under the circumstances obtaining in this case, a finds that the agreement is null and void, inoperative or incapable
of being performed.
one-month period from the time the parties held a 2) Where an action referred to in paragraph (1) of this article has
conference on July 12, 1993 until private respondent been brought, arbitral proceedings may nevertheless be
SPI notified petitioner that it was invoking the commenced or continued, and an award may be made, while the
arbitration clause, is a reasonable time. Indeed, issue is pending before the court.
petitioner may not be faulted for resorting to the
court to claim what was due it under the contract.
However, we find its denial of the existence of the
arbitration clause as an attempt to cover up its Next 5 meetings
misstep in hurriedly filing the complaint before the CIAC
lower court. UNCINTRAL / ICC
NY Convention
In this connection, it bears stressing that the lower Slideshow
court has not lost its jurisdiction over the case.
Section 7 of RA 876 provides that proceedings
therein have only been stayed. After the special Class Notes – August 27, 2010
proceeding of arbitration has been pursued and
completed, then the lower court may confirm the Recap: Which proceedings are summary and
award made by the arbitrator. which are not?
It should be noted that in this jurisdiction, arbitration Covered by Summary Procedure:

has been held valid and constitutional. Even before
1) Judicial Relief Involving the Issue of Existence,
Validity or Enforceability of the Arbitration
Agreement;
2) Referral to ADR;
3) Interim Measures of Protection;
4) Appointment of Arbitrator;
Class Notes: 5) Challenge to Appointment of Arbitrator;
6) Termination of Mandate of Arbitrator;
7) Assistance in Taking Evidence;
8) Confidentiality/Protective Orders; and
9) Deposit and Enforcement of Mediated petition for certiorari questioning the merits of
Settlement Agreements. an arbitral award.
Not Covered by Summary Procedure: See case APT v. CA –
1) Confirmation, Correction or Vacation of Award in As a rule, the award of an arbitrator cannot be set
Domestic Arbitration aside for mere errors of judgment either as to the
2) Recognition and Enforcement or Setting Aside law or as to the facts. Courts are without power
of an Award in International Commercial to amend or overrule merely because of
Arbitration disagreement with matters of law or facts
3) Recognition and Enforcement of a Foreign determined by the arbitrators. They will not
Arbitral Award review the findings of law and fact contained in
an award, and will not undertake to substitute
If the arbitration clause is found void, how will their judgment for that of the arbitrators, since
the parties resolve their dispute? Can one party any other rule would make an award the
go right away to the court? Is it not an issue that commencement, not the end, of litigation. Errors
must be threshed out before the arbitral of law and fact, or an erroneous decision of matters
tribunal? What about the competence- submitted to the judgment of the arbitrators, are
competence principle? insufficient to invalidate an award fairly and honestly
made. Judicial review of an arbitration is thus, more
See Gonzales and Magellan case limited than judicial review of a trial. (Asset
See 3.12, 2.2 Privatization Trust vs CA)
Note: If you do not want judicial review (cite the

Separability clause protects the arbitration clause, abovementioned ratio); if you want judicial
not the container contract. (Carla) review, cite the following)
Before commencement – go to court, prim facie
finding Nonetheless, the arbitrators' award is not absolute
After commencement – go to court, questioning the and without exceptions. The arbitrators cannot
ruling of the arbitral tribunal’s ruling on its jurisdiction resolve issues beyond the scope of the submission
Go to court agreement. The parties to such an agreement are
If court has declared that arbitration clause is void, bound by the arbitrators' award only to the extent
and in the manner prescribed by the contract and
Sir, it’s clear if sabay, but what if the court has only if the award is rendered in conformity thereto.
ALREADY declared the arbitration clause as Thus, Sections 24 and 25 of the Arbitration Law
void. provide grounds for vacating, rescinding or
Sir: Consider Article 5 of the Civil Code. modifying an arbitration award. Where the conditions
If it’s void, can it give rise to a right? described in Articles 2038, 2039, and 1040 of CC
applicable to compromises and arbitration are
If it’s void due to lack of due process – VOID. attendant, the arbitration award may also be
annulled.
Purpose granting the court the power to declare it
void It should be stressed that while a court is precluded
Whether arbitration commencement has started or from overturning an award for errors in the
not determination of factual issues, nevertheless, if an
Purpose of RA 9285 – whether luto or not examination of the record reveals no support
Whether you will allow to proceed first and let us see whatever for the arbitrators determinations, their
the result award must be vacated, in the same manner, an
award must be vacated if it was made in manifest
Note: You cannot assail the arbitral award as to the disregard of the law. (Asset Privatization Trust vs
merits. CA)
Rule 19.7. No appeal or certiorari on the merits of

an arbitral award. — An agreement to refer a dispute Korea Technologies Co. Ltd. v. Lerma, 542 SCRA
to arbitration shall mean that the arbitral award shall 1 (2008)
be final and binding. Consequently, a party to an
arbitration is precluded from filing an appeal or a
Petitioner: Korea Technologies Co Ltd Contract by unilaterally rescinding the contract

Respondents: Hon. Alberto Lerma and Pacific without resorting to arbitration.
General Steel Manufacturing Corporation
PGSMC filed an opposition to the TRO arguing that
Facts: KOGIES was not entitled to the TRO since Art. 15,
the arbitration clause, was null and void for being
Petitioner Korea is a Korean corporation which is against public policy as it ousts the local courts
engaged in the supply and installation of LPG of jurisdiction over the instant controversy. The
Cylinder manufacturing plants, while private RTC issued an Order denying the application for a
respondent is a domestic corporation. The parties writ of preliminary injunction, reasoning that PGSMC
executed a contract in the Philippines whereby had paid KOGIES USD 1,224,000, the value of the
KOGIES would set up an LPG Cylinder machineries and equipment as shown in the contract
Manufacturing Plant in Carmona, Cavite. The parties such that KOGIES no longer had proprietary rights
executed in Korea an Amendment of the Contract over them. And finally, the RTC held that Art. 15 of
regarding the terms of payment. the Contract as amended was invalid as it tended to
oust the trial court or any other court jurisdiction over
However, gleaned from the Certificate executed by any dispute that may arise between the parties.
the parties after the installation of the plant, the initial Later, the trial court issued an Order (1) granting
operation could not be conducted as PGSMC PGSMC’s motion for inspection; (2) denying
encountered financial difficulties affecting the KOGIES’ MR of the July 23, 1998 RTC Order; and
supply of materials, thus forcing the parties to (3) denying KOGIES’ motion to dismiss PGSMC’s
agree that KOGIES would be deemed to have compulsory counterclaims as these counterclaims
completely complied with the terms and fell within the requisites of compulsory
conditions of the contract. For the remaining counterclaims.
balance of USD306,000 for the installation and initial
operation of the plant, PGSMC issued two KOGIES filed a petition for certiorari before the CA
postdated checks. praying that PGSMC be enjoined from dismantling
the machineries and that the RTC enforce the
When KOGIES deposited the checks, they were specific agreement on arbitration to resolve the
dishonored. KOGIES sent a demand letter to dispute.
PGSMC threatening to file a case for BP22. The
wife of PGSMC’s President faxed a letter to The CA affirmed the RTC Orders and dismissed the
KOGIES’ President complaining that KOGIES petition. On the issue of the validity of the arbitration
delivered a different brand of hydraulic press and clause, the CA agreed with the lower court that an
did not deliver several equipment parts. arbitration clause which provided for a final
determination of the legal rights of the parties to the
PGSMC informed KOGIES that it will be cancelling contract by arbitration was against public policy.
their contract on grounds of alteration in the
quantity and lowered quality of the machineries. Issue: WON the arbitration clause is valid
PGSMC filed an Affidavit-Complaint for Estafa
against the President of Kogies. KOGIES informed Held: Yes
PGSMC that the latter could not unilaterally
rescind the contract. It also insisted that the Ratio: Established in this jurisdiction is the rule that
disputes should be settled by arbitration pursuant the law of the place where the contract is made
to the contract. KOGIES instituted an Application governs. Lex loci contractus. The contract in this
for Arbitration before the Korean Commercial case was perfected here in the Philippines.
Arbitration Board pursuant to Art 15 of the Therefore, our laws ought to govern. Nonetheless,
Contract. Art. 2044 CC sanctions the validity of mutually
agreed arbitral clause or the finality and binding
KOGIES also filed a complaint for specific effect of an arbitral award. Art. 2044 provides, “Any
performance before the Muntinlupa RTC. KOGIES stipulation that the arbitrators’ award or decision
averred that PGSMC violated Art. 15 10of their shall be final, is valid, without prejudice to Articles
10
Article 15. Arbitration.—All disputes, controversies, or accordance with the Commercial Arbitration Rules of the Korean
differences which may arise between the parties, out of or in Commercial Arbitration Board. The award rendered by the
relation to or in connection with this Contract or for the breach arbitration(s) shall be final and binding upon both parties
thereof, shall finally be settled by arbitration in Seoul, Korea in concerned. (Emphasis supplied.)
2038, 2039 and 2040.” Arts. 2038, 2039, and 2040 procedural law which has a retroactive effect.
refer to instances where a compromise or an Likewise, KOGIES filed its application for arbitration
arbitral award, as applied to Art. 2044 pursuant before the KCAB on July 1, 1998 and it is still
to Art. 2043, may be voided, rescinded, or pending because no arbitral award has yet been
annulled, but these would not denigrate the rendered. Thus, RA 9285 is applicable to the instant
finality of the arbitral award. case. Well-settled is the rule that procedural laws
are construed to be applicable to actions pending
The arbitration clause was mutually and and undetermined at the time of their passage, and
voluntarily agreed upon by the parties. It has not are deemed retroactive in that sense and to that
been shown to be contrary to any law, or against extent. As a general rule, the retroactive application
morals, good customs, public order, or public policy. of procedural laws does not violate any personal
There has been no showing that the parties have not rights because no vested right has yet attached nor
dealt with each other on equal footing. We find no arisen from them. Among the pertinent features of
reason why the arbitration clause should not be RA 9285 applying and incorporating the UNCITRAL
respected and complied with by both parties. Model Law are the following:
Arbitration clause not contrary to public policy (1) The RTC must refer to arbitration in proper
cases. Under Sec. 24, the RTC does not have
The arbitration clause which stipulates that the jurisdiction over disputes that are properly the
arbitration must be done in Seoul, Korea in subject of arbitration pursuant to an arbitration
accordance with the Commercial Arbitration Rules of clause, and mandates the referral to arbitration.
the KCAB, and that the arbitral award is final and
binding, is not contrary to public policy. This Court (2) Foreign arbitral awards must be confirmed by
has sanctioned the validity of arbitration clauses in a the RTC. Foreign arbitral awards while mutually
catena of cases. stipulated by the parties in the arbitration clause to
be final and binding are not immediately enforceable
Consistent with the policy of encouraging alternative or cannot be implemented immediately. Sec. 35 of
dispute resolution methods, courts should liberally the UNCITRAL Model Law stipulates the
construe arbitration clauses. Provided such clause is requirement for the arbitral award to be recognized
susceptible of an interpretation that covers the by a competent court for enforcement, which court
asserted dispute, an order to arbitrate should be under Sec. 36 of the UNCITRAL Model Law may
granted. Any doubt should be resolved in favor of refuse recognition or enforcement on the grounds
arbitration. provided for. RA 9285 incorporated these provisos
to Secs. 42, 43, and 44 relative to Secs. 47 and 48.
Having said that the instant arbitration clause is not
against public policy, we come to the question on It is now clear that foreign arbitral awards when
what governs an arbitration clause specifying that in confirmed by the RTC are deemed not as a
case of any dispute arising from the contract, an judgment of a foreign court but as a foreign arbitral
arbitral panel will be constituted in a foreign country award, and when confirmed, are enforced as final
and the arbitration rules of the foreign country would and executory decisions of our courts of law. Thus, it
govern and its award shall be final and binding. can be gleaned that the concept of a final and
binding arbitral award is similar to judgments or
RA 9285 incorporated the UNCITRAL Model law awards given by some of our quasi-judicial bodies,
to which we are a signatory like the NLRC and Mines Adjudication Board, whose
final judgments are stipulated to be final and binding,
In case a foreign arbitral body is chosen by the but not immediately executory in the sense that they
parties, the arbitration rules of our domestic may still be judicially reviewed, upon the instance of
arbitration bodies would not be applied. As any party. Therefore, the final foreign arbitral
signatory to the Arbitration Rules of the UNCITRAL awards are similarly situated in that they need first to
Model Law on International Commercial Arbitration be confirmed by the RTC.
of the UNCITRAL, the Philippines committed itself to
be bound by the Model Law. We have even (3) The RTC has jurisdiction to review foreign
incorporated the Model Law in RA 9285. arbitral awards. Sec. 42 in relation to Sec. 45 of RA
9285 designated and vested the RTC with specific
While RA 9285 was passed only in 2004, it authority and jurisdiction to set aside, reject, or
nonetheless applies in the instant case since it is a
vacate a foreign arbitral award on grounds provided may have misgivings on the foreign arbitration done
under Art. 34(2) of the UNCITRAL Model Law. in Korea by the KCAB, it has available remedies
under RA 9285. Its interests are duly protected by
Thus, while the RTC does not have jurisdiction over the law which requires that the arbitral award that
disputes governed by arbitration mutually agreed may be rendered by KCAB must be confirmed here
upon by the parties, still the foreign arbitral award is by the RTC before it can be enforced.
subject to judicial review by the RTC which can set
aside, reject, or vacate it. In this sense, what this Petitioner is correct in its contention that an
Court held in Chung Fu Industries relied upon by arbitration clause, stipulating that the arbitral award
KOGIES is applicable insofar as the foreign arbitral is final and binding, does not oust our courts of
awards, while final and binding, do not oust courts of jurisdiction as the international arbitral award, the
jurisdiction since these arbitral awards are not award of which is not absolute and without
absolute and without exceptions as they are still exceptions, is still judicially reviewable under certain
judicially reviewable. Chapter 7 of RA 9285 has conditions provided for by the UNCITRAL Model
made it clear that all arbitral awards, whether Law on ICA as applied and incorporated in RA 9285.
domestic or foreign, are subject to judicial review on
specific grounds provided for. Finally, it must be noted that there is nothing in the
subject Contract which provides that the parties may
(4) Grounds for judicial review different in dispense with the arbitration clause.
domestic and foreign arbitral awards. The
differences between a final arbitral award from an Issue: WON the unilateral rescission is proper
international or foreign arbitral tribunal and an award
given by a local arbitral tribunal are the specific Held: No
grounds or conditions that vest jurisdiction over our
courts to review the awards. For foreign or Ratio: What this Court held in UP v. De Los
international arbitral awards which must first be Angeles and reiterated in succeeding cases, that
confirmed by the RTC, the grounds for setting aside, the act of treating a contract as rescinded on
rejecting or vacating the award by the RTC are account of infractions by the other contracting party
provided under Art. 34(2) of the UNCITRAL Model is valid albeit provisional as it can be judicially
Law. For final domestic arbitral awards, which also assailed, is not applicable to the instant case on
need confirmation by the RTC pursuant to Sec. 23 of account of a valid stipulation on arbitration. Where
RA 876 and shall be recognized as final and an arbitration clause in a contract is availing,
executory decisions of the RTC, they may only be neither of the parties can unilaterally treat the
assailed before the RTC and vacated on the contract as rescinded since whatever infractions
grounds provided under Sec. 25 of RA 876. or breaches by a party or differences arising
from the contract must be brought first and
(5) RTC decision of assailed foreign arbitral resolved by arbitration, and not through an
award appealable. Sec. 46 of RA 9285 provides for extrajudicial rescission or judicial action.
an appeal before the CA as the remedy of an
aggrieved party in cases where the RTC sets aside, The issues arising from the contract between
rejects, vacates, modifies, or corrects an arbitral PGSMC and KOGIES on whether the equipment
award. The losing party who appeals from the and machineries delivered and installed were
judgment of the court confirming an arbitral award properly installed and operational in the plant in
shall be required by the appellate court to post a Carmona, Cavite; the ownership of equipment and
counterbond executed in favor of the prevailing party payment of the contract price; and whether there
equal to the amount of the award in accordance with was substantial compliance by KOGIES in the
the rules to be promulgated by the Supreme Court. production of the samples, given the alleged fact
Thereafter, the CA decision may further be appealed that PGSMC could not supply the raw materials
or reviewed before this Court through a petition for required to produce the sample LPG cylinders, are
review under Rule 45 of the Rules of Court. matters proper for arbitration. Indeed, we note that
on July 1, 1998, KOGIES instituted an Application
PGSMC has remedies to protect its interests for Arbitration before the KCAB in Seoul, Korea
pursuant to Art. 15 of the Contract as amended.
Thus, based on the foregoing features of RA 9285, Thus, it is incumbent upon PGSMC to abide by its
PGSMC must submit to the foreign arbitration as it commitment to arbitrate.
bound itself through the subject contract. While it
Issue: WON the issue on ownership of plant is As a fundamental point, the pendency of arbitral
proper for arbitration proceedings does not foreclose resort to the courts
for provisional reliefs. The Rules of the ICC, which
Held: Yes governs the parties’ arbitral dispute, allows the
application of a party to a judicial authority for interim
Ratio: It is settled that questions of fact cannot be or conservatory measures. Likewise, Section 14 of
raised in an original action for certiorari. Whether or RA 876 recognizes the rights of any party to petition
not there was full payment for the machineries and the court to take measures to safeguard and/or
equipment and installation is indeed a factual issue conserve any matter which is the subject of the
prohibited by Rule 65. However, what appears to dispute in arbitration. In addition, R.A. 9285 allows
constitute a grave abuse of discretion is the order of the filing of provisional or interim measures with the
the RTC in resolving the issue on the ownership of regular courts whenever the arbitral tribunal has no
the plant when it is the arbitral body (KCAB) and not power to act or to act effectively. It is thus beyond
the RTC which has jurisdiction and authority over cavil that the RTC has authority and jurisdiction to
the said issue. The RTC’s determination of such grant interim measures of protection.
factual issue constitutes grave abuse of discretion
and must be reversed and set aside. Secondly, considering that the equipment and
machineries are in the possession of PGSMC, it has
Issue: What are the interim measures which the the right to protect and preserve the equipment and
RTC can issue machineries in the best way it can. Considering that
the LPG plant was non-operational, PGSMC has the
Ratio: Firstly, while the issue of the proper right to dismantle and transfer the equipment and
installation of the equipment and machineries might machineries either for their protection and
well be under the primary jurisdiction of the arbitral preservation or for the better way to make good use
body to decide, yet the RTC under Sec. 28 of RA of them which is ineluctably within the management
9285 has jurisdiction to hear and grant interim discretion of PGSMC.
measures to protect vested rights of the parties.
Thirdly, and of greater import is the reason that
Art. 17(2) of the UNCITRAL Model Law on ICA maintaining the equipment and machineries in
defines an “interim measure” of protection as:(2) An Worth’s property is not to the best interest of
interim measure is any temporary measure, PGSMC due to the prohibitive rent while the LPG
whether in the form of an award or in another form, plant as set-up is not operational. PGSMC was
by which, at any time prior to the issuance of the losing PhP322,560 as monthly rentals or PhP3.87M
award by which the dispute is finally decided, the for 1998 alone without considering the 10% annual
arbitral tribunal orders a party to: (a) Maintain or rent increment in maintaining the plant.
restore the status quo pending determination of the
dispute; Fourthly, and corollarily, while the KCAB can rule on
motions or petitions relating to the preservation or
(b) Take action that would prevent, or refrain from transfer of the equipment and machineries as an
taking action that is likely to cause, current or interim measure, yet on hindsight, the July 23, 1998
imminent harm or prejudice to the arbitral process Order of the RTC allowing the transfer of the
itself; equipment and machineries given the non-
recognition by the lower courts of the arbitral clause,
(c) Provide a means of preserving assets out of has accorded an interim measure of protection to
which a subsequent award may be satisfied; or PGSMC which would otherwise been irreparably
damaged.
(d) Preserve evidence that may be relevant and
material to the resolution of the dispute. Fifth, KOGIES is not unjustly prejudiced as it has
already been paid a substantial amount based on
Art. 17 J of UNCITRAL Model Law on ICA also the contract. Moreover, KOGIES is amply protected
grants courts power and jurisdiction to issue interim by the arbitral action it has instituted before the
measures. In the recent 2006 case of Transfield KCAB, the award of which can be enforced in our
Philippines, Inc. v. Luzon Hydro Corporation, we jurisdiction through the RTC. Besides, by our
were explicit that even “the pendency of an arbitral decision, PGSMC is compelled to submit to
proceeding does not foreclose resort to the courts arbitration pursuant to the valid arbitration clause of
for provisional reliefs.” We explicated this way: its contract with KOGIES.
PGSMC to preserve the subject equipment and provisional, other party may challenge the validity in
machineries court.
This case, however, was not applied to Korea on
Finally, while PGSMC may have been granted the account of a valid stipulation on arbitration.
right to dismantle and transfer the subject equipment
and machineries, it does not have the right to Sir: It would seem that if you agree to arbitrate, then
convey or dispose of the same considering the your hands will become tied.
pending arbitral proceedings to settle the differences
of the parties. PGSMC therefore must preserve and Note the denial of preliminary injunction by RTC
maintain the subject equipment and machineries Muntinlupa – Court said it’s proper because the
with the diligence of a good father of a family until arbitral tribunal was not yet constituted.
final resolution of the arbitral proceedings and
enforcement of the award, if any. Assuming that the Korean Company proceeded
to commence the arbitration in Korea, can he ask
CLASS NOTES: for the same preliminary injunction from the
Arbitration is valid pursuant to Article 2044 of the arbitral tribunal in Korea? Can it issue an interim
Civil Code. Concept of a final and binding award award opposite from the RTC of Muntinlupa?
similar to final judgments by a QJA.
Theoretically, yes. Basis? Rule 5.13
Art. 2044. Any stipulation that the arbitrators' award or decision Practically speaking, how will Korea enforce it (not to
shall be final, is valid, without prejudice to Articles 2038, 2039, dismantle and remove)?
and 2040.
Art. 2038. A compromise in which there is mistake, fraud, Rule 5.13. Modification, amendment, revision or revocation of
violence, intimidation, undue influence, or falsity of documents, is court’s previously issued interim measure of protection. — Any
subject to the provisions of Article 1330 of this Code. court order granting or denying interim measure/s of protection is
issued without prejudice to subsequent grant, modification,
However, one of parties cannot set up a mistake of fact as against amendment, revision or revocation by the arbitral tribunal as may
the other if the latter, by virtue of the compromise, has withdrawn be warranted.
from a litigation already commenced. (1817a)
An interim measure of protection issued by the arbitral tribunal
Art. 2039. When the parties compromise generally on all shall, upon its issuance be deemed to have ipso jure modified,
differences which they might have with each other, the discovery amended, revised or revoked an interim measure of protection
of documents referring to one or more but not to all of the previously issued by the court to the extent that it is inconsistent
questions settled shall not itself be a cause for annulment or with the subsequent interim measure of protection issued by the
rescission of the compromise, unless said documents have been arbitral tribunal.
concealed by one of the parties.
Rule 5.14. Conflict or inconsistency between interim measure of
But the compromise may be annulled or rescinded if it refers only protection issued by the court and by the arbitral tribunal. — Any
to one thing to which one of the parties has no right, as shown by question involving a conflict or inconsistency between an interim
the newly-discovered documents. (n) measure of protection issued by the court and by the arbitral
tribunal shall be immediately referred by the court to the arbitral
Art. 2040. If after a litigation has been decided by a final tribunal which shall have the authority to decide such question.
judgment, a compromise should be agreed upon, either or both
parties being unaware of the existence of the final judgment, the So how can you enforce such interim award?
compromise may be rescinded.
Note Rule 5.16 – assistance in the enforcement of
interim award. Invoke 5.13 and 5.14. What if he
Voidable: denies again?
Fraud
Violence Rule 19.1. Motion for reconsideration, when allowed. — A party
Mistake may ask the Regional Trial to reconsider its ruling on the
Undue Influence following:
Intimidation d. Granting or denying a party an interim measure of protection
Rule 19.12. Appeal to the Court of Appeals.—An appeal to the

Was there a new doctrine laid down in the Korea Court of Appeals through a petition for review under this Special
case? Is there anything that modified, qualified Rule shall only be allowed from the following final orders of the
what is otherwise a settled doctrine in civil law? Regional Trial Court:
a. Granting or denying an interim measure of protection;
Unilateral rescission / resolution doctrine in UP v. De Rule 19.26. Certiorari to the Court of Appeals. — When the
Los Angeles, thus, under 1191 – one party may Regional Trial Court, in making a ruling under the Special ADR
rescind if other party is unable to comply with his Rules, has acted without or in excess of its jurisdiction, or with
grave abuse of discretion amounting to lack or excess of
obligation (Unilateral rescission) – but this is
jurisdiction, and there is no appeal or any plain, speedy, and to the CA on certiorari questioning the admission of
adequate remedy in the ordinary course of law, a party may file a
special civil action for certiorari to annul or set aside a ruling of the
the amended complaint.
Regional Trial Court. The CA denied due course to the Toyota
A special civil action for certiorari may be filed against the petition on the finding that the amendment of Sun
following orders of the court. Valley's complaint was a valid one as Sun Valley's
d. Granting or refusing an interim relief; action was not for unlawful detainer but an accion
publiciana. Furthermore, the supplemental petitions
filed by Toyota assailing the prohibitory and
Toyota Motor Phils. Corp. V. CA, 216 SCRA 336 mandatory injunctive writ were not ruled upon as
(1992) they were expunged from the records because of
Toyota's failure to attach a motion to admit these
Petitioner: Toyota Motors Philippines Corporation supplemental petitions.
Respondents: CA, Hon. Fernando Gorospe and Sun
Valley Manufacturing and Development Corp Issue:
Who as between Judge Tensuan or Judge Gorospe
Facts: has jurisdiction over the dispute
Both Toyota and Sun Valley are the registered
owners of two adjoining parcels of land formerly Ratio:
owned by Delta Motors Corp (DMC) situated in La
Huerta, Parañaque, Metro Manila which they Toyota filed an action for reformation on September
purchased from the APT. 11, 1991, before Judge Tensuan alleging that the
Part of the duly parcelled Delta I property true intentions of the parties were not expressed in
was sold to Toyota through public bidding for the the instrument. The instrument sought to be
amount of P95,385,000. After its purchase, Toyota reformed is the deed of sale executed by APT in
constructed a concrete hollow block (CHB) perimeter favor of Toyota. Sun Valley was impleaded in order
fence around its alleged property. Another part of to obtain complete relief since it was the owner of
the parcelled Delta I was purchased by Sun Valley the adjacent lot.
from APT for the bid price of P124,349,767. Relying It would appear that Toyota was correct in
upon the title description of its property and the impleading Sun Valley as party defendant. However,
surveys it had commissioned, Sun Valley claimed these principles are not applicable under the
that Toyota's perimeter fence overlaps Sun Valley's particular circumstances of this case. Under the
property. facts of the present case, Toyota's action for
Toyota filed a case against APT and Sun reformation is dismissible as against Sun Valley.
Valley before the Makati RTC for the reformation Attention must first be brought to the fact
of the Deed of Sale executed between Toyota that the contract of sale executed between APT
and APT. Sun Valley filed an MTD, on the ground and Toyota provides an arbitration clause.11
that the Toyota complaint failed to state a cause The contention that the arbitration clause
of action against it (1) since it was not a party to has become disfunctional because of the
the contract, and (2) the complaint was in effect presence of third parties is untenable. Contracts
a collateral attack on its title. are respected as the law between the contracting
Judge Tensuan denied the MTD eventually
and granted Toyota’s application for injunction and
11
granted a writ of preliminary injunction enjoining 5. In case of disagreement or conflict arising out of this
Contract, the parties hereby undertake to submit the matter for
Sun Valley from proceeding with the destruction and determination by a committee of experts, acting as arbitrators, the
removal of Toyota's walls and directed Sun Valley to composition of which shall be as follows:
restore the premises to the status quo ante. The CA a) One member to be appointed by the VENDOR;
affirmed ruling that misjoinder of parties is not a b) One member to be appointed by the VENDEE;
c) One member, who shall be a lawyer, to be appointed by both of
ground for the dismissal of the case. the aforesaid parties;
Sun Valley, on the other hand, filed a case The members of the Arbitration Committee shall be appointed not
for recovery of possession of the disputed 723 later than three (3) working days from receipt of a written notice
square meters boundary with the Makati RTC. from either or both parties. The Arbitration Committee shall
convene not later than three (3) weeks after all its members have
Toyota filed an MTD on the ground that the RTC has been appointed and proceed with the arbitration of the dispute
no jurisdiction over the case since the complaint was within three (3) calendar months counted therefrom. By written
a simple ejectment case cognizable by the MTC. mutual agreement by the parties hereto, such time limit for the
Sun Valley later sought to amend the complaint, arbitration may be extended for another calendar month. The
decision of the Arbitration Committee by majority vote of at least
which was granted by Judge Gorospe. Toyota went two (2) members shall be final and binding upon both the
VENDOR and the VENDEE;
parties. As such, the parties are thereby order denying Toyota's motion to dismiss. An
expected to abide with good faith in their amendment to a complaint before a responsive
contractual commitments. Toyota is therefore pleading is filed, is a matter of right. Whether or not
bound to respect the provisions of the contract it the complaint was amended, Sun Valley's complaint
entered into with APT. was one for accion publiciana cognizable by the
Having been apprised of the presence of the RTC. Its right over the land is premised on the
arbitration clause in the motion to dismiss filed by certificate of title registered in its name after it had
APT, Judge Tensuan should have at least purchased said land from APT. As the registered
suspended the proceedings and directed the owner it had the right of possession of said land
parties to settle their dispute by arbitration. illegally occupied by another
Judge Tensuan should have not taken cognizance With the finding that Toyota's action for
of the case. reformation is dismissable as it is in effect a
But the more apparent reason which collateral attack on Sun Valley's title, Sun Valley's
warrants the dismissal of the action as against Sun action for recovery of possession filed before Judge
Valley is the fact that the complaint for reformation Gorospe now stands to be the proper forum where
amounts to a collateral attack on Sun Valley's title. It the following dispute may be tried or heard.
is disputed that Sun Valley has a Torrens title
registered in its name by virtue of its purchase of the Issue: Who as between the parties has the rightful
land from APT. Well-settled is the rule that a possession of the land
certificate of title can not be altered, modified, or
cancelled except in a direct proceeding in Ratio: In actions involving realty, preliminary
accordance with law. injunction will lie only after the plaintiff has fully
Assuming that Toyota is afforded the relief established his title or right thereto by a proper
prayed for in the Tensuan court, the latter can not action for the purpose. To authorize a temporary
validly order the contested portion to be taken out injunction, the complainant must make out at least a
from the Sun Valley's TCT and award it in favor of prima facie showing of a right to the final relief.
Toyota. Preliminary injunction will not issue to protect a right
An action for reformation is in personam, not not in esse.
in rem even when real estate is involved. It is merely Two requisites are necessary if a preliminary
an equitable relief granted to the parties where injunction is to issue, namely, the existence of the
through mistake or fraud, the instrument failed to right to be protected, and the facts against which the
express the real agreement or intention of the injunction is to be directed, are violative of said right.
parties. While it is a recognized remedy afforded by In particular, for a writ of preliminary injunction to
courts of equity it may not be applied if it is contrary issue, the existence of the right and the violation
to well-settled principles or rules. It is a long must appear in the allegations of the complaint and
standing principle that equity follows the law. It is an injunction is proper also when the plaintiff
applied in the abscence of and never against appears to be entitled to the relief demanded in his
statutory law. Courts are bound by rules of law and complaint. Furthermore, the complaint for injunctive
have no arbitrary discretion to disregard them. relief must be construed strictly against the pleader.
Courts of equity must proceed with utmost caution In the instant case the existence of a "clear
especially when rights of third parties may intervene. positive right" especially calling for judicial protection
Thus in the instant case, vis-a-vis well-settled has been shown by Sun Valley.
principles or rules in land registration, the equitable Toyota's claim over the disputed property is
relief of reformation may not come into play in order anchored on the fact of its purchase of the property
to transfer or appropriate a piece of land that one from APT, that from the circumstances of the
claims to own but which is titled in the name of a purchase and the intention of the parties, the
third party. property including the disputed area was sold to it.
On the other hand, Sun Valley filed an Sun Valley, on the other hand has TCT No. 49019 of
action for reconveyance against Toyota to recover the Registry of Deeds of Parañaque embracing the
possession of the strip of land encroached upon and aforesaid property in its name, having been validly
occupied by the latter. What Sun Valley seeks in its acquired also from APT by virtue of a Deed of Sale
complaint is the recovery of possession de jure and executed in its favor on December 5, 1990.
not merely possession de facto. Toyota moved to There are other circumstances in the case
dismiss on the assumption that the complaint was which militate against Toyota's claim for legal
one for unlawful detainer cognizable by the MTC. possession over the disputed area. The fact that
We do not find any reversible error in the Toyota has filed a suit for reformation seeking the
decision of the CA where it upheld Judge Gorospe's inclusion of the 723 square meters strip of land is
sufficient to deduce that it is not entitled to take over Sir: In other words, the presence of a 3rd Party (Sun
the piece of property it now attempts to appropriate Valley) does not render the arbitration clause
for itself. As early as September, 1988 prior to the dysfunctional.
construction of the perimeter fence, Toyota was
already aware of the discrepancies in the property's
description in the title and the actual survey. Heirs of Agusto L. Salas, Jr. v. Laperal Realty
Despite such notification, Toyota continued Corp., 302 SCRA 620 (1999)
to build the perimeter fence. It is highly doubtful
whether Toyota may be considered a builder in good Petitioners: Heirs of Augusto Salas, et al
faith to be entitled to protection under Article 448 of Respondents: Laperal Realty Corporation, Rockway
the Civil Code. Real Estate Corporation et al
The records also reveal that Toyota's own surveyor,
the Certeza Surveying & Acrophoto Systems, Inc. Facts:
confirmed in its reports dated April 1 and April 5, Salas, Jr. was the registered owner of a vast tract of
1991 that Toyota's perimeter fence overlaps the land in Lipa City. He entered into an Owner-
boundaries of Sun Valley's lot. Contractor Agreement with Laperal Realty
Even communication exchanges between Corporation to render and provide complete
and among APT, Toyota & Sun Valley show that the construction services on his land. Salas, Jr.
parties are certainly aware that the ownership of the executed an SPA in favor of Laperal Realty to
disputed property more properly pertains to Sun exercise general control, supervision and
Valley. Moreover, Sun Valley puts forth evidence management of the sale of his land, for cash or on
that Toyota has altered the boundaries of its own installment basis.
property by moving the monuments erected thereon Later, Salas, Jr. left his home in the morning
by APT's surveyor Geo-Resources and Consultancy, for a business trip to Nueva Ecija. He never
Inc. when Lot 2 was initially surveyed in August returned. Teresita Diaz Salas filed with the Makati
1988. RTC a verified petition for the declaration of
There is therefore sufficient and convincing presumptive death of her husband, Salas, Jr., who
proof that Sun Valley has a clear legal right to had then been missing for more than seven (7)
possession in its favor to warrant the issuance of a years. The petition was granted.
writ of preliminary/mandatory injunction. Sun Valley's Meantime, Laperal Realty subdivided the
TCT gives it that right to possession. On the other land of Salas, Jr. and sold subdivided portions
hand, Toyota has not established its right over the thereof to the other respondents.
said property except for the assertion that there was Petitioners as heirs of Salas, Jr. filed in the
a mistake in an instrument which purportedly should RTC of Lipa City a Complaint for declaration of
have included the questioned strip of land. nullity of sale, reconveyance, cancellation of
As between the two (2) parties, Sun Valley has a contract, accounting and damages against
better right. Under the circumstances, therefore, and respondents. Laperal filed an MTD on the ground
considering that the clear legal right of Toyota to that petitioners failed to submit their grievance to
possession of the disputed area has not been arbitration as required under Article VI of the
established sufficient to grant the prayed for relief, a Agreement12. The RTC dismissed the complaint for
writ of preliminary mandatory injunction may be non-compliance with the foregoing arbitration
issued pendente lite. clause.
Issue: WON the dismissal of the case was proper

CLASS NOTES:
Held: No
What was the effect of a 3rd Party on the
arbitration clause? Ratio: In a catena of cases inspired by Justice
The contention that the arbitration clause has Malcolm's provocative dissent in Vega v. San Carlos
become disfunctional because of the presence of Milling Co., this Court has recognized arbitration
third parties is untenable. Contracts are respected
as the law between the contracting parties. As such, 12
Art. VI. ARBITRATION.
the parties are thereby expected to abide with good All cases of dispute between CONTRACTOR and OWNER'S
faith in their contractual commitments. Toyota is representative shall be referred to the committee represented by:
therefore bound to respect the provisions of the a. One representative of the OWNER;
b. One representative of the CONTRACTOR;
contract it entered into with APT. c. One representative acceptable to both OWNER and
CONTRACTOR.
agreements as valid, binding, enforceable and not heirs. Consequently, the right to arbitrate as
contrary to public policy so much so that when there provided in Article VI of the Agreement was never
obtains a written provision for arbitration which is not vested in respondent lot buyers.
complied with, the trial court should suspend the Laperal Realty, as a contracting party to the
proceedings and order the parties to proceed to Agreement, has the right to compel petitioners to
arbitration in accordance with the terms of their first arbitrate before seeking judicial relief. However,
agreement. Arbitration is the "wave of the future" in to split the proceedings into arbitration for Laperal
dispute resolution. To brush aside a contractual Realty and trial for the respondent lot buyers, or to
agreement calling for arbitration in case of hold trial in abeyance pending arbitration between
disagreement between parties would be a step petitioners and Laperal Realty, would in effect result
backward. in multiplicity of suits, duplicitous procedure and
A submission to arbitration is a contract. As unnecessary delay. On the other hand, it would be in
such, the Agreement, containing the stipulation on the interest of justice if the trial court hears the
arbitration, binds the parties thereto, as well as their complaint against all herein respondents and
assigns and heirs. But only they. Petitioners, as adjudicates petitioners' rights as against theirs in a
heirs of Salas, Jr., and Laperal Realty are certainly single and complete proceeding.
bound by the Agreement. If Laperal had assigned its
rights under the Agreement to a third party, making
the former, the assignor, and the latter, the Del Monte Corp. USA v. CA, 351 SCRA 373 (2001)
assignee, such assignee would also be bound by
the arbitration provision since assignment involves Petitioners: Del Monte-USA, Paul Derby Jr, Daniel
such transfer of rights as to vest in the assignee the Collins and Luis Hidalgo
power to enforce them to the same extent as the Respondents: CA, Judge Bienvenido Reyes,
assignor could have enforced them against the Montebueno Marketing Inc, Liong Liong C. Sy and
debtor 18 or in this case, against the heirs of the Sabrosa Foods
original party to the Agreement. However, Rockway
Real Estate Corporation, South Ridge Village, Inc., Facts: In a Distributorship Agreement, petitioner
Maharami Development Corporation, spouses appointed Montebueno Marketing, Inc. (MMI) as the
Abrajano, spouses Lava, Oscar Dacillo, Eduardo sole and exclusive distributor of its Del Monte
Vacuna, Florante de la Cruz and Jesus Vicente products in the Philippines for a period of 5 years,
Capellan are not assignees of the rights of Laperal renewable for 2 consecutive 5 year periods with the
under the Agreement to develop Salas, Jr.'s land consent of the parties. The agreement provided for
and sell the same. They are, rather, buyers of the an arbitration clause13.
land that Laperal Realty was given the authority to The appointment of MMI was published in
develop and sell under the Agreement. As such, several newspapers in the country. MMI appointed
they are not "assigns" contemplated in Art. 1311 CC Sabrosa Foods, Inc. (SFI), with the approval of
which provides that "contracts take effect only petitioner, as MMI's marketing arm to concentrate on
between the parties, their assigns and heirs". its marketing and selling function as well as to
Petitioners claim that they suffered lesion of manage its critical relationship with the trade.
more than one-fourth (1/4) of the value of Salas, Jr.'s MMI, SFI and MMI's Managing Director
land when Laperal Realty subdivided it and sold Liong Liong C. Sy filed a Complaint against
portions thereof to respondent lot buyers. Thus, they petitioners before the RTC of Malabon for violations
instituted action against both Laperal Realty and of Arts. 20, 21 and 23 CC. DMC-USA products
respondent lot buyers for rescission of the sale continued to be brought into the country by
transactions and reconveyance to them of the parallel importers despite the appointment of MMI
subdivided lots. They argue that rescission, being as the sole and exclusive distributor of Del Monte
their cause of action, falls under the exception products thereby causing them great
clause in Sec. 2 of RA 876 which provides that "such
submission [to] or contract [of arbitration] shall be 13
12. GOVERNING LAW AND ARBITRATION This Agreement
valid, enforceable and irrevocable, save upon such shall be governed by the laws of the State of California and/or, if
grounds as exist at law for the revocation of any applicable, the United States of America. All disputes arising out
of or relating to this Agreement or the parties' relationship,
contract". including the termination thereof, shall be resolved by arbitration
The petitioners' contention is without merit. in the City of San Francisco, State of California, under the Rules
For while rescission, as a general rule, is an of the American Arbitration Association. The arbitration panel
arbitrable issue, 20 they impleaded in the suit for shall consist of three members, one of whom shall be selected by
DMC-USA, one of whom shall be selected by MMI, and third of
rescission the respondent lot buyers who are neither whom shall be selected by the other two members and shall have
parties to the Agreement nor the latter's assigns or relevant experience in the industry x x x x
embarrassment and substantial damage. They trial court were not joined so that the Honorable
alleged that the products brought into the country by Judge was not given the opportunity to satisfy
these importers were aged, damaged, fake or himself that the issue involved in the case was
counterfeit, so that they had to cause the referable to arbitration. They submit that,
publication of a "warning to the trade" paid apparently, petitioners filed a motion to suspend
advertisement in leading newspapers. Private proceedings instead of sending a written demand to
respondents averred that petitioners knowingly and private respondents to arbitrate because petitioners
surreptitiously continued to deal with the former in were not sure whether the case could be a subject
bad faith by involving disinterested third parties and of arbitration. They maintain that had petitioners
by proposing solutions which were entirely out of done so and private respondents failed to answer
their control. Private respondents claimed that they the demand, petitioners could have filed with the trial
had exhausted all possible avenues for an amicable court their demand for arbitration that would warrant
resolution and settlement of their grievances. a determination by the judge whether to refer the
Petitioners filed a Motion to Suspend case to arbitration. Accordingly, private respondents
Proceedings invoking the arbitration clause in assert that arbitration is out of the question.
their Agreement with private respondents. The trial Private respondents further contend that the
court deferred consideration of the motion as the arbitration clause centers more on venue rather
grounds alleged therein did not constitute the than on arbitration.
suspension of the proceedings considering that the There is no doubt that arbitration is valid
action was for damages with prayer for the issuance and constitutional in our jurisdiction. Even before
of Writ of Preliminary Attachment and not on the the enactment of RA 876, this Court has
Distributorship Agreement. countenanced the settlement of disputes through
Later, the Motion to Suspend Proceedings arbitration. Unless the agreement is such as
was denied by the trial court on the ground that absolutely to close the doors of the courts against
it "will not serve the ends of justice and to allow the parties, which agreement would be void, the
said suspension will only delay the courts will look with favor upon such amicable
determination of the issues, frustrate the quest arrangement and will only interfere with great
of the parties for a judicious determination of reluctance to anticipate or nullify the action of the
their respective claims, and/or deprive and delay arbitrator. Moreover, as RA 876 expressly authorizes
their rights to seek redress." The CA affirmed and arbitration of domestic disputes, foreign arbitration
ruled that the alleged damaging acts recited in the as a system of settling commercial disputes was
Complaint, constituting petitioners' causes of action, likewise recognized when the Philippines adhered to
required the interpretation of Art. 21 CC and that in the United Nations "Convention on the Recognition
determining whether petitioners had violated it and the Enforcement of Foreign Arbitral Awards of
"would require a full blown trial" making arbitration 1958" under the 10 May 1965 Resolution No. 71 of
"out of the question." the Senate, giving reciprocal recognition and
allowing enforcement of international arbitration
Issue: WON the dispute warrants an order agreements between parties of different nationalities
compelling them to submit to arbitration. within a contracting state.
A careful examination of the instant case
Held: shows that the arbitration clause in the
Distributorship Agreement between petitioner DMC-
Ratio: Petitioners contend that the subject matter of USA and private respondent MMI is valid and the
private respondents' causes of action arises out of or dispute between the parties is arbitrable.
relates to the Agreement between petitioners and However, this Court must deny the petition.
private respondents. Thus, considering that the The Agreement between petitioner DMC-
arbitration clause of the Agreement provides that all USA and private respondent MMI is a contract. The
disputes arising out of or relating to the Agreement provision to submit to arbitration any dispute arising
or the parties' relationship, including the termination therefrom and the relationship of the parties is part
thereof, shall be resolved by arbitration, they insist of that contract and is itself a contract. As a rule,
on the suspension of the proceedings in Civil Case contracts are respected as the law between the
No. 2637-MN as mandated by Sec. 7 of RA 876. contracting parties and produce effect as
Private respondents claim, on the other between them, their assigns and heirs. Clearly,
hand, that their causes of action are rooted in Arts. only parties to the Agreement, i.e., petitioners
20, 21 and 23 of the CC the determination of which DMC-USA and its Managing Director for Export
demands a full blown trial, as correctly held by the Sales Paul E. Derby, Jr., and private respondents
CA. Moreover, they claim that the issues before the MMI and its Managing Director LILY SY are
bound by the Agreement and its arbitration Do you agree with this decision?
clause as they are the only signatories thereto. NO.
Petitioners Daniel Collins and Luis Hidalgo, and
private respondent SFI, not parties to the RA 9285, Sec. 25 – Interpretation of the Act
Agreement and cannot even be considered In interpreting the Act, the court shall have due regard to the
policy of the law in favor of arbitration. Where action is
assigns or heirs of the parties, are not bound by commenced by or against multiple parties, one or more of whom
the Agreement and the arbitration clause therein. are parties who are bound by the arbitration agreement although
Consequently, referral to arbitration in the State of the civil action may continue as to those who are not bound by
California pursuant to the arbitration clause and the such arbitration agreement.
suspension of the proceedings in Civil Case No. Rule 2.2. Policy on arbitration.— (A) Where the parties have
2637-MN pending the return of the arbitral award agreed to submit their dispute to arbitration, courts shall refer the
could be called for but only as to petitioners DMC- parties to arbitration pursuant to Republic Act No. 9285 bearing in
USA and Paul E. Derby, Jr., and private mind that such arbitration agreement is the law between the
respondents MMI and LILY SY, and not as to the Further, the courts shall not refuse to refer parties to arbitration
other parties in this case. This is consistent with the for reasons including, but not limited to, the following:
recent case of Heirs of Augusto L. Salas, Jr. v. c. The referral would result in multiplicity of suits;
Laperal Realty Corporation, which superseded that
Rule 4.7. Multiple actions and parties. — The court shall not
of Toyota Motor Philippines Corp. v. Court of decline to refer some or all of the parties to arbitration for any of
Appeals. the following reasons:
In Toyota, the Court ruled that "[t]he a. Not all of the disputes subject of the civil action may be
contention that the arbitration clause has referred to arbitration;
b. Not all of the parties to the civil action are bound by the
become dysfunctional because of the presence arbitration agreement and referral to arbitration would result in
of third parties is untenable" ratiocinating that multiplicity of suits;
"[c]ontracts are respected as the law between c. The issues raised in the civil action could be speedily and
the contracting parties" and that "[a]s such, the efficiently resolved in its entirety by the court rather than in
arbitration;
parties are thereby expected to abide with good d. Referral to arbitration does not appear to be the most prudent
faith in their contractual commitments." action; or
However, in Salas, Jr., only parties to the e. The stay of the action would prejudice the rights of the
Agreement, their assigns or heirs have the right parties to the civil action who are not bound by the
arbitration agreement.
to arbitrate or could be compelled to arbitrate.
The Court went further by declaring that in The court may, however, issue an order directing the inclusion
recognizing the right of the contracting parties to in arbitration of those parties who are not bound by the
arbitrate or to compel arbitration, the splitting of the arbitration agreement but who agree to such inclusion
provided those originally bound by it do not object to their
proceedings to arbitration as to some of the inclusion.
parties on one hand and trial for the others on the
other hand, or the suspension of trial pending
arbitration between some of the parties, should Sir:
not be allowed as it would, in effect, result in Problem with this decision is that it will kill arbitration.
multiplicity of suits, duplicitous procedure and A party may simply implead other parties and claim
unnecessary delay. that they are not parties to the arbitration clause.
The object of arbitration is to allow the
expeditious determination of a dispute. Clearly, READ UNITRAL ARBITRATION RULES and ICC
the issue before us could not be speedily and ARBITRATION RULES
efficiently resolved in its entirety if we allow
simultaneous arbitration proceedings and trial, or
suspension of trial pending arbitration. Accordingly,
the interest of justice would only be served if the trial
court hears and adjudicates the case in a single and
complete proceeding.
CLASS NOTES:
Court found that the arbitration clause is valid and

that the dispute is arbitrable, but nevertheless did
not order the arbitration.
Class Notes – September 3, 2010 c/o Adrian Del Monte case : (MMC --- my cause of action is
TORT (20-21 NCC) -- sir wanted to address this.
What is the Rule on Multiple Parties?
What if a party files a motion to suspend
Binding between the parties, assigns and heirs proceedings on the ground that there is an
(1311, Civil Code). existing Arbitration Agreement?
Can the court motu proprio separate the parties? The court should grant a motion to suspend
proceedings and order the parties to proceed to
What is the impact of presence of third parties? arbitration.
Rule 4.7. Multiple actions and parties. — The court shall not 9285 Sec. 25. Interpretation of the Act. - In interpreting the Act,
decline to refer some or all of the parties to arbitration for any of the court shall have due regard to the policy of the law in favor of
the following reasons: arbitration. Where action is commenced by or against multiple
a. Not all of the disputes subject of the civil action may be parties, one or more of whom are parties who are bound by
referred to arbitration; the arbitration agreement although, the civil action may
b. Not all of the parties to the civil action are bound by the continue as to those who are not bound by such arbitration
arbitration agreement and referral to arbitration would result in agreement.
multiplicity of suits;
c. The issues raised in the civil action could be speedily and (-ME- the jurisdiction of the court is determined by
efficiently resolved in its entirety by the court rather than in
arbitration;
the allegations in the pleadings True - MMC)
d. Referral to arbitration does not appear to be the most prudent
action; or Still : MMC --- my cause of action is TORT (20-
e. The stay of the action would prejudice the rights of the 21 NCC) -- sir wanted to address this. -- AUTEA -
parties to the civil action who are not bound by the
arbitration agreement.
This is a spurious argument. Article 21, says any
damage. Why is there damage? "Although I am the
The court may, however, issue an order directing the inclusion Exclusive Distributor, Del monte allowed the entry of
in arbitration of those parties who are not bound by the subpar products." It is the distributorship agreement
arbitration agreement but who agree to such inclusion
provided those originally bound by it do not object to their
that caused damage.
inclusion.
(ANECDOTE: the first two students who recited
"AGREED" on the Del Monte Ruling. Sir was
How did the court rule on the issue in the case of surprised.)
Toyota?
The presence of third parties does not render the DANGEROUS IMPLICATION OF DELMONTE -
Arbitration Clause dysfunctional. again, is the vulnerability of the Arbitration Clause to
a party defeating it by impleading other parties. This
What about in Salas? Are the facts the same? is what gave rise to SECTION 25 of RA 9285.
---- WHAT IS THE PRESENT STATE OF THE

Are the vendees bound by the Arbitration clause RULE WITH RESPECT TO THE PRESENC OF
contained in the contract between Laperal Realty PARTIES?
and Salas, JR?
See RULE 2.2. Special ADR Rules
SALAS NO : because the vendees are not
"assignees." (UNDER 1311 OF THE CIVIL CODE)
? ADR RULE - Rule 4.5. Court action. — After
The buyers are not bound, although they are hearing, the court shall stay the action and,
successors-in-interest, they are not assigns. considering the statement of policy embodied in
ME : is a subrogee under through an insurance Rule 2.4, above, refer the parties to arbitration if it
contract an assign? (see california case, finds prima facie, based on the pleadings and
supporting documents submitted by the parties, that
What is the effect of the Del Monte Ruling? there is an arbitration agreement and that the
Individuals who are NOT real parties in interest were subject-matter of the dispute is capable of
impleaded. And the court ruled that the court settlement or resolution by arbitration in accordance
proceeding should continue. A party may simply put with Section 6 of the ADR Act. Otherwise, the court
arbitration into naught by impleading certain parties. shall continue with the judicial proceedings.
What is the impact of KOREA regarding Can the court reverse the dispositive portion of the
reciprocal obligations under 1191 (CIVIL CODE)? Arbitral Award? NO - court cannot substitute.
if there is a delay on the part of one of the parties,
the other party may rescind the contract.
APT v. CA
Is this in act of judicial legislation?
"As a rule, the award of an arbitrator cannot be set
aside for mere errors of judgment either as to the
ASSAILING AN ARBITRAL AWARD law or as to the facts. Courts are without power to
amend or overrule merely because of disagreement
What are the grounds for assailing a DOMESTIC with matters of law or facts determined by the
ARBITRATION AWARD? arbitrators. They will not review the findings of law
and fact contained in an award, and will not
See RA 876 - undertake to substitute their judgment for that of the
arbitrators, since any other rule would make an
Sec. 24. Grounds for vacating award. In any one of the following
cases, the court must make an order vacating the award upon the
award the commencement, not the end, of litigation.
petition of any party to the controversy when such party proves Errors of law and fact, or an erroneous decision of
affirmatively that in the arbitration proceedings; matters submitted to the judgment of the arbitrators,
are insufficient to invalidate an award fairly and
(a) The award was procured by corruption, fraud, or other undue
means; or honestly made. Judicial review of an arbitration is,
(b) That there was evident partiality or corruption in the arbitrators thus, more limited than judicial review of a trial."
or any of them; or
(c) That the arbitrators were guilty of misconduct in refusing to How did they come to arbitration?
postpone the hearing upon sufficient cause shown, or in refusing
to hear evidence pertinent and material to the controversy; that
How did it become a Rule 65 case?
one or more of the arbitrators was disqualified to act as such
under section nine hereof, and willfully refrained from disclosing THERE was an ORDER confirming. Petition under
such disqualifications or of any other misbehavior by which the rule 65 Was availed of.
rights of any party have been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly
executed them, that a mutual, final and definite award upon the Is this valid?
subject matter submitted to them was not made.
See Section 29. CF: ruling in APT vs CA:
Is this an exclusive listing? NO, see 11.4 of
Special ADR rules Section 29 of Republic Act No. 876, provides that: . . . An appeal
may be taken from an order made in a proceeding under this Act,
or from a judgment entered upon an award through certiorari
The award may also be vacated on any or all of the following proceedings, but such appeals shall be limited to questions of
grounds: law. . . ..
a. The arbitration agreement did not exist, or is invalid for any The provision, however, does not preclude a party aggrieved by
ground for the revocation of a contract or is otherwise the arbitral award from resorting to the extraordinary remedy of
unenforceable; or certiorari under Rule 65 where, as in this case, the RTC to which
b. A party to arbitration is a minor or a person judicially declared the award was submitted for confirmation has acted without
to be incompetent. jurisdiction or with grave abuse of discretion and there is no
appeal, nor any plain, speedy remedy in the course of law. In the
Are these additions? instant case, the respondent court erred in dismissing the special
civil action for certiorari, it being clear from the pleadings and the
No, see section of RA 876: evidence that the trial court lacked jurisdiction and/or committed
grave abuse of discretion in taking cognizance of private
Sec. 2. Persons and matters subject to arbitration. XXX Such respondents' motion to confirm the arbitral award and, worse, in
submission or contract shall be valid, enforceable and irrevocable, confirming said award which is grossly and patently not in accord
save upon such grounds as exist at law for the revocation of any with the arbitration agreement, as will be hereinafter
contract. demonstrated.
XXX
A controversy cannot be arbitrated where one of the parties to the
controversy is an infant, or a person judicially declared to be Rule 19.7. No appeal or certiorari on the merits of an arbitral
incompetent, unless the appropriate court having jurisdiction award. — An agreement to refer a dispute to arbitration shall
approve a petition for permission to submit such controversy to mean that the arbitral award shall be final and binding.
arbitration made by the general guardian or guardian ad litem of Consequently, a party to an arbitration is precluded from filing an
the infant or of the incompetent. appeal or a petition for certiorari questioning the merits of an
arbitral award.
Under the present state of the law, are there Rule 19.26. -- Certiorari to the Court of Appeals. — When the
other grounds? Regional Trial Court, in making a ruling under the Special ADR
Rules, has acted without or in excess of its jurisdiction, or

with grave abuse of discretion amounting to lack or excess
of jurisdiction, and there is no appeal or any plain, speedy, and
adequate remedy in the ordinary course of law, a party may file a Petition v. Motion to Vacate
special civil action for certiorari to annul or set aside a ruling of Petition – filed in a court which has no jurisidiction
the Regional Trial Court.
over the dispute; original; after dismissal (see APT)
A special civil action for certiorari may be filed against the Motion – filed in a court which has jurisdiction over
following orders of the court. the dispute; continuation of proceedings; e.g.
XXX proceeding in the court was suspended / referred to
f. Confirming, vacating or correcting a domestic arbitral
arbitration
award;
g. Suspending the proceedings to set aside an international
commercial arbitral award and referring the case back to the Is a Motion or Petition to Vacate governed by
arbitral tribunal; summary procedure?
h. Allowing a party to enforce an international commercial
arbitral award pending appeal; No. See 1.3.
i. Adjourning or deferring a ruling on whether to set aside,
recognize and or enforce an international commercial arbitral Rule 1.3. Summary proceedings in certain cases.—The
award; proceedings in the following instances are summary in nature and
j. Allowing a party to enforce a foreign arbitral award pending shall be governed by this provision:
appeal; and
k. Denying a petition for assistance in taking evidence.
a. Judicial Relief Involving the Issue of Existence, Validity or
Enforceability of the Arbitration Agreement;
Note : "...and there is no appeal…") SEE: 19.12 -- b. Referral to ADR;
c. Interim Measures of Protection;
d. Appointment of Arbitrator;
Appeal to the Court of Appeals.—An appeal to the Court of e. Challenge to Appointment of Arbitrator;
Appeals through a petition for review under this Special Rule shall f. Termination of Mandate of Arbitrator;
only be allowed from the following final orders of the Regional g. Assistance in Taking Evidence;
Trial Court: h. Confidentiality/Protective Orders; and
i. Deposit and Enforcement of Mediated Settlement
XXXConfirming, vacating or correcting a domestic arbitral Agreements.
award;
Must it be verified? Can it be verified by the

Kung ako yung kalaban and the other party files a
lawyer?
certiorari, but there is an appeal.
Yes. See 1.4. It can be verified by a lawyer. See
1.11(f).
--
Rule 1.4. Verification and submissions. —Any pleading, motion,
So how do we use 19.26? opposition, comment, defense or claim filed under the Special
ADR Rules by the proper party shall be supported by verified
-- ME : LUZON DEVELOPMENT BANK prescribes statements that the affiant has read the same and that the factual
the mode --FINAL - and not subject to review. 00 allegations therein are true and correct of his own personal
knowledge or based on authentic records and shall contain as
APPEAL -- annexes the supporting documents.
What is the object of an appeal - The annexes to the pleading, motion, opposition, comment,
defense or claim filed by the proper party may include a legal
brief, duly verified by the lawyer submitting it, stating the pertinent
What are you trying to say? -- facts, the applicable law and jurisprudence to justify the necessity
for the court to rule upon the issue raised.
ADAMSON, CHUNGFU, NATIONAL STEEL --
f. “Verification” shall mean a certification under oath by a party
HOME BANKER'S ASSOCIATION. or a person who has authority to act for a party that he has read
the pleading/motion, and that he certifies to the truth of the facts
stated therein on the basis of his own personal knowledge or
authentic documents in his possession. When made by a lawyer,
No Class – September 10, 2010 verification shall mean a statement under oath by a lawyer signing
a pleading/motion for delivery to the Court or to the parties that he
personally prepared the pleading/motion, that there is sufficient
factual basis for the statements of fact stated therein, that there is
sufficient basis in the facts and the law to support the prayer for
relief therein, and that the pleading/motion is filed in good faith
and is not interposed for delay.
Class Notes – September 17, 2010

Is there an Appointing Authority in adhoc appointing an arbitrator or arbitrators, such method shall be
arbitration? followed; but if no method be provided therein the Court of First
Instance shall designate an arbitrator or arbitrators.
Yes. 6.1 (c).
The Court of First Instance shall appoint an arbitrator or
Rule 6.1. When the court may act as Appointing Authority. — The arbitrators, as the case may be, in the following instances:
court shall act as Appointing Authority only in the following
instances: (a) If the parties to the contract or submission are unable to
agree upon a single arbitrator; or
a. Where any of the parties in an institutional arbitration failed or
(b) If an arbitrator appointed by the parties is unwilling or unable
refused to appoint an arbitrator or when the parties have failed to
to serve, and his successor has not been appointed in the manner
reach an agreement on the sole arbitrator (in an arbitration before
in which he was appointed; or
a sole arbitrator) or when the two designated arbitrators have
failed to reach an agreement on the third or presiding arbitrator (in
(c) If either party to the contract fails or refuses to name his
an arbitration before a panel of three arbitrators), and the
arbitrator within fifteen days after receipt of the demand for
institution under whose rules arbitration is to be conducted fails or
arbitration; or
is unable to perform its duty as appointing authority within a
reasonable time from receipt of the request for appointment;
(d) If the arbitrators appointed by each party to the contract, or
appointed by one party to the contract and by the proper Court,
b. In all instances where arbitration is ad hoc and the parties
shall fail to agree upon or to select the third arbitrator.
failed to provide a method for appointing or replacing an
arbitrator, or substitute arbitrator, or the method agreed upon is
(e) The court shall, in its discretion appoint one or three
ineffective, and the National President of the Integrated Bar of the
arbitrators, according to the importance of the controversy
Philippines (IBP) or his duly authorized representative fails or
involved in any of the preceding cases in which the agreement is
refuses to act within such period as may be allowed under the
silent as to the number of arbitrators.
pertinent rules of the IBP or within such period as may be agreed
upon by the parties, or in the absence thereof, within thirty (30)
(f) Arbitrators appointed under this section shall either accept or
days from receipt of such request for appointment;
decline their appointments within seven days of the receipt of their
appointments. In case of declination or the failure of an arbitrator
c. Where the parties agreed that their dispute shall be resolved
or arbitrators to duly accept their appointments the parties or the
by three arbitrators but no method of appointing those arbitrators
court, as the case may be, shall proceed to appoint a substitute or
has been agreed upon, each party shall appoint one arbitrator
substitutes for the arbitrator or arbitrators who decline or failed to
and the two arbitrators thus appointed shall appoint a third
accept his or their appointments.
arbitrator. If a party fails to appoint his arbitrator within thirty (30)
days of receipt of a request to do so from the other party, or if the
two arbitrators fail to agree on the third arbitrator within a Problem:
reasonable time from their appointment, the appointment shall be Claimant appoints an arbitrator. Respondent refuses
made by the Appointing Authority. If the latter fails or refuses to
act or appoint an arbitrator within a reasonable time from receipt to name his arbitrator. Claimant asks IBP to appoint
of the request to do so, any party or the appointed arbitrator/s in behalf of Respondent, which IBP did. Can
may request the court to appoint an arbitrator or the third Respondent ask for an injunction enjoining the
arbitrator as the case may be. commencement of the injunction on the ground that
it did not appoint an arbitrator? Can a court enjoin
RA 9285, Sec. 26 – Meaning of “Appointing Authority” arbitration proceedings?
"Appointing Authority" as used in the Model Law shall mean the
person or institution named in the arbitration agreement as the Rule 3.18. Court action. — (B) No injunction of arbitration
appointing authority; or the regular arbitration arbitration institution proceedings. — The court shall not enjoin the arbitration
under whose rules the arbitration is agreed to be conducted. proceedings during the pendency of the petition.
Where the parties have agreed to submit their dispute to
institutional arbitration rules, and unless they have agreed to a What is the “petition” contemplated in Rule
different procedure, they shall be deemed to have agreed to
procedure under such arbitration rules for the selection and 3.18?
appointment of arbitrators. In ad hoc arbitration, the default Petition concerning the existence, validity or
appointment of an arbitrator shall be made by the National enforceability of the arbitration agreement. This
President of the Integrated Bar of the Philippines (IBP) or his duly concerns the jurisdiction of the arbitral tribunal.
authorized representative.
RA 9285, Sec. 27 – What Functions May be Performed by Rule 5.6. Type of interim measure of protection that a court may
Appointing Authority grant.—The following, among others, are the interim measures of
The functions referred to in Articles 11(3), 11(4), 13(3) and 14(1) protection that a court may grant:
of the Model Law shall be performed by the Appointing Authority,
unless the latter shall fail or refuse to act within thirty (30) days a. Preliminary injunction directed against a party to arbitration;
from receipt of the request in which case the applicant may renew
the application with the Court. RA 9285, Sec. 28 – Grant of Interim Measure of Protection
(a) It is not incompatible with an arbitration agreement for a party
RA 876, Sec. 8 – Appointment of arbitrators
to request, before constitution of the tribunal, from a Court an
interim measure of protection and for the Court to grant such
If, in the contract for arbitration or in the submission described in measure. After constitution of the arbitral tribunal and during
section two, provision is made for a method of naming or
arbitral proceedings, a request for an interim measure of performance of subject contract, it was stipulated
protection or modification thereof, may be made with the arbitral
tribunal or to the extent that the arbitral tribunal has no power to
therein that the issue(s) shall be submitted for
act or is unable to act effectively, the request may be made with resolution before a single arbitrator chosen by both
the Court. The arbitral tribunal is deemed constituted when the parties. Apart from the construction agreement,
sole arbitrator or the third arbitrator who has been nominated, has Chung Fu and Roblecor entered into two (2) other
accepted the nomination and written communication of said
nomination and acceptance has been received by the party
ancillary contracts, for the construction of a
making request. dormitory and support facilities and for the
installation of electrical, water and hydrant systems
(b) The following rules on interim or provisional relief shall be at the plant site.
observed:
However, Roblecor failed to complete the
(1) Any party may request that provision relief be granted against work despite the extension of time allowed it by
the adverse party: Chung Fu. Subsequently, the latter had to take over
the construction. Claiming an unsatisfied account of
(2) Such relief may be granted:
P10,500,000.00 and unpaid progress billings of
(i) to prevent irreparable loss or injury: P2,370,179.23, Roblecor filed a petition for
Compulsory Arbitration with prayer for TRO before
(ii) to provide security for the performance of any obligation; the RTC, pursuant to the arbitration clause in the
(iii) to produce or preserve any evidence; or
construction agreement. Chung Fu moved to dismiss
the petition and further prayed for the quashing of
(iv) to compel any other appropriate act or omission. the restraining order.
Subsequent negotiations between the
(3) The order granting provisional relief may be conditioned upon
the provision of security or any act or omission specified in the
parties eventually led to the formulation of an
order. arbitration agreement. The RTC approved the
agreement. Engr. Willardo Asuncion was appointed
(4) Interim or provisional relief is requested by written application as the sole arbitrator.
transmitted by reasonable means to the Court or arbitral tribunal
as the case may be and the party against whom the relief is
Arbitrator Asuncion ordered petitioners to
sought, describing in appropriate detail the precise relief, the party immediately pay respondent P16,108,801.00. He
against whom the relief is requested, the grounds for the relief, declared the award as final and unappealable,
and evidence supporting the request. pursuant to the Arbitration Agreement precluding
(5) The order shall be binding upon the parties.
judicial review of the award.
Roblecor moved for the confirmation of said
(6) Either party may apply with the Court for assistance in award. On the other hand, Chung Fu moved to
Implementing or enforcing an interim measure ordered by an remand the case for further hearing and asked for a
arbitral tribunal.
reconsideration of the judgment award claiming that
(7) A party who does not comply with the order shall be liable for Arbitrator Asuncion committed twelve (12) instances
all damages resulting from noncompliance, including all of grave error by disregarding the provisions of the
expenses, and reasonable attorney's fees, paid in obtaining the parties' contract. The lower court denied petitioner’s
order's judicial enforcement.
motion to remand and granted Roblecor’s Motion for
Confirmation of Award. The CA affirmed.
Xam: No. Prohibition not injunction.
Issue: WON the arbitration award is beyond the
ambit of the court's power of judicial review.
Chung Fu Industries vs CA (1992) Held: No
Petitioner: Chung Fu Industries, et al Ratio: Sparse though the law and jurisprudence
Respondents: CA, Hon. Francisco Velez and may be on the subject of arbitration in the
Roblecor Philippines Inc Philippines, it was nonetheless recognized in the
Spanish Civil Code; specifically, the provisions on
Ponente: Romero compromises made applicable to arbitrations under
Articles 1820 and 1821. Although said provisions
Facts: Petitioner Chung Fu Industries and Roblecor were repealed by implication with the repeal of the
Philippines, Inc. forged a construction agreement Spanish Law of Civil Procedure, these and
whereby respondent committed to construct and additional ones were reinstated in the present Civil
finish on December 31, 1989, petitioner 's Code.
industrial/factory complex in Cavite for P42,000,000. Arbitration found a fertile field in the
In the event of disputes arising from the resolution of labor-management disputes in the
Philippines. Although early on, CA 103 (1936) may likewise be proven where the arbitrator has not
provided for compulsory arbitration as the state been selected by the parties.
policy to be administered by the CIR, in time such a Under present law, may the parties who
modality gave way to voluntary arbitration. The agree to submit their disputes to arbitration further
Industrial Peace Act which was passed in 1953 as provide that the arbitrators' award shall be final,
RA875, favored the policy of free collective unappealable and executory?
bargaining and resort to grievance procedure, in Article 2044 of the Civil Code recognizes the
particular, as the preferred mode of settling disputes validity of such stipulation, thus: Any stipulation that
in industry. It was accepted and enunciated more the arbitrators' award or decision shall be final is
explicitly in the Labor Code, which was passed on valid, without prejudice to Articles 2038, 2039 and
November 1, 1974 as PD 442, with the 2040.
amendments later introduced by RA6715 (1989). Similarly, the Construction Industry
That there was a growing need for a law Arbitration Law provides that the arbitral award "shall
regulating arbitration in general was acknowledged be final and inappealable except on questions of law
when RA876 (1953), otherwise known as the which shall be appealable to the Supreme Court."
Arbitration Law, was passed. "Said Act was Under the original Labor Code, voluntary
obviously adopted to supplement — not to supplant arbitration awards or decisions were final,
— the New Civil Code on arbitration. It expressly unappealable and executory. "However, voluntary
declares that "the provisions of chapters one and arbitration awards or decisions on money claims,
two, Title XIV, Book IV of the Civil Code shall remain involving an amount exceeding P100,000 or 40% of
in force." the paid-up capital of the respondent employer,
In recognition of the pressing need for an whichever is lower, maybe appealed to the NLRC on
arbitral machinery for the early and expeditious any of the following grounds: (a) abuse of discretion;
settlement of disputes in the construction industry, a and (b) gross incompetence." It is to be noted that
CIAC was created by EO 1008, enacted on the appeal in the instances cited were to be made to
February 4, 1985. the NLRC and not to the courts.
In practice nowadays, absent an agreement With the subsequent deletion of the
of the parties to resolve their disputes via a provision from the LC, the voluntary arbitrator is now
particular mode, it is the regular courts that remain mandated to render an award or decision within 20
the fora to resolve such matters. However, the calendar days from the date of submission of the
parties may opt for recourse to third parties, dispute and such decision shall be final and
exercising their basic freedom to "establish such executory after 10 calendar days from receipt of the
stipulation, clauses, terms and conditions as they copy of the award or decision by the parties.
may deem convenient, provided they are not Where the parties agree that the decision of
contrary to law, morals, good customs, public order the arbitrator shall be final and unappealable as in
or public policy." In such a case, resort to the the instant case, the pivotal inquiry is whether
arbitration process may be spelled out by them in a subject arbitration award is indeed beyond the ambit
contract in anticipation of disputes that may arise of the court's power of judicial review. We rule in the
between them. Or this may be stipulated in a negative. It is stated explicitly under Art. 2044 CC
submission agreement when they are actually that the finality of the arbitrators' award is not
confronted by a dispute. Whatever be the case, such absolute and without exceptions. Where the
recourse to an extrajudicial means of settlement is conditions described in Articles 203814, 2039 and
not intended to completely deprive the courts of
jurisdiction.
But certainly, the stipulation to refer all future 14
Art. 2038. A compromise in which there is mistake, fraud,
disputes to an arbitrator or to submit an ongoing violence, intimidation, undue influence, or falsity of
dispute to one is valid. Being part of a contract documents, is subject to the provisions of Article 1330 of this
Code.
between the parties, it is binding and enforceable in
court in case one of them neglects, fails or refuses However, one of parties cannot set up a mistake of fact as against
to arbitrate. Going a step further, in the event that the other if the latter, by virtue of the compromise, has withdrawn
they declare their intention to refer their differences from a litigation already commenced. (1817a)
to arbitration first before taking court action, this Art. 2039. When the parties compromise generally on all
constitutes a condition precedent, such that where a differences which they might have with each other, the discovery
suit has been instituted prematurely, the court shall of documents referring to one or more but not to all of the
suspend the same and the parties shall be directed questions settled shall not itself be a cause for annulment or
rescission of the compromise, unless said documents have
forthwith to proceed to arbitration. A court action been concealed by one of the parties.
2040 applicable to both compromises and committing a grave abuse of discretion.

arbitrations are obtaining, the arbitrators' award may Furthermore, in granting unjustified extra
be annulled or rescinded. 19 Additionally, under compensation to respondent for several items, he
Sections 24 and 25 of the Arbitration Law, there are exceeded his powers — all of which would have
grounds for vacating, modifying or rescinding an constituted ground for vacating the award under
arbitrator's award. Thus, if and when the factual Section 24 (d) of the Arbitration Law.
circumstances referred to in the above-cited But the respondent trial court's refusal to
provisions are present, judicial review of the award is look into the merits of the case, despite prima facie
properly warranted. showing of the existence of grounds warranting
What if courts refuse or neglect to inquire judicial review, effectively deprived petitioners of
into the factual milieu of an arbitrator's award to their opportunity to prove or substantiate their
determine whether it is in accordance with law or allegations. In so doing, the trial court itself
within the scope of his authority? How may the committed grave abuse of discretion. Likewise, the
power of judicial review be invoked? This is where appellate court, in not giving due course to the
the proper remedy is certiorari under Rule 65 of the petition, committed grave abuse of discretion.
Revised Rules of Court. It is to be borne in mind, Respondent courts should not shirk from exercising
however, that this action will lie only where a grave their power to review, where under the applicable
abuse of discretion or an act without or in excess of laws and jurisprudence, such power may be
jurisdiction on the part of the voluntary arbitrator is rightfully exercised; more so where the objections
clearly shown. For "the writ of certiorari is an extra- raised against an arbitration award may properly
ordinary remedy and that certiorari jurisdiction is not constitute grounds for annulling, vacating or
to be equated with appellate jurisdiction. In a special modifying said award under the laws on arbitration.
civil action of certiorari, the Court will not engage in
a review of the facts found nor even of the law as
interpreted or applied by the arbitrator unless the Adamson vs CA (1994)
supposed errors of fact or of law are so patent and Petitioners: Dr. Lucas Adamson and Adamson
gross and prejudicial as to amount to a grave abuse Management Corporation
of discretion or an exces de pouvoir on the part of Respondents: CA and Apac Holding Limited
the arbitrator."
Even decisions of administrative agencies Facts: Adamson Management Corporation and
which are declared "final" by law are not exempt Lucas Adamson on the one hand, and APAC
from judicial review when so warranted. It should be Holdings Limited on the other, entered into a
stressed, too, that voluntary arbitrators, by the contract whereby the former sold 99.97% of
nature of their functions, act in a quasi-judicial outstanding common shares of stocks of Adamson
capacity. It stands to reason, therefore, that their and Adamson, Inc. to the latter for P24,384,600 plus
decisions should not be beyond the scope of the the Net Asset Value of Adamson and Adamson, Inc.
power of judicial review of this Court. as of June 19, 1990. But the parties failed to agree
After closely studying the list of errors, as on a reasonable Net Asset Value. This prompted
well as petitioners' discussion of the same in their them to submit the case for arbitration in accordance
Motion to Remand Case For Further Hearing and with RA 876.
Reconsideration and Opposition to Motion for The Arbitration Committee rendered a
Confirmation of Award, we find that petitioners have decision finding the Net Asset Value of the Company
amply made out a case where the voluntary to be P167,118. The Arbitration Committee
arbitrator failed to apply the terms and provisions of disregarded petitioners' argument. According to the
the Construction Agreement which forms part of the Committee, however, the amount of P5,146,000
law applicable as between the parties, thus which was claimed as initial NAV by petitioners, was
merely an estimate of the Company's NAV as of
But the compromise may be annulled or rescinded if it refers only February 28, 1990 which was still subject to financial
to one thing to which one of the parties has no right, as developments until June 19, 1990, the cut-off date.
shown by the newly-discovered documents. (n) Aside from deciding the amount of NAV, the
Art. 2040. If after a litigation has been decided by a final Committee also held that any ambiguity in the
judgment, a compromise should be agreed upon, either or both contract should not necessarily be interpreted
parties being unaware of the existence of the final judgment, against private respondents because the parties had
the compromise may be rescinded. stipulated that the draft of the agreement was
Ignorance of a judgment which may be revoked or set aside submitted to petitioners for approval and that the
is not a valid ground for attacking a compromise.
latter even proposed changes which were eventually We find no reason to depart from the Court
incorporated in the final form of the Agreement. of Appeal's conclusion.
APAC Holdings Ltd. filed a petition for Petitioners herein failed to prove their
confirmation of the arbitration award before the allegation of partiality on the part of the arbitrators.
Makati RTC. Petitioners opposed the petition and Proofs other than mere inferences are needed to
prayed for the nullification, modification and/or establish evident partiality. That they were
correction of the same, alleging that the arbitrators disadvantaged by the decision of the Arbitration
committed evident partiality and grave abuse of Committee does not prove evident partiality.
discretion. The RTC vacated the arbitration award. Too much reliance has been accorded by
The CA reversed. petitioners on the decision of the trial court.
However, we find that the same is but an adaptation
Issue: WON the CA erred in affirming the of the arguments of petitioners to defeat the petition
arbitration award for confirmation of the arbitral award in the trial court
by private respondent. The trial court itself stated as
Held: No follows: To allay any fear of petitioner that its reply
and opposition, dated 11 June 1991, has not been
Ratio: The CA, in reversing the trial court's taken into account in resolving this case, it will be
decision held that the nullification of the decision of well to state that the court has carefully read the
the Arbitration Committee was not based on the same and, what is more, it has also read
grounds provided by the Arbitration Law and that ". . respondents' comment, dated 19 June 1991,
. petitioners herein have failed to substantiate with wherein they made convincing arguments which are
any evidence their claim of partiality. Significantly, likewise adopted and incorporated herein by
even as respondent judge ruled against the reference.
arbitrators' award, he could not find fault with their The justifications advanced by the trial court
impartiality and integrity. Evidently, the nullification for vacating the arbitration award are the following:
of the award rendered at the case at bar was made (a) ". . . that the arbitration committee had advanced
not on the basis of any of the grounds provided by no valid justification to warrant a departure from the
law." well-settled rule in contract interpretation that if the
Assailing the above conclusion, petitioners terms of the contract are clear and leave no doubt
argue that ". . . evident partiality is a state of mind upon the intention of the contracting parties the
that need not be proved by direct evidence but may literal meaning of its interpretation shall control; (b)
be inferred from the circumstances of the case. It is that the final NAV of P47,121,468.00 as computed
related to intention which is a mental process, an by herein petitioners was well within APAC's normal
internal state of mind that must be judged by the investment level which was at least US$1 million and
person's conduct and acts which are the best index to say that the NAV was merely P167,118.00 would
of his intention." They pointed out that from the negate Clause 6 of the Agreement which provided
following circumstances may be inferred the that the purchaser would deposit in escrow
arbitrators' evident partiality: P5,146,000.00 to be held for two (2) years and to be
1. the material difference between the results of the used to satisfy any actual or contingent liability of the
arbitrators' computation of the NAV and that of vendor under the Agreement; (c) that the provision
petitioners; for an escrow account negated any idea of the NAV
2. the alleged piecemeal interpretation by the being less than P5,146,000.00; and (d) that herein
arbitrators of the Agreement which went beyond the private respondent, being the drafter of the
clear provisions of the contract and negated the Agreement could not avoid performance of its
obvious intention of the parties; obligations by raising ambiguity of the contract, or its
3. reliance by the arbitrators on the financial failure to express the intention of the parties, or the
statements and reports submitted by SGV which, difficulty of performing the same.
according to petitioners, acted solely for the interests It is clear therefore, that the award was
of private respondents; and vacated not because of evident partiality of the
4. the finding of the trial court that "the arbitration arbitrators but because the latter interpreted the
committee has advanced no valid justification to contract in a way which was not favorable to herein
warrant a departure from the well-settled rule in petitioners and because it considered that herein
contract interpretation that if the terms of the private respondents, by submitting the controversy
contract are clear and leave no doubt upon the to arbitration, was seeking to renege on its
intention of the contracting parties the literal obligations under the contract.
meaning of its interpretation shall control." That the award was unfavorable to
petitioners herein did not prove evident partiality.
That the arbitrators resorted to contract parties HAVE FIXED at P5,146,000.00 prior to
interpretation neither constituted a ground for Adjustments . . .
vacating the award because under the However, such quotation is incomplete and,
circumstances, the same was necessary to settle the therefore, misleading. The full text of the above
controversy between the parties regarding the provision as quoted by the arbitration committee
amount of the NAV. The SC finds that the reads as follows:
interpretation made by the arbitrators did not create (B) The consideration for the purchase of the Sale
a new contract, as alleged by herein petitioners but Shares by the purchaser shall be equivalent to the
was a faithful application of the provisions of the Net Asset Value of the Company, without the
Agreement. Neither was the award arbitrary for it Property, which the parties have fixed at P5,146,000
was based on the statements prepared by the SGV prior to Adjustments plus P24,384,600. The
which was chosen by both parties to be the consideration for the sale of the Sale Shares by the
"auditors." Vendor, is the acquisition of the property by the
The trial court held that private respondent Vendor, through Aloha, from the Company at
could not shirk from performing its obligations on historical cost plus all Taxes due on said transfer of
account of the difficulty of complying with the terms Property, and the release of all collaterals of the
of the contract. It said further that the contract may Vendor securing the RSBS Credit Facility. However,
be harsh but private respondent could not excuse in the implementation of this Agreement, the parties
itself from performing its obligations on account of shall designate the amounts specified in Clause 5 as
the ambiguity of the contract because as its drafter, the purchaser prices in the pro-forma deeds of sale
private respondent was well aware of the and other documents required to effect the transfers
implications of the Agreement. We note herein that contemplated in this Agreement.
during the arbitration proceedings, the parties Thus, petitioner cannot claim that the
agreed that the contract as prepared by private consideration for private respondent's acquisition of
respondent, was submitted to petitioners for the outstanding common shares of stock was
approval. Petitioners, therefore, are presumed to grossly inadequate. If the NAV as computed was
have studied the provisions of the Agreement and small, the result was not due to error in the
agreed to its import when they approved and signed computations made by the arbitrators but due to the
the same. When it was submitted to arbitration to extent of the liabilities being borne by petitioners.
settle the issue regarding the computation of the During the arbitration proceedings, the committee
NAV, petitioners agreed to be bound by the found that petitioner has been suffering losses since
judgment of the arbitration committee, except in 1983, a fact which was not denied by petitioner. We
cases where the grounds for vacating the award cannot sustain the argument of petitioners that the
existed. Petitioners cannot now refuse to perform its amount of P5,146,000.00 was an initial NAV as of
obligation after realizing that it had erred in its February 28, 1990 to which should still be added the
understanding of the Agreement. value of tangible assets (excluding the land) and of
Petitioners also assailed the arbitrator's intangible assets. If indeed the P5,146,000.00 was
reliance upon the financial statements submitted by the initial NAV as of February 28, 1990, then as of
SGV as they allegedly served the interests of private said date, the total assets and liabilities of the
respondents and did not reflect the true intention of company have already been set off against each
the parties. We agree with the observation made by other. NET ASSET VALUE is arrived at only after
the arbitrators that SGV, being a reputable firm, it deducting TOTAL LIABILITIES from TOTAL
should be presumed to have prepared the ASSETS. "TOTAL ASSETS" includes those that are
statements in accordance with sound accounting tangible and intangible. If the amount of the tangible
principles. Petitioners have presented no proof to and intangible assets would still be added to the
establish that SGV's computation was erroneous "initial NAV," this would constitute double counting.
and biased. Unless the company acquired new assets from
Petitioners likewise pointed out that the February 28, 1990 up to June 19, 1990, no value
computation of the arbitrators leads to the absurd corresponding to tangible and intangible assets may
result of petitioners incurring great expense just to be added to the NAV.
sell its properties. In arguing that the NAV could not We also note that the computation by
be less than P5,146,000, petitioners quote Clause petitioners of the NAV did not reflect the liabilities of
(B) of the Agreement as follows: the company. The term "net asset value" indicates
CLAUSE 3(B) the amount of assets exceeding the liabilities as
The consideration for the purchase of the Sale differentiated from total assets which include the
Shares by the Purchaser shall be equivalent to the liabilities. If petitioners were not satisfied, they could
Net Asset Value of the Company, . . . which the
have presented their own financial statements to rules of procedure [19.7] to be promulgated by the Supreme Court
only on those grounds enumerated in Section 2515 of Republic Act
rebut SGV's report but this, they did not do. No. 876. Any other ground raised against a domestic arbitral
Lastly, in assailing the decision of the Court award shall be disregarded by the regional trial court.
of Appeals, petitioners would have this Court believe
that the respondent court held that the decision of RA 876, Sec. 24. Grounds for vacating award {P-A-G-E}
In any one of the following cases, the court must make an order
the arbitrators was not subject to review by the vacating the award upon the petition of any party to the
courts. This was not the position taken by the controversy when such party proves affirmatively that in the
respondent court. arbitration proceedings;
The Court of Appeals, in its decision stated,
(a) The award was procured by corruption, fraud, or other undue
thus: means; or
It is settled that arbitration awards are subject to (b) That there was evident partiality or corruption in the
judicial review. In the recent case of Chung Fu arbitrators or any of them; or
Industries (Philippines), Inc., et. al. v. Court of (c) That the arbitrators were guilty of misconduct in refusing to
postpone the hearing upon sufficient cause shown, or in refusing
Appeals, Hon Francisco X. Velez, et. al., G. R. No. to hear evidence pertinent and material to the controversy; that
96283, February 25, 1992, the Supreme Court one or more of the arbitrators was disqualified to act as such
categorically ruled that: under section nine hereof, and willfully refrained from disclosing
It is stated expressly under Art. 2044 of the such disqualifications or of any other misbehavior by which the
rights of any party have been materially prejudiced; or
Civil Code that the finality of the arbitrators' award is (d) That the arbitrators exceeded their powers, or so imperfectly
not absolute and without exceptions. Where the executed them, that a mutual, final and definite award upon the
conditions described in Articles 2038, 2039 and subject matter submitted to them was not made.
2040 applicable to both compromises and
Where an award is vacated, the court, in its discretion, may direct
arbitrations are obtaining, the arbitrators' award may a new hearing either before the same arbitrators or before a new
be annulled or rescinded. Additionally, under arbitrator or arbitrators to be chosen in the manner provided in the
Sections 24 and 25 of the Arbitration Law, there are submission or contract for the selection of the original arbitrator or
grounds for vacating, modifying or rescinding an arbitrators, and any provision limiting the time in which the
arbitrators may make a decision shall be deemed applicable to
arbitrators' award. Thus, if and when the factual the new arbitration and to commence from the date of the court's
circumstances referred to in the above-cited order.
provisions are present, judicial review of the award is
properly warranted. Where the court vacates an award, costs, not exceeding fifty
pesos and disbursements may be awarded to the prevailing party
Clearly, though recourse to the courts may and the payment thereof may be enforced in like manner as the
be availed of by parties aggrieved by decisions or payment of costs upon the motion in an action.
awards rendered by arbitrator/s, the extent of such is
neither absolute nor all encompassing. . . . Rule 19.7. No appeal or certiorari on the merits of an arbitral
award. — An agreement to refer a dispute to arbitration shall
It is clear then that the Court of Appeals reversed mean that the arbitral award shall be final and binding.
the trial court not because the latter reviewed the Consequently, a party to an arbitration is precluded from filing an
arbitration award involved herein, but because the appeal or a petition for certiorari questioning the merits of an
respondent appellate court found that the trial court arbitral award.
had no legal basis for vacating the award.
What is the option of the court after vacating the
award?
CLASS NOTES:
Rule 11.9. Court action. — Unless a ground to vacate an arbitral
How do you assess the Chung Fu Rule in light of award under Rule 11.5 above is fully established, the court shall
confirm the award.
the new Special ADR Rules?
An arbitral award shall enjoy the presumption that it was made
In Chung Fu, the SC said that TC should have and released in due course of arbitration and is subject to
looked into the merits of the case, after a prima facie confirmation by the court
showing of the existence of grounds warranting In resolving the petition or petition in opposition thereto in
judicial review. accordance with these Special ADR Rules, the court shall either
confirm or vacate the arbitral award. The court shall not disturb
If a court, after vacating an award, reverse the the arbitral tribunal’s determination of facts and/or interpretation of
law.
award?
No. See 19.7 In a petition to vacate an award or in petition to vacate an award
in opposition to a petition to confirm the award, the petitioner may
RA 9285, Sec. 41. Vacation Award simultaneously apply with the Court to refer the case back to the
A party to a domestic arbitration may question the arbitral award
with the appropriate regional trial court in accordance with the 15
Should be Section 25 of RA 876.
same arbitral tribunal for the purpose of making a new or revised was enacted by Congress since there was a growing
award or to direct a new hearing, or in the appropriate case, order
the new hearing before a new arbitral tribunal, the members of
need for a law regulating arbitration in general.
which shall be chosen in the manner provided in the arbitration he parties in the present case, upon entering
agreement or submission, or the law. In the latter case, any into a Contract for Site Development, mutually
provision limiting the time in which the arbitral tribunal may make agreed that any dispute arising from the said
a decision shall be deemed applicable to the new arbitral tribunal.
contract shall be submitted for arbitration. Explicit is
In referring the case back to the arbitral tribunal or to a new Paragraph 19 of subject contract. Thereunder, if a
arbitral tribunal pursuant to Rule 24 of Republic Act No. 876, dispute should arise from the contract, the
the court may not direct it to revise its award in a particular Arbitration Board shall assume jurisdiction and
way, or to revise its findings of fact or conclusions of law or
otherwise encroach upon the independence of an arbitral
conduct hearings. After the Board comes up with a
tribunal in the making of a final award. decision, the parties may immediately implement the
same by treating it as an amicable settlement.
However, if one of the parties refuses to comply or is
dissatisfied with the decision, he may file a Petition
National Steel Corporation vs RTC of Lanao
to Vacate the Arbitrator's decision before the trial
Date: March 11, 1999 court. On the other hand, the winning party may ask
Petitioner: National Steel Corporation the trial court's confirmation to have such decision
Respondents: RTC of Lanao del Norte and E. enforced.
Willkom Enterprises Inc It should be stressed that voluntary
arbitrators, by the nature of their functions, act in a
Ponente: Purisima quasi-judicial capacity. As a rule, findings of facts by
quasi-judicial bodies, which have acquired expertise
Facts: Edward Willkom Enterprises Inc. together
because their jurisdiction is confined to specific
with Ramiro Construction and National Steel matters, are accorded not only respect but even
Corporation executed a contract whereby the former finality if they are supported by substantial evidence,
jointly undertook the Contract for Site Development even if not overwhelming or preponderant. As the
for the latter's Integrated Iron and Steel Mills petitioner has availed of Rule 65, the Court will not
Complex to be established at Iligan City. review the facts found nor even of the law as
Sometime in 1983, the services of Ramiro interpreted or applied by the arbitrator unless the
Construction was terminated and EWEI took over supposed errors of facts or of law are so patent and
Ramiro's contractual obligation. Due to this, gross and prejudicial as to amount to a grave abuse
extensions of time for the termination of the project, of discretion or an excess de pouvoir on the part of
initially agreed to be finished on July 17, 1983, were the arbitrators.
granted by NSC. Differences later arose, EWEI filed Thus, in a Petition to Vacate Arbitrator's
a civil casebefore the RTC of Lanao del Norte, Decision before the trial court, regularity in the
Branch 06 praying for the payments of performance of official functions is presumed and
P458,381.001 with interest from the time of delay; the complaining party has the burden of proving the
the price adjustment as provided by PD 1594; and existence of any of the grounds for vacating the
exemplary damages in the amount of P50,000.00 award, as provided for by Sections 24 of the
and attorney's fees. Arbitration Law.
The court upon joint motion of both parties The grounds relied upon by the petitioner
had issued an order dismissing the complaint and were the following (a) That there was evident
counterclaim . . . in view of the desire of both parties partiality in the assailed decision of the Arbitrators in
to implement Sec. 19 of the contract, providing for a favor of the respondent; and (b) That there was
resolution of any conflict by arbitration. After series mistaken appreciation of the facts and application of
of hearings, the Arbitrators rendered the decision the law by the Arbitrators. These were the very same
which is the subject matter of these present causes grounds alleged by NSC before the trial court in their
of action, both initiated separately by the herein Petition to Vacate the Arbitration Award and which
contending parties, substantial portion of which petitioner is reiterating in this petition under scrutiny.
directs NSC to pay EWEI. The RTC affirmed. Petitioner's allegation that there was evident
partiality is untenable. It is anemic of evidentiary
Issue: WON the court acted with grave abuse of
support. In the case of Adamson vs. Court of
discretion in not vacating the arbitrator's award. Appeals, 232 SCRA 602, in upholding the decision
Held:
of the Board of Arbitrators, this Court ruled that the
Ratio: A stipulation to refer all future disputes or to
fact that a party was disadvantaged by the decision
submit an ongoing dispute to an arbitrator is valid. of the Arbitration. Committee does not prove evident
RA 876, otherwise known as the Arbitration Law, partiality. Proofs other than mere inference are
needed to establish evident partiality. Here, cited these obligations in detail for EWEI to
petitioner merely averred evident partiality without perform/comply within 30 days, such failure to
any proof to back it up. Petitioner was never perform/comply should have constituted as an event
deprived of the right to present evidence nor was in default that would have justified termination of
there any showing that the Board showed signs of contract of NSC with EWEI. If at all, this unfinished
any bias in favor of EWEI. work may be additional/extra work awarded in 1984
Indeed, the allegation of evident partiality is to another contractor at prices higher than the unit
not well-taken because the petitioner failed to price tendered by EWEI in 1982 and/or the
substantiate the same. discrepancy between actual quantities of work
Anent the issue of mistaken appreciation of accomplished per plans versus estimated quantities
facts and law of the case, the petitioner theorizes of work covered by separate contract as expansion
that the awards made by the Board were of the original project.
unsubstantiated and the same were a plain Furthermore, under the contract sued upon,
misapplication of the law and even contrary to it is clear that should the Owner feel that the work
jurisprudence. To have a clearer understanding of agreed upon was not completed by the contractor, it
the petition, this Court will try to discuss individually is incumbent upon the OWNER to send to
the awards made by the Board, and determine if CONTRACTOR a letter within seven (7) days after
there was grave abuse of discretion on the part of completion of the inspection to specify the objections
the trial court when it adopted such awards in toto. thereto. 9 NSC failed to comply with such
I. P458,381.00 representing EWEI's last billing requirement, and therefore it would be unfair to
No. 16 with interest thereon at the rate of 1-1/4% refuse payment to EWEI, considering that the latter
per month from January 1, 1985 to actual date of had faithfully submitted Final Billing No. 16 believing
payment; that its work had been completed because NSC did
Petitioner seeks to bar payment of the said not call its attention to any objectionable aspect of
amount to EWEI. Since the latter failed to complete their project.
the works as agreed upon, NSC had the right to But, what cannot be upheld is the Board's
withhold such amount. The same will be used to imposition of a 1-1/4% interest per month from
cover the cost differential paid to another contractor January 1, 1985 to actual date of payment. There is
who finished the work allegedly left uncompleted by nothing in the said contract to justify or authorize
EWEI. Said work cost NSC P1,225,000, and should such an award. The trial court should have therefore
be made chargeable to EWEI's receivables on Final disregarded the same and instead, applied the legal
Billing No. 16 issued to NSC. rate of 6% per annum, from Jan. 1, 1985 until this
The query here therefore is whether there decision becomes final and executory. This is so
was failure on the part of EWEI to complete the work because the legal rate of interest on monetary
agreed upon. This will determine whether Final obligations not arising from loans or forebearance of
Billing No. 16 can be made chargeable to the cost credits or goods is 6% 10 per annum in the absence
differential paid by NSC to another contractor. of any stipulation to the contrary.
After a series of hearings, the Board of (II) Price escalation with the interest rate of 1-
Arbitrators concluded that the work was completed 1/4% per month from 1 January 1985 to actual
by EWEI. As correctly stated To authenticate the date of payment.
extent of unfinished work, quantity, unit cost Petitioner contends that EWEI is not entitled
differential and amount, NSC was required to submit to price escalation absent any stipulation to that
copies of payment vouchers and/or job awards effect in the contract under which, the contract price
extended to the other contractor engaged to is fixed, citing Paragraph 2 thereof, which stipulates:
complete the works. The best efforts by NSC despite 2. CONTRACT PRICE — applicable unit prices
the multiplicity of accounting/auditing/engineering above fixed are based on the assumption that the
records required in a corporate complex failed to disposal areas for cleared, grubbed materials,
produce documentary proofs from their Iligan or debris, excess filling materials and other matters that
Makati office despite repeated requests. NSC failed are to be disposed of or are within the boundary
to substantiate such allusion of completion by limits of the site, as designated in Annex A hereof. In
another contractor three unfinished items of works, the event that disposal areas fixed and designated in
actual quantities accomplished and unit cost Annex A are diverted and transferred to such other
differential paid chargeable against EWEI. areas as would be outside the limits of the site as
To affirm the work items, quantity, unit cost would require additional costs to the contractor, then
differential and amount of unfinished work left Owner shall be liable for such additional hauling
behind by EWEI, NSC in serving notice of contract costs of P1.45/km/m3."
termination to EWEI should have instead specifically
The phrase "prices above fixed" means that adjustment compensation even without the benefit of
the contract price of the work shall be that agreed escalation provision in the contract but allowed in
upon by the parties at the time of the execution of accordance with PD NO. 1594 enforceable among
the contract, which is the law between them government controlled or owned corporation. The
provided it is not contrary to law, morals, good statement is embodied in an affidavit (Exhibit "111-
customs, public order, or public policy. (Article 1306, h") submitted by affiant Jose M. Mesina, Asst. to the
New Civil Code). It cannot be inferred therefrom, President and Legal Counsel of GTCI, submitted to
however, that the parties are prohibited from the Arbitrators upon solicitation of EWEI, copy to
imposing future increases or price escalation. It is a NSC, on 3 October 1991. NSC did not assail the
cardinal rule in the interpretation of contracts that "if affidavit upon receipt of such document as evidence
the terms of a contract are clear and leave no doubt until the hearing of 19 December 1991 when the
upon the intention of the contracting parties, the affidavit was branded by NSC counsel as incorrect
literal meaning of its stipulations shall control. 11 and hearsay. Within 7 days reglamentary period
But price escalation is expressly allowed after receipt of affidavit in 3 October 1991, the NSC
under Presidential Decree 1594, which law allows had the recourse to contest the affidavit even
price escalation in all contracts involving government preferably charge the affiant for slander if NSC could
projects including contracts entered into by disprove the statements as untrue.
government entities and instrumentalities and If Petitioner seeks to refute such evidence, it
Government Owned or Controlled Corporations should have done so before the Board of Arbitrators,
(GOCCs). It is a basic rule in contracts that law is during the hearings. To raise the issue now is futile.
deemed written into the contract between the However, the same line of reasoning with
parties. And when there is no prohibitory clause on respect to the first award should be used in
price escalation, the Court will allow payment disregarding the interest rate of 1-1/4%. The legal
therefor. Thus, petitioner cannot rely on the case of rate of 6% per annum should be similarly applied to
Llama Development Corporation vs. Court of the price escalation to be computed from Jan. 1,
Appeals and National Steel Corporation, GR 88093, 1985 until this decision becomes final and
Resolution, Third Division, 20 Sept 1989. It is not executory.
applicable here since in that case, the contract (III) The award of P50,000 as exemplary damages
explicitly provided that the contract price stipulated and P350,000 as attorney's fees;
was fixed, inclusive of all costs and not subject to The exemplary damages and attorneys fees
escalation. This, in effect, waived the provisions of awarded by the Board of Arbitrators should be
PD 1594. The case under scrutiny is different as the deleted in light of the circumstances surrounding the
disputed contract does not contain a similar case.
provision. The requirements for an award of exemplary
In a vain attempt to evade said law's damages, are: (1) they may be imposed by way of
application, they would like the Court to believe that example in addition to compensatory damages, and
it is an acquired asset corporation and not a only after the claimants right to them has been
government owned or controlled corporation so that established; (2) that they cannot be recovered as a
they are not within the coverage of PD 1594. matter of right, their determination depending upon
Whether NSC is an asset-acquired corporation or a the amount of compensatory damages that may be
government owned or controlled corporation is of no awarded to the claimant; (3) the act must be
moment. It is not determinative of the pivot of accompanied by bad faith or done in a wanton,
inquiry. It bears emphasizing that during the fraudulent, oppressive or malevolent manner.
hearings conducted by the Board of Arbitrators, EWEI cannot claim that NSC acted in bad
there was presented documentary evidence to show faith or in a wanton manner when it refused payment
that NSC, despite its being allegedly an asset of the Final Billing No. 16. The belief that the work
acquired corporation, allowed price escalation to was never completed by EWEI and that it (NSC) had
another contractor, Geo Transport and Construction, the right to make it chargeable to the cost differential
Inc. (GTCI). As said in the decision of a Board of paid by the latter to another contractor was neither
Arbitrators: wanton nor done in evident bad faith. The payment
On the other hand, there was documentary of legal rate of interest will suffice to compensate
evidence presented that NSC granted Geo EWEI of whatever prejudice it suffered by reason of
Transport and Construction, Inc. (GTCI), the other the delay caused by NSC. As regards the award of
favored contractor working side by side with EWEI attorney's fees, award for attorney's fees without
on the site development project during the same justification is a "conclusion without a premise, its
period the GTCE was granted upon request and basis being improperly left to …………….
paid by NSC an actual sum of P6.9 million as price
CLASS NOTES: the agreement, respondent was granted the

National Steel Corporation is problematic. Supreme exclusive license to distribute and sublicense the
Court is wrong in substituting its own judgment. distribution of TFC in Japan. A dispute arose
between the parties when petitioner accused
respondent of inserting nine episodes of WINS
Next Friday: WEEKLY, a weekly 35-minute community news
program for Filipinos in Japan, into the TFC
1) CIAC programming from March to May 2002. Petitioner
EO 1008 series of 1985, as amended claimed that these were “unauthorized insertions”
China Chiang Jiang Energy Corp (Phils) v. Rosal constituting a material breach of their agreement.
Infrastructure Builders, G.R. 125706, 30 September Consequently, petitioner notified respondent of its
1996 intention to terminate the agreement effective June
10, 2002.
2) Appeals
Study ADR Rules very intensively. They Respondent filed an arbitration suit pursuant to
substantially modified the appellate process. the arbitration clause of its agreement with
Take note of the wording of the Special ADR Rules petitioner. It contended that the airing of WINS
– “enjoining” or “refusing to enjoining” WEEKLY was made with petitioner's prior approval.
Section 1, Rule 43, Rules of Court – gives the It also alleged that petitioner only threatened to
impression that you can appeal from an arbitral terminate their agreement because it wanted to
award renegotiate the terms thereof to allow it to demand
Whereas Special ADR Rules – review of the trial higher fees. Respondent also prayed for damages.
court’s action
The parties appointed Prof Tadiar to act as sole
Hi Precision Steel 228 SCRA 397 arbitrator. The arbitrator found in favor of
ABS CBN v. World 544 SCRA 308 respondent. He held that petitioner gave its approval
to respondent for the airing of WINS WEEKLY as
3) Rule A shown by a series of written exchanges between the
parties. He also ruled that, had there really been a
material breach of the agreement, petitioner should
have terminated the same instead of sending a mere
Class Notes – September 24, 2010 notice to terminate said agreement.
*Where the law extends to you a remedy of Petitioner filed in the CA a petition for review
appeal, but the ICC Rules of Arbitration prohibits under Rule 43 or, in the alternative, a petition for
you from taking an appeal (28.6), is there still a certiorari under Rule 65, with application for TRO
remedy for appeal or not? and writ of preliminary injunction. Respondent, on
the other hand, filed a petition for confirmation of
It’s waived! Article 1159 of the Civil Code! arbitral award before RTC of QC.
Under the Special ADR Rules, can one appeal Petitioner filed a supplemental petition in the CA
from an arbitral award? seeking to enjoin the RTC of QC from further
proceeding with the hearing of respondent's petition
See ABSCBN. for confirmation of arbitral award. After the petition
was admitted by the appellate court, the RTC of QC
issued an order holding in abeyance any further
ABS CBN vs WINS action on respondent's petition as the assailed
decision of the arbitrator had already become the
Date: February 11, 2008
subject of an appeal in the CA. Respondent filed a
Petitioner: ABS CBN Corporation
MR but no resolution has been issued by the lower
Respondents: World Interactive Network Systems
court to date. The CA dismissed the petition for lack
Japan Co, Ltd
of jurisdiction. It stated that as the TOR itself
provided that the arbitrator's decision shall be final
Facts: ABS-CBN Broadcasting Corporation entered
and unappealable and that no MR shall be filed,
into a licensing agreement with World Interactive
then the petition for review must fail. It ruled that it is
Network Systems Japan Co., Ltd., a foreign
the RTC which has jurisdiction over questions
corporation licensed under the laws of Japan. Under
relating to arbitration. It held that the only instance it proper remedy from the adverse decision of a
can exercise jurisdiction over an arbitral award is an voluntary arbitrator, if errors of fact and/or law are
appeal from the trial court's decision confirming, raised, is a petition for review under Rule 43 of the
vacating or modifying the arbitral award. Rules of Court. Thus, petitioner's contention that it
may avail of a petition for review under Rule 43
Issue: WON an aggrieved party in a voluntary under the circumstances of this case is correct.
arbitration dispute may avail of a Rule 43 or Rule 65
instead of a petition to vacate the award in the RTC As to petitioner's arguments that a petition
for certiorari under Rule 65 may also be resorted to,
we hold the same to be in accordance with the
Held: Constitution and jurisprudence. It is well within the
power and jurisdiction of the Court to inquire
Ratio: RA 876 itself mandates that it is the RTC, whether any instrumentality of the Government,
which has jurisdiction over questions relating to such as a voluntary arbitrator, has gravely abused
arbitration such as a petition to vacate an arbitral its discretion in the exercise of its functions and
award. The law itself clearly provides that the RTC prerogatives. Any agreement stipulating that “the
must issue an order vacating an arbitral award only decision of the arbitrator shall be final and
“in any one of the . . . cases” enumerated therein. unappealable” and “that no further judicial recourse
Under the legal maxim in statutory construction if either party disagrees with the whole or any part of
expressio unius est exclusio alterius, the explicit the arbitrator's award may be availed of” cannot be
mention of one thing in a statute means the held to preclude in proper cases the power of judicial
elimination of others not specifically mentioned. As review which is inherent in courts. We will not
RA 876 did not expressly provide for errors of fact hesitate to review a voluntary arbitrator's award
and/or law and grave abuse of discretion (proper where there is a showing of grave abuse of authority
grounds for a petition for review under Rule 43 and a or discretion and such is properly raised in a petition
petition for certiorari under Rule 65, respectively) as for certiorari and there is no appeal, nor any plain,
grounds for maintaining a petition to vacate an speedy remedy in the course of law.
arbitral award in the RTC, it necessarily follows that
a party may not avail of the latter remedy on the Significantly, Insular Savings Bank v.
grounds of errors of fact and/or law or grave abuse FEBTC definitively outlined several judicial remedies
of discretion to overturn an arbitral award. an aggrieved party to an arbitral award may
undertake:
In cases not falling under any of the grounds
to vacate an award, the Court has already made (1) a petition in the proper RTC to issue an order to
several pronouncements that a petition for review vacate the award on the grounds provided for in
under Rule 43 or a petition for certiorari under Rule Section 24 of RA 876;
65 may be availed of in the CA. Which one would
depend on the grounds relied upon by petitioner.
(2) a petition for review in the CA under Rule 43 of
the Rules of Court on questions of fact, of law,
or mixed questions of fact and law; and
In Luzon Development Bank v. Association
of Luzon Development Bank Employees, the Court
held that a voluntary arbitrator is properly classified (3) a petition for certiorari under Rule 65 of the Rules
as a “quasi-judicial instrumentality” and is, thus, of Court should the arbitrator have acted without
within the ambit of Section 9 (3) of the Judiciary or in excess of his jurisdiction or with grave
Reorganization Act, as amended. As such, abuse of discretion amounting to lack or excess
decisions handed down by voluntary arbitrators fall of jurisdiction.
within the exclusive appellate jurisdiction of the CA.
This decision was taken into consideration in Nevertheless, although petitioner’s position
approving Section 1 of Rule 43 of the Rules of on the judicial remedies available to it was correct,
Court. we sustain the dismissal of its petition by the CA.
The remedy petitioner availed of, entitled alternative
This rule was cited in Sevilla Trading petition for review under Rule 43 or petition for
Company v. Semana, Manila Midtown Hotel v. certiorari under Rule 65, was wrong.
Borromeo, and Nippon Paint Employees Union-
Olalia v. Court of Appeals. These cases held that the
Time and again, we have ruled that the completion to Steel Builders which allegedly had
remedies of appeal and certiorari are mutually frequently incurred delays during the original
exclusive and not alternative or successive. Proper contract period and the extension period. Steel
issues that may be raised in a petition for review Builders insisted that the delays in the project were
under Rule 43 pertain to errors of fact, law or mixed either excusable or due to Hi-Precision's own fault
questions of fact and law. While a petition for and issuance of change orders. The project was
certiorari under Rule 65 should only limit itself to taken over on 7 November 1990, and eventually
errors of jurisdiction, that is, grave abuse of completed on February 1991, by Hi-Precision.
discretion amounting to a lack or excess of
jurisdiction. Moreover, it cannot be availed of where Steel Builders filed a "Request for
appeal is the proper remedy or as a substitute for a Adjudication" with CIAC. In its Complaint filed with
lapsed appeal. the CIAC, Steel Builders sought payment of its
unpaid progress buildings, alleged unearned profits
A careful reading of the assigned errors and other receivables. Hi-Precision, upon the other
reveals that the real issues calling for the CA's hand, in its Answer and Amended Answer, claimed
resolution were less the alleged grave abuse of actual and liquidated damages, reimbursement of
discretion exercised by the arbitrator and more alleged additional costs it had incurred in order to
about the arbitrator’s appreciation of the issues and complete the project and attorney's fees.
evidence presented by the parties. Therefore, the
issues clearly fall under the classification of errors of The CIAC formed an Arbitral Tribunal with
fact and law” questions which may be passed upon three (3) members. After the arbitration proceeding,
by the CA via a petition for review under Rule 43. the Arbitral Tribunal rendered a unanimous ordering
Petitioner cleverly crafted its assignment of errors in petitioner to pay the Contractor the amount of
such a way as to straddle both judicial remedies, P6,400,717.83 and all other claims of the parties
that is, by alleging serious errors of fact and law (in against each other are deemed compensated and
which case a petition for review under Rule 43 would offset. Upon MR, the Arbitral Tribunal issued an
be proper) and grave abuse of discretion (because Order which reduced the net amount due to
of which a petition for certiorari under Rule 65 would contractor Steel Builders to P6,115,285.83. In its
be permissible). Award, the Arbitral Tribunal stated that it was guided
by Articles 1169, 1192 and 2215 CC. With such
It must be emphasized that every lawyer guidance, the arbitrators concluded that (a) both
should be familiar with the distinctions between the parties were at fault, though the Tribunal could not
two remedies for it is not the duty of the courts to point out which of the parties was the first infractor;
determine under which rule the petition should fall. and (b) the breaches by one party affected the
Petitioner's ploy was fatal to its cause. An appeal discharge of the reciprocal obligations of the other
taken either to this Court or the CA by the wrong or party. With mutual fault as a principal premise, the
inappropriate mode shall be dismissed. Thus, the Arbitral Tribunal denied (a) petitioner's claims for the
alternative petition filed in the CA, being an additional costs allegedly incurred to complete the
inappropriate mode of appeal, should have been project; and (b) private respondent's claim for profit it
dismissed outright by the CA. had failed to earn because of petitioner's take over
of the project.
Petitioner now asks this Court to set aside

Hi Precision Steel vs Lim Kim Steel the Award, contending basically that it was Steel
Date: December 13, 1993 Builders who had defaulted on its contractual
Petitioner: Hi Precision Steel Center Inc undertakings and so could not be the injured party
Respondents: Lim Kim Steel Builders and CIAC and should not be allowed to recover any losses it
may have incurred in the project. Petitioner insists it
Facts: Petitioner entered into a contract with private is still entitled to damages, and claims that the
respondent under which the latter as Contractor was Arbitral Tribunal committed grave abuse of discretion
to complete a P21 M construction project owned by when it allowed certain claims by Steel Builders and
the former within a period of 153 days, i.e. from 8 offset them against claims of Hi-Precision.
May 1990 to 8 October 1990. The project completion
date was first moved to 4 November 1990. On that Issue: WON the CIAC should be impleaded
date, however, only 75.8674% of the project was
actually completed. Petitioner attributed this non- Held: No
Ratio: We note that the Arbitral Tribunal has not under the aegis of the CIAC. Consideration of the
been impleaded as a respondent in the Petition at animating purpose of voluntary arbitration in general,
bar. The CIAC has indeed been impleaded; and arbitration under the aegis of the CIAC in
however, the Arbitral Award was not rendered by the particular, requires us to apply rigorously the above
CIAC, but rather by the Arbitral Tribunal. Moreover, principle embodied in Section 19 that the Arbitral
under Section 20 of EO 1008, it is the Arbitral Tribunal's findings of fact shall be final and
Tribunal, or the single Arbitrator, with the inappealable.
concurrence of the CIAC, which issues the writ of
execution requiring any sheriff or other proper officer Voluntary arbitration involves the reference
to execute the award. The Arbitral Tribunal which of a dispute to an impartial body, the members of
rendered the Award sought to be reviewed and set which are chosen by the parties themselves, which
aside, should be impleaded even though the parties freely consent in advance to abide by the
defense of its Award would presumably have to be arbitral award issued after proceedings where both
carried by the prevailing party. parties had the opportunity to be heard. The basic
objective is to provide a speedy and inexpensive
Petitioner Hi-Precision apparently seeks method of settling disputes by allowing the parties to
review of both under Rule 45 and Rule 65 of the avoid the formalities, delay, expense and
Rules of Court. We do not find it necessary to rule aggravation which commonly accompany ordinary
which of the two: a petition for review under Rule 45 litigation, especially litigation which goes through the
or a petition for certiorari under Rule 65 — is entire hierarchy of courts. EO1008 created an
necessary under Executive Order No. 1008, as arbitration facility to which the construction industry
amended; this issue was, in any case, not squarely in the Philippines can have recourse. The EO was
raised by either party and has not been properly and enacted to encourage the early and expeditious
adequately litigated. settlement of disputes in the construction industry, a
public policy the implementation of which is
Issue: WON petitioner is entitled to relief necessary and important for the realization of
national development goals.
Held: No
Aware of the objective of voluntary
Ratio: Hi-Precision may be seen to be making two arbitration in the labor field, in the construction
(2) basic arguments: industry, and in any other area for that matter, the
Court will not assist one or the other or even both
(a) Petitioner asks this Court to correct legal errors parties in any effort to subvert or defeat that
committed by the Arbitral Tribunal, which at the objective for their private purposes. The Court will
same time constitute grave abuse of discretion not review the factual findings of an arbitral tribunal
amounting to lack of jurisdiction on the part of the upon the artful allegation that such body had
Arbitral Tribunal; and "misapprehended the facts" and will not pass upon
issues which are, at bottom, issues of fact, no matter
(b) Should the supposed errors petitioner asks us to how cleverly disguised they might be as "legal
correct be characterized as errors of fact, such questions." The parties here had recourse to
factual errors should nonetheless be reviewed arbitration and chose the arbitrators themselves;
because there was "grave abuse of discretion" in the they must have had confidence in such arbitrators.
misapprehension of facts on the part of the Arbitral The Court will not, therefore, permit the parties to
Tribunal. relitigate before it the issues of facts previously
presented and argued before the Arbitral Tribunal,
EO 1008, as amended, provides, in its save only where a very clear showing is made that,
Section 19, as follows: Sec. 19. Finality of Awards. in reaching its factual conclusions, the Arbitral
— The arbitral award shall be binding upon the Tribunal committed an error so egregious and
parties. It shall be final and inappealable except on hurtful to one party as to constitute a grave abuse
questions of law which shall be appealable to the of discretion resulting in lack or loss of jurisdiction.
Supreme Court. Prototypical examples would be factual conclusions
of the Tribunal which resulted in deprivation of one
Section 19 makes it crystal clear that or the other party of a fair opportunity to present its
questions of fact cannot be raised in proceedings position before the Arbitral Tribunal, and an award
before the Supreme Court — which is not a trier of obtained through fraud or the corruption of
facts — in respect of an arbitral award rendered arbitrators. Any other, more relaxed, rule would
result in setting at naught the basic objective of a
voluntary arbitration and would reduce arbitration to A second "legal issue" sought to be raised
a largely inutile institution. by petitioner Hi-Precision relates to the supposed
failure of the Arbitral Tribunal to apply the doctrines
Examination of the Petition at bar reveals of estoppel and waiver as against Steel Builders.
that it is essentially an attempt to re-assert and re- The Arbitral Tribunal, after declaring that the parties
litigate before this Court the detailed or itemized were mutually at fault, proceeded to enumerate the
factual claims made before the Arbitral Tribunal faults of each of the parties. One of the faults
under a general averment that the Arbitral Tribunal attributed to petitioner Hi-Precision is that it had
had "misapprehended the facts" submitted to it. In failed to give the contractor Steel Builders the
the present Petition, too, Hi-Precision claims that the required 15-day notice for termination of the
Arbitral Tribunal had committed grave abuse of contract. This was clearly a finding of fact on the part
discretion amounting to lack of jurisdiction in of the Tribunal, supported by the circumstance that
reaching its factual and legal conclusions. per the record, petitioner had offered no proof that it
had complied with such 15-day notice required
The first "legal issue" submitted by the under Article 28.01 of the General Conditions of
Petition is the claimed misapplication by the Arbitral Contract forming part of the Contract Documents.
Tribunal of the first and second paragraphs of Article Petitioner Hi-Precision's argument is that a written
1911 CC. Hi-Precision contends energetically that it Agreement dated 16 November 1990 with Steel
is the injured party and that Steel Builders was the Builders concerning the take over of the project by
obligor who did not comply with what was incumbent Hi-Precision, constituted waiver on the part of the
upon it, such that Steel Builders was the party in latter of its right to a 15-day notice of contract
default and the entity guilty of negligence and delay. termination. Whether or not that Agreement dated
As the injured party, Hi-Precision maintains that it 16 November 1990 (a document not submitted to
may choose between the fulfillment or rescission of this Court) is properly characterized as constituting
the obligation in accordance with Article 1191, and is waiver on the part of Steel Builders, may be
entitled to damages in either case. Thus, Hi- conceded to be prima facie a question of law; but, if
Precision continues, when the contractor Steel it is, and assuming arguendo that the Arbitral
Builders defaulted on the 153rd day of the original Tribunal had erred in resolving it, that error clearly
contract period, Hi-Precision opted for specific did not constitute a grave abuse of discretion
performance and gave Steel Builders a 30-day resulting in lack or loss of jurisdiction on the part of
extension period with which to complete the project. the Tribunal.
What petitioner Hi-Precision, in its above A third "legal issue" posed by Hi-Precision
argument, disregards is that the determination of relates to the supposed failure on the part of the
whether Hi-Precision or Steel Builders was the Arbitral Tribunal "to uphold the supremacy of 'the law
"injured party" is not to be resolved by an application between the parties' and enforce it against private
of Article 1191. That determination is eminently a respondent [Steel Builders]." The "law between that
question of fact, for it requires ascertainment and parties" here involved is the "Technical
identification of which the two (2) contending parties Specifications" forming part of the Contract
had first failed to comply with what is incumbent Documents. Hi-Precision asserts that the Arbitral
upon it. In other words, the supposed misapplication Tribunal did not uphold the "law between the
of Article 1191, while ostensibly a "legal issue," is parties," but instead substituted the same with "its
ultimately a question of fact, i.e., the determination [own] absurd inference and 'opinion' on mud." Here
of the existence or non-existence of a fact or set of again, petitioner is merely disguising a factual
facts in respect of which Article 1191 may be question as a "legal issue," since petitioner is in
properly applied. Thus, to ask this Court to correct a reality asking this Court to review the physical
claimed misapplication or non-application of Article operations relating, e.g., to site preparation carried
1191 is to compel this Court to determine which of out by the contractor Steel Builders and to determine
the two (2) contending parties was the "injured party" whether such operations were in accordance with
or the "first infractor." As noted earlier, the Arbitral the Technical Specifications of the project. The
Tribunal after the prolonged arbitration proceeding, Arbitral Tribunal resolved Hi-Precision's claim by
was unable to make that factual determination and finding that Steel Builders had complied substantially
instead concluded that both parties had committed with the Technical Specifications. This Court will not
breaches of their respective obligations. We will not pretend that it has the technical and engineering
review, and much less reverse, that basic factual capability to review the resolution of that factual
finding of the Arbitral Tribunal. issue by the Arbitral Tribunal.
Finally, the Petition asks this Court to

"review serious errors in the findings of fact of the
[Arbitral Tribunal]." In this section of its Petition, Hi-
Precision asks us to examine each item of its own
claims which the Arbitral Tribunal had rejected in its
Award, and each claim of the contractor Steel
Builders which the Tribunal had granted. In respect
of each item of the owner's claims and each item of
the contractor's claims, Hi-Precision sets out its
arguments, to all appearances the same arguments
it had raised before the Tribunal. As summarized in
the Arbitral Award, Contractor's Claims were as
follows:
We consider that in asking this Court to go

over each individual claim submitted by it and each
individual countering claim submitted by Steel
Builders to the Arbitral Tribunal, petitioner Hi-
Precision is asking this Court to pass upon claims
which are either clearly and directly factual in nature
or require previous determination of factual issues.
This upon the one hand. Upon the other hand, the
Court considers that petitioner Hi-Precision has
failed to show any serious errors of law amounting to
grave abuse of discretion resulting in lack of
jurisdiction on the part of the Arbitral Tribunal, in
either the methods employed or the results reached
by the Arbitral Tribunal, in disposing of the detailed
claims of the respective parties.
CHINA CHIANG
Was there an arbitration clause in China

Chiang?
CIAC jurisdiction vs. ICC jurisdiction?

Sir doesn’t know exactly what the answer is.
How is the UNCITRAL different from ICC

Rules?
Uncitral – no petition for review; adhoc; but
there’s nothing to prevent party to adopt
institutional; final and binding (32.2)
ICC – with petition for review; insituttional; final
and binding (28.6), but ICC is more strongly
worded.
REPUBLIC OF THE PHILIPPINES

REGIONAL TRIAL COURT
NATIONAL CAPITAL JUDICIAL REGION
QUEZON CITY, BRANCH _____
MANUFACTURING CORPORATION
Petitioner,
Sp .Proc. No. _____________
- versus - For: Enforcement of Arbitration
Agreement
SUPPLIER CORPORATION
Respondents.
x----------------------------------------------x
PETITION FOR ENFORCEMENT

OF ABITRATION AGREEMENT
Petitioner MANUFACTURING CORPORATION, by counsel, respectfully states that:
I. PARTIES
1. Petitioner MANUFACTURING CORPORATION is a domestic corporation with business address at 123 High Rise, Gil
Puyat Street, Makati City, where it may be served with pleadings, motions and other processes.
2. Respondent SUPPLIER CORPORATION is a domestic corporation with business address at 456 Low Rise, Makati
Avenue, Makati City, where it may be served with pleadings, motions and other processes.
II. FACTS
3. On November 20, 2010, P & R entered into a contract for the construction of a building.
4. Contained in the construction contract (Attached as Annex “A”) is an arbitration clause in the following tenor:
“32. ARBITRATION
32.1 If at any time a dispute or claim arises out of or in connection with the Agreement the parties shall endeavor to settle
such amicably, failing which it shall be referred to arbitration by a single arbitrator in London, such arbitrator to be appo inted by
agreement between the Lines within 14 days after service by one Line upon the other of a notice specifying the nature of the
dispute or claim and requiring reference of such dispute or claim to arbitration pursuant to this Article.”
5. On February 20, 2010, a dispute arose regarding the construction contract.
6. P sent R a Demand for Arbitration (Attached Annex “B”) but R failed to respond within fifteen (15) days after receipt
thereof.
7. On May 15, 2010, P filed with the Clerk of the Court of the RTC, a copy of the demand for arbitration under the xxx
PRAYER
WHEREFORE, in view of the foregoing, petitioner respectfully prays that this Honorable Court issue an order directing that the
arbitration agreement be enforced in the manner provided for in the arbitration of clause of the container contract.
Petitioner also prays for such other reliefs as may be deemed just or equitable under the premises.
Respectfully submitted.
Quezon City; 29 July 2010.
ATTY. ANNA MARIE F. ROXAS

IBP Lifetime Member No. 12345; Pasig City
PTR No. 67890; 08/01/10; Pasig City
SC Roll No. 55555
MCLE No. III – 22222
VERIFICATION16
AND CERTIFICATION OF NON-FORUM SHOPPING
I, JUAN DE LA CRUZ, of legal age, single, Filipino, with residence and postal address at 31 Lacson St., Quezon City, after being
duly sworn on oath in accordance with law, hereby voluntarily depose and say:
1. That I am the Petitioner in the above-entitled case;
2. That I have caused the preparation of the foregoing Petition;
3. That I have read the contents thereof and the same are true and correct to the best of my knowledge and based on
authentic records in my possession;
4. That I certify to the authenticity of the documents attached to the Petition;
5. That I hereby certify that I have not commenced any action or proceeding involving the same issues in the Supreme
Court, the Court of Appeals, or any tribunal or agency;
6. That if I should hereafter learn that a similar action or proceeding has been filed or is pending before the Supreme Court,
the Court of Appeals, or any tribunal or agency, I undertake to immediately report the same within five (5) days therefrom to the court or
agency wherein the original pleading and sworn certification contemplated in Administrative Circular No. 04-94 of the Supreme Court has been
filed.
JUAN DE LA CRUZ
Affiant
- JURAT -
- SECRETARY’S CERTIFICATE -
ATTESTED:
xxxxxx
President
PLUS: Jurat
- EXPLANATION -
- REQUEST FOR AND NOTICE OF HEARING -
Copy Furnished:
xxxxx
16
When made by a lawyer, verification shall mean a statement under oath by a lawyer signing a pleading/motion for delivery to t he Court or to
the parties that he personally prepared the pleading/motion, that there is sufficient factual basis for the statements of fact stated therein, that
there is sufficient basis in the facts and the law to support the prayer for relief therein, and that the pleading/motion is filed in good faith and is
not interposed for delay.
Formatted: Font: (Default) Arial, 8 pt, English (Philippines)

Law 160a Alternative Dispute Resolution PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Law 160a Alternative Dispute Resolution PDF

Uploaded by

Copyright:

Available Formats

LAW 160A

ALTERNATIVE DISPUTE RESOLUTION

Prof. Arthur Autea

Relevant Laws / Rules

Class Notes - June 11, 2010 challenge the Act

Note: Doctrine of separability applies. Sample arbitration clause:

Examples: RA 9285, Sec. 2 – Declaration of Policy

tribunal includes the power to determine the admissibility, Next meeting:

Note: (b) A party, a mediator, or a nonparty participant may refuse to

(c) Confidential Information shall not be subject to discovery and

MEDIATION (f) a mediator may not be called to testify to provide information

Sec. 11 – Exceptions to Privilege {RPTCPM}

or witness who disclosed or who was compelled to disclose

Rule 10.1. Who may request confidentiality. — A party, counsel

Rule 10.10. Consequence of disobedience. — Any person who

Arbitration Agreement Submission

What is Arbitration? Covered by Summary Procedure:

(b) The following rules on interim or provisional relief shall be

(ii) to provide security for the performance of any obligation;

(iv) to compel any other appropriate act or omission.

Why is there no publication of awards of arbitral

A party may ask that the ruling of the arbitral tribunal

What is the effect of multiple actions and Illustration

Defendant-appellant contends that Sec. 23 of the

What is the Judicial Relief After Commencement 3

1) Inasmuch as clause 23 of the Mill's Covenants,

*Spain (Ley de Enjuiciamiento Civil) – detailed

The petition originated in a complaint for injunction Held:

To none of the exceptions then do the

that award or decision, the CA must be deemed to Is it “any other misbehavior"?

CLASS NOTES: 2) Ground for termination of mandate.

If an arbitrator and an RTC judge are of the same

Petitioners: Pedro Gonzales – alleges nullity

Rule 2.2. Policy on arbitration.— (A) Where the parties have

b. The court finds that: Petitioners: Magellan Capital Management

The lower court then ruled that, assuming that the

It should be noted that in this jurisdiction, arbitration Covered by Summary Procedure:

Not Covered by Summary Procedure: See case APT v. CA –

Note: If you do not want judicial review (cite the

Rule 19.7. No appeal or certiorari on the merits of

Petitioner: Korea Technologies Co Ltd Contract by unilaterally rescinding the contract

Rule 19.12. Appeal to the Court of Appeals.—An appeal to the

Issue: WON the dismissal of the case was proper

Court found that the arbitration clause is valid and

---- WHAT IS THE PRESENT STATE OF THE

Rules, has acted without or in excess of its jurisdiction, or

Must it be verified? Can it be verified by the

Class Notes – September 17, 2010

Chung Fu Industries vs CA (1992) Held: No

2040 applicable to both compromises and committing a grave abuse of discretion.

CLASS NOTES: the agreement, respondent was granted the

Petitioner now asks this Court to set aside

Finally, the Petition asks this Court to

We consider that in asking this Court to go

Was there an arbitration clause in China

CIAC jurisdiction vs. ICC jurisdiction?

How is the UNCITRAL different from ICC

REPUBLIC OF THE PHILIPPINES

PETITION FOR ENFORCEMENT

Petitioner MANUFACTURING CORPORATION, by counsel, respectfully states that:

5. On February 20, 2010, a dispute arose regarding the construction contract.

Quezon City; 29 July 2010.

ATTY. ANNA MARIE F. ROXAS