D.
ARBITRATION obtained through fraud or the corruption of arbitrators, (2)
1. Concept
G.R. No. 126619. December 20, 2006. *
UNIWIDE SALES REALTY AND RESOURCES
CORPORATION, petitioner, vs. TITAN-IKEDA
CONSTRUCTION AND DEVELOPMENT CORPORATION,
respondent.
Actions;  Alternative Dispute Resolution (ADR);
Arbitrations; Construction Industry Arbitration Commission
(CIAC); Administrative Law; Factual findings of construction
arbitrators are final and conclusive and not reviewable by the
Supreme Court on appeal; Exceptions.—As a rule, findings of
fact of administrative agencies and quasi-judicial bodies,
which have acquired expertise because their jurisdiction is
confined to specific matters, are generally accorded not only
respect, but also finality, especially when affirmed by the
Court of Appeals. In particular, factual findings of
construction arbitrators are final and conclusive and not
reviewable by this Court on appeal. This rule, however admits
of certain exceptions. In David v. Construction Industry and
Arbitration Commission, 435 SCRA 654 (2004), we ruled that,
as exceptions, factual findings of construction arbitrators
may be reviewed by this Court when the petitioner proves
affirmatively that: (1) the award was procured by corruption,
fraud or other undue means; (2) there was evident partiality
or corruption of the arbitrators or of any of them; (3) the
arbitrators were guilty of misconduct in refusing to hear
evidence pertinent and material to the controversy; (4) one
or more of the arbitrators were disqualified to act as such
under Section nine of Republic Act No. 876 and willfully
refrained from disclosing such disqualifications or of any
other misbehavior by which the rights of any party have been
materially prejudiced; or (5) the arbitrators exceeded their
powers, or so imperfectly executed them, that a mutual, final
and definite award upon the subject matter submitted to
them was not made. Other recognized exceptions are as
follows: (1) when there is a very clear showing of grave
abuse of discretion resulting in lack or loss of jurisdiction as
when a party was deprived of a fair opportunity to present its
position before the Arbitral Tribunal or when an award is
when the findings of the Court of Appeals are contrary to
those of the CIAC, and (3) when a party is deprived of
administrative due process.
_______________
 THIRD DIVISION.
*
336
336 SUPREME COURT REPORTS
ANNOTATED
Uniwide Sales Realty and Resources Corporation vs.
Titan-Ikeda Construction and Development Corporation
Same;  Same; Same;  Same; Natural Obligations;  The
Supreme Court has not been wont to give an expansive
construction of Art. 1724 of the Civil Code, denying, for
example, claims that it applies to constructions made of ship
vessels, or that it can deny the claim for payment of
professional fees to the architect.—To be certain, this Court
has not been wont to give an expansive construction of Art.
1724, denying, for example, claims that it applies to
constructions made of ship vessels, or that it can validly deny
the claim for payment of professional fees to the architect.
The present situation though presents a thornier problem.
Clearly, Art. 1724 denies, as a matter of right, payment to
the contractor for additional works which were not authorized
in writing by the proprietor, and the additional price of which
was not determined in writing by the parties. Yet the
distinction pointed out by the Court of Appeals is material.
The issue is no longer centered on the right of the contractor
to demand payment for additional works undertaken because
payment, whether mistaken or not, was already made by
Uniwide. Thus, it would not anymore be incumbent on Titan
to establish that it had the right to demand or receive such
payment.
Same;  Same; Same;  Same; Same;  Solutio Indebiti; For
the provisions on solutio indebiti to apply, there has to be
evidence establishing the frame of mind of the payor at the
time the payment was made.—Uniwide, as the owner who did
pay the contractor for such additional works even if they had
not been authorized in writing, has to establish its own right
to reimbursement not under Art. 1724, but under a different
provision of law. Uniwide’s burden of establishing its legal
right to reimbursement becomes even more crucial in the
light of the general presumption contained in Section 3(f),
Rule 131 of the Rules of Court that “money paid by one to
another was due to the latter.” Uniwide undertakes such a
task before this Court, citing the provisions on solutio
indebiti under Arts. 2154 and 2156 of the Civil Code.
However, it is not enough to prove that the payments made
by Uniwide to Titan were “not due” because there was no
prior authorization or agreement with respect to additional
works. There is a further requirement that the payment by
the debtor was made either through mistake or under a cloud
of doubt. In short, for the provisions on solutio indebiti to
apply, there has to be evidence establishing the frame of
mind of the payor at the time the payment was made.
337
VOL. 511, DECEMBER 20, 2006 337
Uniwide Sales Realty and Resources Corporation vs.
Titan-Ikeda Construction and Development Corporation
Same;  Same; Same;  Same; As an arbitration body, the
Construction Industry Arbitration Commission (CIAC) can only
resolve issues brought before it by the parties through the
Terms of Reference (TOR) which functions similarly as a pre-
trial brief.—Arbitration has been defined as “an arrangement
for taking and abiding by the judgment of selected persons in
some disputed matter, instead of carrying it to established
tribunals of justice, and is intended to avoid the formalities,
the delay, the expense and vexation of ordinary litigation.”
Voluntary arbitration, on the other hand, involves the
reference of a dispute to an impartial body, the members of
which are chosen by the parties themselves, which parties
freely consent in advance to abide by the arbitral award
issued after proceedings where both parties had the
opportunity to be heard. The basic objective is to provide a
speedy and inexpensive method of settling disputes by
allowing the parties to avoid the formalities, delay, expense
and aggravation which commonly accompany ordinary
litigation, especially litigation which goes through the entire
hierarchy of courts. As an arbitration body, the CIAC can only
resolve issues brought before it by the parties through the
TOR which functions similarly as a pre-trial brief. Thus, if
Uniwide’s claim for liquidated damages was not raised as an
issue in the TOR or in any modified or amended version of it,
the CIAC cannot make a ruling on it. The Rules of Court
cannot be used to contravene the spirit of the CIAC rules,
whose policy and objective is to “provide a fair and
expeditious settlement of construction disputes through a
non-judicial process which ensures harmonious and friendly
relations between or among the parties.”
Same;  Same; Same;  Same; Pleadings and
Practice; Amendment of Pleadings; Due Process; A party may
not be deprived of due process of law by an amendment of
the complaint as provided in Section 5, Rule 10 of the Rules
of Court.—A party may not be deprived of due process of law
by an amendment of the complaint as provided in Section 5,
Rule 10 of the Rules of Court. In this case, as noted by the
Court of Appeals, Uniwide only introduced and quantified its
claim for liquidated damages in its memorandum submitted
to the CIAC at the end of the arbitration proceeding. Verily,
Titan was not given a chance to present evidence to counter
Uniwide’s claim for liquidated damages.
338
338 SUPREME COURT REPORTS
ANNOTATED
Uniwide Sales Realty and Resources Corporation vs.
Titan-Ikeda Construction and Development Corporation
Same;  Same; Same;  Same; Same;  Formal Offer of
Evidence; Doctrine of Multiple Admissibility; The purpose for
which evidence is offered must be specified because such
evidence may be admissible for several purposes under the
doctrine of multiple admissibility, or may be admissible for
one purpose and not for another, otherwise the adverse
party cannot interpose the proper objection.—Uniwide
alludes to an alleged judicial admission made by Engr. Luzon
Tablante wherein he stated that Project 1 was completed on
10 March 1992. It now claims that by virtue of Engr.
Tablante’s statement, Titan had admitted that it was in
delay. We disagree. The testimony of Engr. Tablante was
offered only to prove that Project 1 was indeed completed. It
was not offered to prove the fact of delay. It must be
remembered that the purpose for which evidence is offered
must be specified because such evidence may be admissible
for several purposes under the doctrine of multiple
admissibility, or may be admissible for one purpose and not
for another, otherwise the adverse party cannot interpose
the proper objection. Evidence submitted for one purpose
may not be considered for any other purpose. Furthermore,
even assuming, for the sake of argument, that said testimony
on the date of completion of Project 1 is admitted, the
establishment of the mere fact of delay is not sufficient for
the imposition of liquidated damages. It must further be
shown that delay was attributable to the contractor if not
otherwise justifiable. Contrarily, Uniwide’s belated claim
constitutes an admission that the delay was justified and
implies a waiver of its right to such damages.
Same;  Same; Same;  Same; National Building Code (P.D.
No. 1098); The submission of “as-built” plans is not a pre-
requisite for the contractor to be paid by the owner; The
purposes of the National Building Code is to safeguard life,
health, property, and public welfare, consistent with the
principles of sound environmental management and control,
and the purposes of the “as-built” plans is necessary only in
furtherance of the law’s purpose.—On the necessity of
submitting “as-built” plans, this Court rules that the
submission of such plans is not a pre-requisite for Titan to be
paid by Uniwide. The argument that said plans are required
by Section 308 of Presidential Decree No. 1098 (National
Building Code) and by Section 2.11 of its Implementing Rules
before payment can be made is untenable. The purpose of
the law is “to safeguard life, health, property, and public
welfare, consistent with the principles of sound
environmental management and control.” The submission of
these plans is necessary
339
VOL. 511, DECEMBER 20, 2006 339
Uniwide Sales Realty and Resources Corporation vs.
Titan-Ikeda Construction and Development Corporation
only in furtherance of the law’s purpose by setting
minimum standards and requirements to control the
“location, site, design, quality of materials, construction, use,
occupancy, and maintenance” of buildings constructed and
not as a requirement for payment to the contractor. The
testimony of Engr. Tablante to the effect that the “as-built”
plans are required before payment can be claimed by Titan is
a mere legal conclusion which is not binding on this Court.
Same;  Same; Same;  Same; Aware of the objective of
voluntary arbitration in the labor field, in the construction
industry, and in any other area for that matter, the Court will
not assist one or the other or even both parties in any effort
to subvert or defeat that objective for their private purposes;
The Court will not permit the parties to relitigate before it the
issues of facts previously presented and argued before the
Arbitral Tribunal, save only where a clear showing is made
that, in reaching its factual conclusions, the Arbitral Tribunal
committed an error so egregious and hurtful to one party as
to constitute a grave abuse of discretion resulting in lack or
loss of jurisdiction.—It is worthy to stress our ruling in Hi-
Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc.,
228 SCRA 397 (1993), which was reiterated in David v.
Construction Industry and Arbitration Commission, 435 SCRA
654 (2004), that: x x x Executive Order No. 1008 created an
arbitration facility to which the construction industry in the
Philippines can have recourse. The Executive Order was
enacted to encourage the early and expeditious
settlement of disputes in the construction industry, a
public policy the implementation of which is necessary
and important for the realization of national
development goals. Aware of the objective of voluntary
arbitration in the labor field, in the construction industry, and
in any other area for that matter, the Court will not assist one
or the other or even both parties in any effort to subvert or
defeat that objective for their private purposes. The Court
will not review the factual findings of an arbitral
tribunal upon the artful allegation that such body had
“misapprehended facts” and will not pass upon issues
which are, at bottom, issues of fact, no matter how
cleverly disguised they might be as “legal questions.”
The parties here had recourse to arbitration and chose
the arbitrators themselves; they must have had
confidence in such arbitrators. The Court will not,
therefore, permit the parties to relitigate before it the
issues of facts previously presented and argued
before the Arbitral Tribunal,
340
340 SUPREME COURT REPORTS
 ANNOTATED
Uniwide Sales Realty and Resources Corporation vs.
Titan-Ikeda Construction and Development Corporation
save only where a clear showing is made that, in
reaching its factual conclusions, the Arbitral Tribunal
committed an error so egregious and hurtful to one
party as to constitute a grave abuse of discretion
resulting in lack or loss of jurisdiction. Prototypical
examples would be factual conclusions of the Tribunal which
resulted in deprivation of one or the other party of a fair
opportunity to present its position before the Arbitral
Tribunal, and an award obtained through fraud or the
corruption of 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 largely inutile institution.
PETITION for review on certiorari of a resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
     Balgos & Perez for petitioner.
     Roderick R.C. Salazar III, Devi Katerina S.
Martinez-Negre and Michelle B. Lazaro co-counsels for
petitioner.
     Jose Angelito B. Bulao for private respondent.
TINGA, J.:
This Petition for Review on Certiorari under Rule 45
seeks the partial reversal of the 21 February 1996
Decision  of the
1
_______________
1
 Rollo, pp. 10-33, 54-77 and 155-178. The dispositive portion of the
said decision states:
“WHEREFORE, the judgment of the CIAC herein appealed from is
hereby MODIFIED in the following respects:
1. a)The ruling holding petitioner liable directly to the BIR for the
VAT on Project 3 and exempting respondent from the said
obligation is hereby DELETED, and in lieu thereof, judgment
is hereby rendered that the Value-Added Tax for Project 3, as
determined by the BIR may be passed on to the petitioner,
subject to such defenses as it may raise with regard to its
computation;
2. b)The denial of petitioner’s claims for liquidated damages is
hereby made without prejudice;
341
VOL. 511, DECEMBER 20, 2006 341
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
Court of Appeals Fifteenth Division in CA-G.R. SP No.
37957 which modified the 17 April 1995 Decision  of the 2
Construction Industry Arbitration Commission (CIAC).
The case originated from an action for a sum of
money filed by Titan-Ikeda Construction and
Development Corporation (Titan) against Uniwide Sales
Realty and Resources Corporation (Uniwide) with the
Regional Trial Court (RTC), Branch 119,  Pasay City 3
arising from Uniwide’s non-payment of certain claims
billed by Titan after completion of three projects
covered by agreements they entered into with each
other. Upon Uniwide’s motion to dismiss/suspend
proceedings and Titan’s open court manifestation
agreeing to the suspension, Civil Case No. 98-0814 was
suspended for it to undergo arbitration.  Titan’s 4
complaint was thus re-filed with the CIAC.  Before the 5
CIAC, Uniwide filed an answer which was later amended
and re-amended, denying the material allegations of the
complaint, with counterclaims for refund of
overpayments, actual and exemplary damages, and
attorney’s fees. The agreements between Titan and
Uniwide are briefly described below.
PROJECT 1. 6
The first agreement (Project 1) was a written
“Construction Contract” entered into by Titan and
Uniwide sometime in
_______________
1. c)The interest of 12% per annum attached to the unpaid
balances for Projects 2 and 3 is hereby REDUCED to 6% per
annum.
In all other aspects, the said judgment is hereby AFFIRMED.
SO ORDERED.”
2
 Id., at pp. 225-249.
3
 Id., at pp. 293-307. Docketed as Civil Case No. 98-0814.
4
 Id., at p. 308; Under Executive Order No. 1008 (Construction
Industry Arbitration Law).
5
 Docketed as CIAC Case No. 13-94.
6
 Rollo, pp. 261-267.
342
342 SUPREME COURT REPORTS ANNOTATED
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
May 1991 whereby Titan undertook to construct
Uniwide’s Warehouse Club and Administration Building
in Libis, Quezon City for a fee of P120,936,591.50,
payable in monthly progress billings to be certified to by
Uniwide’s representative.  The parties stipulated that
7 Uniwide Sales Realty and Resources Corporation vs. Titan-
the building shall be completed not later than 30
November 1991. As found by the CIAC, the building was
eventually finished on 15 February 1992  and turned 8
over to Uniwide.
PROJECT 2.
Sometime in July 1992, Titan and Uniwide entered into
the second agreement (Project 2) whereby the former
agreed to construct an additional floor and to renovate
the latter’s warehouse located at the EDSA Central
Market Area in Mandaluyong City. There was no written
contract executed between the parties for this project.
Construction was allegedly to be on the basis of
drawings and specifications provided by Uniwide’s
structural engineers. The parties proceeded on the basis
of a cost estimate of P21,301,075.77 inclusive of Titan’s
20% mark-up. Titan conceded in its complaint to having
received P15,000,000.00 of this amount. This project
was completed in the latter part of October 1992 and
turned over to Uniwide.
PROJECT 3. 9
The parties executed the third agreement (Project 3) in
May 1992. In a written “Construction Contract,” Titan
undertook to construct the Uniwide Sales Department
Store Building in Kalookan City for the price of
P118,000,000.00 payable
_______________
 Id., at pp. 261-267.
7
 Uniwide claims that Titan allegedly admitted that the building was
8
completed only on 12 March 1992, which date was reflected in Titan’s
Opposition to Partial Motion for Reconsideration dated 10 May 1996.
 Rollo, pp. 285-292.
9
343
VOL. 511, DECEMBER 20, 2006 343
Ikeda Construction and Development Corporation
in progress billings to be certified to by Uniwide’s
representative.  It was stipulated that the project shall
10
be completed not later than 28 February 1993. The
project was completed and turned over to Uniwide in
June 1993.
Uniwide asserted in its petition that: (a) it overpaid
Titan for unauthorized additional works in Project 1 and
Project 3; (b) it is not liable to pay the Value-Added Tax
(VAT) for Project 1; (c) it is entitled to liquidated
damages for the delay incurred in constructing Project 1
and Project 3; and (d) it should not have been found
liable for deficiencies in the defectively constructed
Project 2.
 An Arbitral Tribunal consisting of a chairman and two
members was created in accordance with the CIAC
Rules of Procedure Governing Construction Arbitration.
It conducted a preliminary conference with the parties
and thereafter issued a Terms of Reference (TOR) which
was signed by the parties. The tribunal also conducted
an ocular inspection, hearings, and received the
evidence of the parties consisting of affidavits which
were subject to cross-examination. On 17 April 1995,
after the parties submitted their respective memoranda,
the Arbitral Tribunal promulgated a Decision,  the 11
decretal portion of which is as follows:
“WHEREFORE, judgment is hereby rendered as follows:
On Project 1–Libis:
[Uniwide] is absolved of any liability for the claims made
by [Titan] on this Project.
Project 2–Edsa Central:
[Uniwide] is absolved of any liability for VAT payment on
this project, the same being for the account of the [Titan]. On
the other hand, [Titan] is absolved of any liability on the
counterclaim for defective construction of this project.
_______________
 Id., at pp. 286-292.
10
 Id., at pp. 225-248.
11
344
344 SUPREME COURT REPORTS ANNOTATED
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
[Uniwide] is held liable for the unpaid balance in the amount
of P6,301,075.77 which is ordered to be paid to the [Titan]
with 12% interest per annum commencing from 19
December 1992 until the date of payment.
On Project 3–Kalookan:
[Uniwide] is held liable for the unpaid balance in the
amount of P5,158,364.63 which is ordered to be paid to the
[Titan] with 12% interest per annum commencing from 08
September 1993 until the date of payment.
[Uniwide] is held liable to pay in full the VAT on this
project, in such amount as may be computed by the Bureau
of Internal Revenue to be paid directly thereto. The BIR is
hereby notified that
[Uniwide] Sales Realty and Resources Corporation has
assumed responsibility and is held liable for VAT payment on
this project. This accordingly exempts Claimant Titan-Ikeda
Construction and Development Corporation from this
obligation.
Let a copy of this Decision be furnished the Honorable
Aurora P. Navarette Recina, Presiding Judge, Branch 119,
Pasay City, in Civil Case No. 94-0814 entitled Titan-Ikeda
Construction Development Corporation, Plaintiff—versus—
Uniwide Sales Realty and Resources Corporation, Defendant,
pending before said court for information and proper action.
SO ORDERED.” 12
Uniwide filed a motion for reconsideration of the 17 April
1995 decision which was denied by the CIAC in its
Resolution dated 6 July 1995. Uniwide accordingly filed
a petition for review with the Court of Appeals,  which
13
rendered the assailed decision on 21 February 1996.
Uniwide’s motion for reconsideration was likewise
denied by the Court of Appeals in its assailed
Resolution  dated 30 September 1996.
14
_______________
 Id., at pp. 246-247.
12
 Docketed as CA-G.R. SP No. 37857.
13
 Rollo, pp. 180-183.
14
345
VOL. 511, DECEMBER 20, 2006 345
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
Hence, Uniwide comes to this Court via a petition for
review under Rule 45. The issues submitted for
resolution of this Court are as follows:  (1) Whether
15
Uniwide is entitled to a return of the amount it allegedly
paid by mistake to Titan for additional works done on
Project 1; (2) Whether Uniwide is liable for the payment
of the Value-Added Tax (VAT) on Project 1; (3) Whether
Uniwide is entitled to liquidated damages for Projects 1
and 3; and (4) Whether Uniwide is liable for deficiencies
in Project 2.
As a rule, findings of fact of administrative agencies
and quasi-judicial bodies, which have acquired expertise
because their jurisdiction is confined to specific matters,
are generally accorded not only respect, but also
finality, especially when affirmed by the Court of
Appeals.  In particular, factual findings of construction
16
arbitrators are final and conclusive and not reviewable
by this Court on appeal.  This rule, however admits of
17
certain exceptions.
In David v. Construction Industry and Arbitration
Commission,  we ruled that, as exceptions, factual
18
findings of construction arbitrators may be reviewed by
this Court when the petitioner proves affirmatively that:
(1) the award was procured by corruption, fraud or other
undue means; (2) there was evident partiality or
corruption of the arbitrators or of any of them; (3) the
arbitrators were guilty of misconduct in refusing to hear
evidence pertinent and material to the controversy; (4)
one or more of the arbitrators were disqualified to act as
such under Section nine of Republic Act No. 876 and
willfully refrained from disclosing such disqualifications
or of any other misbehavior by which the rights of any
party have
_______________
 Id., at pp. 344-373. See Petitioner’s Memorandum.
15
 See Megaworld Globus Asia, Inc. v. DSM Construction and
16
Development Corporation, G.R. No. 153310, 2 March 2004, 424 SCRA
179, 197.
 See David
17
v. Construction Industry and Arbitration
Commission, G.R. No. 159795, 30 July 2004, 435 SCRA 654, 666.
 Id.
18
346
346 SUPREME COURT REPORTS ANNOTATED
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
been materially prejudiced; or (5) the arbitrators
exceeded their powers, or so imperfectly executed
them, that a mutual, final and definite award upon the
subject matter submitted to them was not made. 19
Other recognized exceptions are as follows: (1) when
there is a very clear showing of grave abuse of
discretion  resulting in lack or loss of jurisdiction as
20
when a party was deprived of a fair opportunity to
present its position before the Arbitral Tribunal or when
an award is obtained through fraud or the corruption of
arbitrators,  (2) when the findings of the Court of
21
Appeals are contrary to those of the CIAC,  and (3) when
22
a party is deprived of administrative due process. 23
Thus, in Hi-Precision Steel Center, Inc. v. Lim Kim
Builders, Inc.,  we refused to review the findings of fact
24
of the CIAC for the reason that petitioner was requiring
the Court to go over each individual claim and
counterclaim submitted by the parties in the CIAC. A
review of the CIAC’s findings of fact would have had the
effect of “setting at naught the basic objective of a
voluntary arbitration and would reduce arbitration to a
largely inutile institution.” Further, petitioner therein
failed to show any serious error 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. In
_______________
 Id.
19
 Megaworld Globus Asia, Inc. v. DSM Construction
20
and
Development Corporation, supra note 15 at p. 198.
  Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc., G.R.
21
No. 110434, 13 December 1993, 228 SCRA 397, 405.
 Metro Construction, Inc. v. Chatham Properties, Inc., 418 Phil. 176;
22
365 SCRA 697 (2001).
 Megaworld Globus Asia, Inc. v. DSM Construction and
23
Development Corporation, supra.
 G.R. No. 110434, 13 December 1993, 228 SCRA 397.
24
347
VOL. 511, DECEMBER 20, 2006 347
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
Metro Construction, Inc. v. Chatham Properties, Inc.,  we
reviewed the findings of fact of the Court of Appeals
because its findings on the issue of whether petitioner
therein was in delay were contrary to the findings of the
CIAC. Finally, in Megaworld Globus Asia, Inc. v. DSM
Construction and Development Corporation,  we
declined to depart from the findings of the Arbitral
Tribunal considering that the computations, as well as
the propriety of the awards, are unquestionably factual
issues that have been discussed by the Arbitral Tribunal
and affirmed by the Court of Appeals.
In the present case, only the first issue presented for
resolution of this Court is a question of law while the
rest are factual in nature. However, we do not hesitate
to inquire into these factual issues for the reason that
the CIAC and the Court of Appeals, in some matters,
differed in their findings.
We now proceed to discuss the issues in seriatim.
Payment by Mistake for Project 1
The first issue refers to the P5,823,481.75 paid by
Uniwide for additional works done on Project 1. Uniwide
asserts that Titan was not entitled to be paid this
amount because the additional works were without any
written authorization.
It should be noted that the contracts do not contain
stipulations on “additional works,” Uniwide’s liability for
“additional works,” and prior approval as a requirement
before Titan could perform “additional works.”
Nonetheless, Uniwide cites Article (Art.) 1724 of the
New Civil Code as basis for its claim that it is not liable
to pay for “additional works” it did not authorize or
agree upon in writing. The provision states:
_______________
 418 Phil. 176; 365 SCRA 697 (2001).
25
 G.R. No. 153310, 2 March 2004, 424 SCRA 179 (2004).
26
25
348
348 SUPREME COURT REPORTS ANNOTATED
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
“Art. 1724. The contractor who unde rtakes to build a
26
structure or any other work for a stipulated price, in
conformity with plans and specifications agreed upon with
the landowner, can neither withdraw from the contract nor
demand an increase in the price on account of the higher
cost of labor or materials, save when there has been a
change in the plans and specifications, provided:
1. (1)Such change has been authorized by the proprietor
in writing; and
2. (2)The additional price to be paid to the contractor has
been determined in writing by both parties.
The Court of Appeals did take note of this provision, but
deemed it inapplicable to the case at bar because
Uniwide had already paid, albeit with unwritten
reservations, for the “additional works.” The provision
would have been operative had Uniwide refused to pay
for the costs of the “additional works.” Instead, the
Court of Appeals applied Art. 1423  of the New Civil
27
Code and characterized Uniwide’s payment of the said
amount as a voluntary fulfillment of a natural obligation.
The situation was characterized as being akin to
Uniwide being a debtor who paid a debt even while it
knew that it was not legally compelled to do so. As such
debtor, Uniwide could no longer demand the refund of
the amount already paid.
Uniwide counters that Art. 1724 makes no distinction
as to whether payment for the “additional works” had
already been made. It claims that it had made the
payments, subject to reservations, upon the false
representation of Titan-Ikeda that the “additional works”
were authorized in writing. Uniwide characterizes the
payment as a “mistake,” and not a “voluntary”
fulfillment under Art. 1423 of the Civil Code.
_______________
27
 Art. 1423. Obligations are civil or natural. Civil obligations give a
right of action to compel their performance. Natural obligations, not
being based on positive law but on equity and natural law, do not grant
a right of action to enforce their performance, but after voluntary
fulfillment by the obligor, they authorize the retention of what has
been delivered or rendered by reason thereof. Some natural
obligations are set forth in the following articles.
349
VOL. 511, DECEMBER 20, 2006 349
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
Hence, it urges the application, instead, of the principle
of solutio indebiti under Arts. 2154  and 2156  of the
28 29
Civil Code.
To be certain, this Court has not been wont to give an
expansive construction of Art. 1724, denying, for
example, claims that it applies to constructions made of
ship vessels,  or that it can validly deny the claim for
30
payment of professional fees to the architect.  The
present situation though presents a thornier problem.
Clearly, Art. 1724 denies, as a matter of right, payment
to the contractor for additional works which were not
authorized in writing by the proprietor, and the
additional price of which was not determined in writing
by the parties.
Yet the distinction pointed out by the Court of
Appeals is material. The issue is no longer centered on
the right of the contractor to demand payment for
additional works undertaken because payment, whether
mistaken or not, was already made by Uniwide. Thus, it
would not anymore be incumbent on Titan to establish
that it had the right to demand or receive such
payment.
But, even if the Court accepts Art. 1724 as applicable
in this case, such recognition does not ipso facto accord
Uniwide the right to be reimbursed for payments
already made, since Art. 1724 does not effect such right
of reimbursement. It has to be understood that Art.
1724 does not preclude the payment to the contractor
who performs additional works without any prior written
authorization or agreement as to the
_______________
28
 Art. 2154. If something is received when there is no right to
demand it, and it was unduly delivered through mistake, the obligation
to return it arises.
29
 Art. 2156. If the payer was in doubt whether the debt was due, he
may recover if he proves that it was not due.
30
 See Royal Lines, Inc. v. Court of Appeals, 227 Phil. 570; 143 SCRA
608 (1986).
31
 See Arenas v. Court of Appeals, G.R. No. 56524, 27 January
1989, 169 SCRA 558.
350
350 SUPREME COURT REPORTS ANNOTATED
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
price for such works if the owner decides anyway to
31
make such payment. What the provision does preclude
is the right of the contractor to insist upon payment for
unauthorized additional works.
Accordingly, Uniwide, as the owner who did pay the
contractor for such additional works even if they had not
been authorized in writing, has to establish its own right
to reimbursement not under Art. 1724, but under a
different provision of law. Uniwide’s burden of
establishing its legal right to reimbursement becomes
even more crucial in the light of the general
presumption contained in Section 3(f), Rule 131 of the
Rules of Court that “money paid by one to another was
due to the latter.”
Uniwide undertakes such a task before this Court,
citing the provisions on solutio indebiti under Arts. 2154
and 2156 of the Civil Code. However, it is not enough to
prove that the payments made by Uniwide to Titan were
“not due” because there was no prior authorization or
agreement with respect to additional works. There is a
further requirement that the payment by the debtor was
made either through mistake or under a cloud of doubt.
In short, for the provisions on solutio indebiti to apply,
there has to be evidence establishing the frame of mind
of the payor at the time the payment was made.
_______________
 Rollo, p. 232. On this score, the CIAC made two crucial
32
conclusions:
The Tribunal finds that the evidence sufficiently establishes this issue in favor
of the [Titan]. The fact that [Uniwide] had paid the claim for said
additional works implies that the additional works were actually done
and that they had been duly authorized. Otherwise, Jimmy Gow would not
have instructed his daughter-treasurer to make payments for them.
What [Uniwide] merely complains about is that there were no sufficient
documents that had been attached by the [Titan] in support of its billings
therefor. That claim of [Uni-
351
VOL. 511, DECEMBER 20, 2006 351
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
The CIAC refused to acknowledge that the additional
works on Project 1 were indeed unauthorized by
Uniwide. Neither did the Court of Appeals arrive at a
contrary determination. There would thus be some
difficulty for this Court to agree with this most basic
premise submitted by Uniwide that it did not authorize
the additional works on Project 1 undertaken by Titan.
Still, Uniwide does cite testimonial evidence from the
record alluding to a concession by employees of Titan
that these additional works on Project 1 were either
authorized or documented. 33
Yet even conceding that the additional works on
Project 1 were not authorized or committed into writing,
the undisputed fact remains that Uniwide paid for these
additional works. Thus, to claim a refund of payments
made under the principle of solutio indebiti, Uniwide
must be able to establish that these payments were
made through mistake. Again, this is a factual matter
that would have acquired a mantle of invulnerability had
it been determined by both the CIAC and the Court of
Appeals. However, both bodies failed to arrive at
_______________
32
wide] has not been substantiated despite Cherrie Gow’s undertaking to do so.
But even hypothetically assuming that claim to be established, it would not
help [Uniwide] any. The presumption is that payment is made for
something that is due. Thus, [S]ection 3(f), Rule 131 of the Revised Rules of
Evidence provides “that money paid by one to another was due to the latter.”
If payment was made by mistake for an obligation not due, [Uniwide] has
the burden of proving that claim in order to get a refund. This burden was not
discharged by [Uniwide]. Sufficient documentation surely does not establish
that payment was not due. All it establishes is carelessness on the part of
[Uniwide]. Not having been contradicted and overcome[d] by any
evidence adduced by [Uniwide], the presumption enjoyed by the
[Titan] on this issue is satisfactory in accordance with the foregoing
cited procedural rule. (Emphasis supplied.)
 See Rollo, pp. 356, 360-361.
33
352
352 SUPREME COURT REPORTS ANNOTATED
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
such a conclusion. Moreover, Uniwide is unable to direct
our attention to any pertinent part of the record that
would indeed establish that the payments were made
by reason of mistake.
We note that Uniwide alleged in its petition that the
CIAC award in favor of Titan in the amount
P5,158,364.63 as the unpaid balance in Project 3
included claims for additional works of P1,087,214.18
for which no written authorization was presented.
Unfortunately, this issue was not included in its
memorandum as one of the issues submitted for the
resolution of the Court.
Liability for the Value-Added Tax (VAT)
The second issue takes us into an inquiry on who, under
the law, is liable for the payment of the VAT, in the
absence of a written stipulation on the matter. Uniwide
claims that the VAT was already included in the contract
price for Project 1. Citing Secs. 99 and 102 of the
National Internal Revenue Code, Uniwide asserts that
VAT, being an indirect tax, may be shifted to the buyer
by including it in the cash or selling price and it is
entirely up to the buyer to agree or not to agree to
absorb the VAT.  Thus, Uniwide concludes, if there is no
34
provision in the contract as to who should pay the VAT,
it is presumed that it would be the seller. 35
The contract for Project 1 is silent on which party
should shoulder the VAT while the contract for Project 3
contained a provision to the effect that Uniwide is the
party responsible for the payment of the VAT.  Thus,
when Uniwide paid the amount of P2,400,000.00 as
billed by Titan for VAT, it assumed that it was the VAT
for Project 3. However, the CIAC and the Court of
Appeals found that the same was for Project 1.
_______________
 Citing BIR Ruling No. 242, dated 6 June 1988.
34
 Citing BIR Ruling No. 131, dated 31 August 1994.
35
 See Rollo, pp. 597-604. No. 2 of Article IV of the contract states
36
that “It is agreed that the value-added-tax shall be for the OWNER’s
account.” Uniwide is the OWNER referred by this stipulation.
353
VOL. 511, DECEMBER 20, 2006
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
We agree with the conclusions of both the CIAC and the
Court of Appeals that the amount of P2,400,000.00 was
paid by Uniwide as VAT for Project 1. This conclusion
was drawn from an Order of Payment  dated 7 October
37
1992 wherein Titan billed Uniwide the amount of
P2,400,000.00 as “Value Added Tax based on
P60,000,000.00 Contract,” computed on the basis of 4%
of P60,000,000.00. Said document which was approved
by the President of Uniwide expressly indicated that the
project involved was the “UNIWIDE SALES WAREHOUSE
CLUB & ADMIN BLDG.” located at “90 E. RODRIGUEZ JR.
AVE., LIBIS, Q.C.” The reduced base for the computation
of the tax, according to the Court of Appeals, was an
indication that the parties agreed to pass the VAT for
Project 1 to Uniwide but based on a lower contract price.
Indeed, the CIAC found as follows:
“Without any documentary evidence than Exhibit “H” to
show the extent of tax liability assumed by [Uniwide], the
Tribunal holds that the parties is [sic] obliged to pay only a
share of the VAT payment up to P60,000,000.00 out of the
total contract price of P120,936,591.50. As explained by
Jimmy Gow, VAT is paid on labor only for construction
contracts since VAT had already been paid on the
36
materials purchased. Since labor costs is [sic]
proportionately placed at 60%-40% of the contract
price, simplified accounting computes VAT at 4% of
the contract price. Whatever is the balance for VAT that
remains to be paid on Project 1–Libis shall remain the
obligation of [Titan]. (Emphasis supplied.)” 38
Liquidated Damages
On the third issue of liquidated damages, the CIAC
rejected such claim while the Court of Appeals held that
the matter should be left for determination in future
proceedings where the issue has been made clear.
353 _______________
 Id., at p. 440. This document is referred in the CIAC and CA
37
decisions as Exhibit “H.”
 Id., at p. 237.
38
354
354 SUPREME COURT REPORTS ANNOTATED
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
In rejecting Uniwide’s claim for liquidated damages, the
CIAC held that there is no legal basis for passing upon
and resolving Uniwide’s claim for the following reasons:
(1) no claim for liquidated damages arising from the
alleged delay was ever made by Uniwide at any time
before the commencement of Titan’s complaint; (2) the
claim for liquidated damages was not included in the
counterclaims stated in Uniwide’s answer to Titan’s
complaint; (3) the claim was not formulated as an issue
to be resolved by the CIAC in the TOR;  and (4) no
attempt was made to modify the TOR to accommodate
the same as an issue to be resolved.
Uniwide insists that the CIAC should have applied
VOL. 511, DECEMBER 20, 2006 355
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
to the CIAC at the end of the arbitration proceeding. The
Court of Appeals also noted that the only evidence on
record to prove delay in the construction of Project 1 is
the testimony of Titan’s engineer regarding the date of
completion of the project while the only evidence of
delay in the construction of Project 3 is the affidavit of
Uniwide’s President.
According to Uniwide, the ruling of the Court of
Appeals on the issue of liquidated damages goes
39
against the established judicial policy that a court
should always strive to settle in one proceeding the
entire controversy leaving no root or branch to bear the
seeds of future litigations.  Uniwide claims that the
41

Section 5, Rule 10 of the Rules of Court.  On this matter,40

the Court of Appeals held that the CIAC is an arbitration
body, which is not necessarily bound by the Rules of
Court. Also, the Court of Appeals found that the issue
has never been made concrete enough to make Titan
and the CIAC aware that it will be an issue. In fact,
Uniwide only introduced and quantified its claim for
liquidated damages in its Memorandum submitted
_______________
 The CIAC noted that the Terms of Reference (TOR) functions
39
similarly as a pre-trial order in a judicial proceeding.
 Rules of Court, Rule 10, Section 5 states:
40
required evidence for an affirmative ruling on its claim is
already on the record. It cites the pertinent provisions of
the written contracts which contained deadlines for
liquidated damages. Uniwide also noted that the
evidence show that Project 1 was completed either on
15 February 1992, as found by the CIAC, or 12 March
1992, as shown by Titan’s own evidence, while Project
3, according to Uniwide’s President, was completed in
June 1993. Furthermore, Uniwide asserts, the CIAC
should have applied procedural rules such as Section 5,
Rule 10 with more liberality because it was an
administrative tribunal free from the rigid technicalities
of regular courts. 42

SEC. 5. Amendment to conform to or authorize presentation of evidence.—

When issues not raised by the pleadings are tried with the express or implied
consent of the parties, they shall be treated in all respects as if they had been
raised in the pleadings. Such amendment of the pleadings as may be necessary
to cause them to conform to the evidence and to raise these issues may be
made upon motion of any party at any time, even after judgment; but failure to
amend does not affect the result of the trial of these issues. If evidence is
objected to at the trial on the ground that it is not within the issues made by
the pleadings, the court may allow the pleadings to be amended and shall do
so with liberality if the presentation of the merits of the action and the ends of
substantial justice will be subserved thereby. The court may grant a
continuance to enable the amendment to be made.
355
On this point, the CIAC held:
“The Rule of Procedure Governing Construction Arbitration
promulgated by the CIAC contains no provision on the
application of
_______________
41
 Citing Gokongwei, Jr. v. Securities and Exchange Commission, et
al., No. L-45911, 11 April 1979, 89 SCRA 336, 360-361, Galan Realty
Co., Inc. v. Arranz, A.M. No. MTJ-93-878, 27 October 1994, 237 SCRA
770, 776; and Caltex Philippines, Inc. v. Intermediate Appellate
Court, G.R. No. 74730, 25 August 1989, 176 SCRA 741, 753.
 Citing Bautista v. Secretary of Labor and Employment, 196 SCRA
42
470, 475 and Realty Exchange Venture Corporation v. Sendino, G.R.
No. 109703, 5 July 1994, 233 SCRA 665, 671. See also RULES OF
PROCEDUREGOVERNING CONSTRUCTION ARBITRATION.
356
356 SUPREME COURT REPORTS ANNOTATED
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
the Rules of Court to arbitration proceedings, even in a
suppletory capacity. Hypothetically admitting that there is
such a provision, suppletory application is made only if it
would not contravene a specific provision in the arbitration
rules and the spirit thereof. The Tribunal holds that such
importation of the Rules of Court provision on
amendment to conform to evidence would contravene
the spirit, if not the letter of the CIAC rules. This is for
the reason that the formulation of the Terms of Reference is
done with the active participation of the parties and their
counsel themselves. The TOR is further required to be signed
by all the parties, their respective counsel and all the
members of the Arbitral Tribunal. Unless the issues thus
carefully formulated in the Terms of Reference were
expressly showed [sic] to be amended, issues outside thereof
may not be resolved. As already noted in the Decision, “no
attempt was ever made by the [Uniwide] to modify the TOR
in order to accommodate the issues related to its belated
counterclaim” on this issue.” (Emphasis supplied.)
Arbitration has been defined as “an arrangement for
taking and abiding by the judgment of selected persons
in some disputed matter, instead of carrying it to
established tribunals of justice, and is intended to avoid
the formalities, the delay, the expense and vexation of
ordinary litigation.”  Voluntary arbitration, on the other
43
hand, involves the reference of a dispute to an impartial
body, the members of which are chosen by the parties
themselves, which parties freely consent in advance to
abide by the arbitral award issued after proceedings
where both parties had the opportunity to be heard. The
basic objective is to provide a speedy and inexpensive
method of settling disputes by allowing the parties to
avoid the formalities, delay, expense and aggravation
which commonly accompany ordinary litigation,
especially litigation which goes through the entire
hierarchy of courts.  As an arbitration body, the CIAC
44
can only resolve issues brought before it by the parties
through the TOR which functions similarly as a pre-trial
brief. Thus, if Uniwide’s claim for liquidated damages
was not
_______________
 Black’s LAW DICTIONARY (6th Edition), p. 105.
43
 Supra note 23, at p. 405.
44
357
VOL. 511, DECEMBER 20, 2006 357
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
raised as an issue in the TOR or in any modified or
amended version of it, the CIAC cannot make a ruling on
it. The Rules of Court cannot be used to contravene the
spirit of the CIAC rules, whose policy and objective is to
“provide a fair and expeditious settlement of
construction disputes through a non-judicial process
which ensures harmonious and friendly relations
between or among the parties.” 45
Further, a party may not be deprived of due process
of law by an amendment of the complaint as provided in
Section 5, Rule 10 of the Rules of Court. In this case, as
noted by the Court of Appeals, Uniwide only introduced
and quantified its claim for liquidated damages in its
memorandum submitted to the CIAC at the end of the
arbitration proceeding. Verily, Titan was not given a
chance to present evidence to counter Uniwide’s claim
for liquidated damages.
Uniwide alludes to an alleged judicial admission made
by Engr. Luzon Tablante wherein he stated that Project
1 was completed on 10 March 1992. It now claims that
by virtue of Engr. Tablante’s statement, Titan had
admitted that it was in delay. We disagree. The
testimony of Engr. Tablante was offered only to prove
that Project 1 was indeed completed. It was not offered
to prove the fact of delay. It must be remembered that
the purpose for which evidence is offered must be
specified because such evidence may be admissible for
several purposes under the doctrine of multiple
admissibility, or may be admissible for one purpose and
not for another, otherwise the adverse party cannot
interpose the proper objection. Evidence submitted for
one purpose may not be considered for any other
purpose.  Furthermore, even assuming, for the sake of
46
argument, that said testimony on the date of
completion of Project 1 is admitted, the establishment
of the mere fact of delay is not sufficient for the
imposition of liquidated damages. It must further be
shown that delay was attribut-
_______________
 RULES
45
OF PROCEDURE GOVERNING CONSTRUCTION
ARBITRATION, Art. 1, Sec. 1.
 Regalado, Remedial Law Compendium (Vol. II), pp. 694-695.
46
358
358 SUPREME COURT REPORTS ANNOTATED
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
able to the contractor if not otherwise justifiable.
Contrarily, Uniwide’s belated claim constitutes an
admission that the delay was justified and implies a
waiver of its right to such damages.
Project 2: “as-built” plans, overpricing, defective
construction
To determine whether or not Uniwide is liable for the
unpaid balance of P6,301,075.77 for Project 2, we need
to resolve four sub-issues, namely: (1) whether or not it
was necessary for Titan to submit “as-built” plans
before it can be paid by Uniwide; (2) whether or not
there was overpricing of the project; (3) whether or not
the P15,000,000.00 paid by Uniwide to Titan for Project
2 constitutes full payment; and (4) whether or not Titan
can be held liable for defective construction of Project 2.
The CIAC, as affirmed by the Court of Appeals, held
Uniwide liable for deficiency relating to Project 2 in the
amount of P6,301,075.77. It is nonetheless alleged by
Uniwide that Titan failed to submit any “as-built” plans
for Project 2, such plans allegedly serving as a condition
precedent for payment. Uniwide further claims that
Titan had substantially overcharged Uniwide for Project
2, there being uncontradicted expert testimony that the
total cost of Project 2 did not exceed P7,812,123.60.
Furthermore, Uniwide alleged that the works performed
were structurally defective, as evidenced by the
structural damage on four columns as observed on
ocular inspection by the CIAC and confirmed by Titan’s
project manager.
On the necessity of submitting “as-built” plans, this
Court rules that the submission of such plans is not a
pre-requisite for Titan to be paid by Uniwide. The
argument that said plans are required by Section 308 of
Presidential Decree No. 1098 (National Building Code)
and by Section 2.11 of its Implementing Rules before
payment can be made is untenable. The purpose of the
law is “to safeguard life, health, property, and public
welfare, consistent with the principles of sound
359
VOL. 511, DECEMBER 20, 2006 359
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
environmental management and control.” The
submission of these plans is necessary only in
furtherance of the law’s purpose by setting minimum
standards and requirements to control the “location,
site, design, quality of materials, construction, use,
occupancy, and maintenance” of buildings constructed
and not as a requirement for payment to the
contractor.  The testimony of Engr. Tablante to the
47
effect that the “as-built” plans are required before
payment can be claimed by Titan is a mere legal
conclusion which is not binding on this Court.
Uniwide claims that, according to one of its
consultants, the true price for Project 2 is only
P7,812,123.60. The CIAC and the Court of Appeals,
however, found the testimony of this consultant suspect
and ruled that the total contract price for Project 2 is
P21,301,075.77. The CIAC held:
“The Cost Estimate for Architectural and Site
Development Works for the EDSA Central, Dau Branch
Project (Exhibit “2-A” for [Uniwide] and made as a common
exhibit by [Titan] who had it marked at [sic] its own Exhibit
“U”), which was admittedly prepared by Fermindoza and
Associates, [Uniwide]’s own architects, shows that the
amount of P17,750,896.48 was arrived at. Together with
the agreed upon mark-up of 20% on said amount, the
total project cost was P21,301,075.77.
The Tribunal holds that the foregoing document is binding
upon the [Uniwide], it being the mode agreed upon by which
its liability for the project cost was to be
determined.”  (Emphasis supplied.)
48
Indeed, Uniwide is bound by the amount indicated in the
above document. Claims of connivance or fraudulent
conspiracy between Titan and Uniwide’s representatives
which, it is alleged, grossly exaggerated the price may
properly be dismissed. As held by the CIAC:
_______________
 NATIONAL BUILDING CODE OF THE PHILIPPINES, Sec. 102.
47
 Rollo, p. 238.
48
360
360 SUPREME COURT REPORTS ANNOTATED
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
“The Tribunal holds that [Uniwide] has not introduced
any evidence to sustain its charge of fraudulent
conspiracy. As a matter of fact, [Uniwide]’s own principal
witness, Jimmy Gow, admitted on cross-examination that
he does not have any direct evidence to prove his
charge of connivance or complicity between the
[Titan] and his own representatives. He only made that
conclusion by the process of his own “logical reasoning”
arising from his consultation with other contractors who gave
him a much lower estimate for the construction of the Dau
Project. There is thus no reason to invalidate the
binding character of Exhibit “2-A” which, it is
significant to point out, is [Uniwide]’s own
evidence.”  (Emphasis supplied.)
49
Accordingly, deducting the P15,000,000.00 already paid
by Uniwide from the total contract price of
P21,301,075.77, the unpaid balance due for Project 2 is
P6,301,075.77. This is the same amount reflected in the
Order of Payment prepared by Uniwide’s representative,
Le Consultech, Inc. and signed by no less than four top
officers and architects of Le Consultech, Inc. endorsing
for payment by Uniwide to Titan the amount of
P6,301,075.77. 50
Uniwide asserts that Titan should not have been
allowed to recover on Project 2 because the said project
was defective and would require repairs in the amount
of P800,000.00. It claims that the CIAC and the Court of
Appeals should have applied Nakpil and Sons v. Court of
Appeals  and Art. 1723 of the New Civil Code holding a
51
contractor responsible for damages if the edifice
constructed falls within fifteen years from completion on
account of defects in the construction or the use of
materials of inferior quality furnished by him or due to
any violation of the terms of the contract.
On this matter, the CIAC conducted an ocular
inspection of the premises on 30 January 1995. What
transpired in the said ocular inspection is described
thus:
_______________
 Id., at p. 239.
49
  Rollo, p. 443.
50
 G.R. No. L-47851, 3 October 1986, 144 SCRA 596.
51
361
VOL. 511, DECEMBER 20, 2006 361
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
“On 30 January 1995, an ocular inspection was conducted by
the Arbitral Tribunal as requested by [Uniwide]. Photographs
were taken of the alleged construction defects, an actual
ripping off of the plaster of a certain column to expose the
alleged structural defect that is claimed to have resulted in
its being “heavily damaged” was done, clarificatory questions
were asked and manifestations on observations were made
by the parties and their respective counsels. The entire
proceedings were recorded on tape and subsequently
transcribed. The photographs and transcript of the ocular
inspection form part of the records and considered as
evidence.”52
And, according to these evidence, the CIAC concluded
as follows:
“It is likewise the holding of this Tribunal that [Uniwide]’s
counterclaim of defective construction has not been
sufficiently proven. The credibility of Engr. Cruz,
[Uniwide]’s principal witness on this issue, has been
severely impaired. During the ocular inspection of the
premises, he gave such assurance of the soundness of his
opinion as an expert that a certain column was heavily
damaged judging from the external cracks that was readily
apparent x x x
xxxx
On insistence of the Tribunal, the plaster was chipped
off and revealed a structurally sound column x x x
Further, it turns out that what was being passed off as
a defective construction by [Titan], was in fact an old
column, as admitted by Mr. Gow himself x x x x”  (Emphasis
53
supplied.)
Uniwide had the burden of proving that there was
defective construction in Project 2 but it failed to
discharge this burden. Even the credibility of its own
witness was severely impaired. Further, it was found
that the concrete slab placed by Titan was not attached
to the old columns where cracks were discovered. The
CIAC held that the post-tensioning of the new concrete
slab could not have caused any of the defects mani-
_______________
 Id., at p. 226.
52
 Id., at p. 242.
53
362
362 SUPREME COURT REPORTS ANNOTATED
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
fested by the old columns. We are bound by this finding
of fact by the CIAC.
It is worthy to stress our ruling in Hi-Precision Steel
Center, Inc. v. Lim Kim Steel Builders, Inc.  which was
54
reiterated in David v. Construction Industry and
Arbitration Commission,  that:
55
“x x x Executive Order No. 1008 created an arbitration
facility to which the construction industry in the Philippines
can have recourse. The Executive Order was enacted to
encourage the early and expeditious settlement of
disputes in the construction industry, a public policy
the implementation of which is necessary and
important for the realization of national development
goals.
Aware of the objective of voluntary arbitration in the labor
field, in the construction industry, and in any other area for
that matter, the Court will not assist one or the other or even
both parties in any effort to subvert or defeat that objective
for their private purposes. The Court will not review the
factual findings of an arbitral tribunal upon the artful
allegation that such body had “misapprehended
facts” and will not pass upon issues which are, at
bottom, issues of fact, no matter how cleverly
disguised they might be as “legal questions.” The
parties here had recourse to arbitration and chose the
arbitrators themselves; they must have had
confidence in such arbitrators. The Court will not,
therefore, permit the parties to relitigate before it the
issues of facts previously presented and argued
before the Arbitral Tribunal, save only where a clear
showing is made that, in reaching its factual
conclusions, the Arbitral Tribunal committed an error
so egregious and hurtful to one party as to constitute
a grave abuse of discretion resulting in lack or loss of
jurisdiction. Prototypical examples would be factual
conclusions of the Tribunal which resulted in deprivation of
one or the other party of a fair opportunity to present its
position before the Arbitral Tribunal, and an award obtained
through fraud or the corruption of arbitrators. Any other,
more
Technologies, Inc. vs. Ingenieuburo Birkhahn +
Nolte, 435 SCRA 246 [2004])
Errors of law and fact, or an erroneous decision on
matters submitted to the judgment of the arbitrator, are
sufficient to invalidate an award fairly and honestly
made—judicial review of an arbitration award is more
limited than judicial review of a trial. (National Power
Corporation vs. Alonzo-Legasto, 443 SCRA 342 [2004])
——o0o——

_______________ 364
364 SUPREME COURT REPORTS ANNOTATED
 Supra note 23, at pp. 405-406.
54
Camitan vs. Court of Appeals
 Supra note 16, at pp. 666-667.
55

363 © Copyright 2020 Central Book Supply, Inc. All rights reserved.
VOL. 511, DECEMBER 20, 2006 363
Uniwide Sales Realty and Resources Corporation vs. Titan-
Ikeda Construction and Development Corporation
relaxed rule would result in setting at naught the
basic objective of a voluntary arbitration and would
reduce arbitration to a largely inutile institution.”
(Emphasis supplied.)
WHEREFORE, premises considered, the petition is
DENIED and the Decision of the Court of Appeals dated
21 February 1996 in CA-G.R. SP No. 37957 is hereby
AFFIRMED.
SO ORDERED.
     Quisumbing (Chairperson), Carpio, Carpio-
Morales and Velasco, Jr., JJ., concur.
Petition denied, judgment affirmed.
Notes.—Arbitration agreements are valid, binding,
enforceable and not contrary to public policy such that
when there obtains a written provision for arbitration
which is not complied with, the trial court should
suspend the proceedings and order the parties to
proceed to arbitration in accordance with the terms of
their agreement. (European Resources and
196 SUPREME COURT REPORTS ANNOTATED
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
G.R. No. 163101. February 13, 2008. *
BENGUET CORPORATION, petitioner, vs. DEPARTMENT
OF ENVIRONMENT AND NATURAL RESOURCES-MINES
ADJUDICATION BOARD and J.G. REALTY AND MINING
CORPORATION, respondents.
Arbitration; Mines Adjudication Board; Appeals;  A
decision of the Mines Adjudication Board (MAB) must first be
appealed to the Court of Appeals (CA) under Rule 43 of the
Rules of Court before recourse to the Court may be had.—
The last paragraph of Section 79 of Republic Act No. (RA)
7942 or the “Philippine Mining Act of 1995” states, “A
petition for review by certiorari and question of law may
_______________
 SECOND DIVISION.
*
197
VOL. 545, FEBRUARY 13, 2008 197
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
be filed by the aggrieved party with the Supreme Court
within thirty (30) days from receipt of the order or decision of
the [MAB].” However, this Court has already invalidated such
provision in Carpio v. Sulu Resources Development Corp.,
387 SCRA 128 (2002) ruling that a decision of the MAB must
first be appealed to the Court of Appeals (CA) under Rule 43
of the Rules of Court, before recourse to this Court may be
had.
Same;  Same; A contractual stipulation that requires
prior resort to voluntary arbitration before the parties can go
directly to court is not illegal and is in fact promoted by the
State.—In RA 9285 or the “Alternative Dispute Resolution Act
of 2004,” the Congress reiterated the efficacy of arbitration
as an alternative mode of dispute resolution by stating in
Sec. 32 thereof that domestic arbitration shall still be
governed by RA 876. Clearly, a contractual stipulation that
requires prior resort to voluntary arbitration before the
parties can go directly to court is not illegal and is in fact
promoted by the State. Thus, petitioner correctly cites
several cases whereby arbitration clauses have been upheld
by this Court.
Same;  Same; Distinction between Voluntary and
Compulsory Arbitration.—J.G. Realty’s contention, that prior
resort to arbitration is unavailing in the instant case because
the POA’s mandate is to arbitrate disputes involving mineral
agreements, is misplaced. A distinction must be made
between voluntary and compulsory arbitration. In Ludo and
Luym Corporation v. Saordino, 395 SCRA 451 (2003), the
Court had the occasion to distinguish between the two types
of arbitrations: Comparatively, in Reformist Union of R.B.
Liner, Inc. vs. NLRC, 266 SCRA 713 (1997), compulsory
arbitration has been defined both as “the process of
settlement of labor disputes by a government agency
which has the authority to investigate and to make an
award which is binding on all the parties, and as a mode of
arbitration where the parties are compelled to accept the
resolution of their dispute through arbitration by a third
party.” While a voluntary arbitrator is not part of the
governmental unit or labor department’s personnel,
said arbitrator renders arbitration services provided for under
labor laws. (Emphasis supplied.)
Civil Law;  Unjust Enrichment;  Definition of Unjust
Enrichment;  There is no unjust enrichment when the person
who will benefit has a valid claim to such benefit.—In Car
Cool Philippines, Inc. v.
198
198 SUPREME COURT REPORTS
ANNOTATED
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
Ushio Realty and Development Corporation, 479 SCRA
404 (2006), we defined unjust enrichment, as follows: We
have held that “[t]here is unjust enrichment when a
person unjustly retains a benefit to the loss of another, or
when a person retains money or property of another against
the fundamental principles of justice, equity and good
conscience.” Article 22 of the Civil Code provides that
“[e]very person who through an act of performance by
another, or any other means, acquires or comes into
possession of something at the expense of the latter without
just or legal ground, shall return the same to him.” The
principle of unjust enrichment under Article 22 requires two
conditions: (1) that a person is benefited without a valid basis
or justification, and (2) that such benefit is derived at
another’s expense or damage. There is no unjust
enrichment when the person who will benefit has a
valid claim to such benefit. (Emphasis supplied.)
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the Court.
     Reynaldo P. Mendoza for petitioner.
     Cortina, Buted & Coloma Law Offices for J.G.
Realty & Mining Corporation.
VELASCO, JR., J.:
The instant petition under Rule 65 of the Rules of Court
seeks the annulment of the December 2, 2002
Decision  and March 17, 2004 Resolution  of the
1 2
Department of Environment and Natural Resources-
Mines Adjudication Board (DENR-MAB) in MAB Case No.
0124-01 (Mines Administrative Case No. R-M-2000-01)
entitled Benguet Corporation (Benguet) v. J.G. Realty
and Mining Corporation (J.G. Realty). The December 2,
2002 Decision upheld the March 19, 2001 Decision  of 3
the MAB Panel of Arbitrators (POA) which
_______________
 Rollo, pp. 25-38.
1 chooses to do so and before the expiration of the
 Id., at pp. 39-41.
2
 Id., at pp. 42-47.
3
199
VOL. 545, FEBRUARY 13, 2008 199
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
canceled the Royalty Agreement with Option to
Purchase (RAWOP) dated June 1, 1987  between 4
Benguet and J.G. Realty, and excluded Benguet from the
joint Mineral Production Sharing Agreement (MPSA)
application over four mining claims. The March 17, 2004
Resolution denied Benguet’s Motion for Reconsideration.
The Facts
On June 1, 1987, Benguet and J.G. Realty entered into a
RAWOP, wherein J.G. Realty was acknowledged as the
owner of four mining claims respectively named as
Bonito-I, BonitoII, Bonito-III, and Bonito-IV, with a total
area of 288.8656 hectares, situated in Barangay
Luklukam, Sitio Bagong Bayan, Municipality of Jose
Panganiban, Camarines Norte. The parties also
executed a Supplemental Agreement  dated June 1,
5
1987. The mining claims were covered by MPSA
Application No. APSA-V-0009 jointly filed by J.G. Realty
as claimowner and Benguet as operator.
In the RAWOP, Benguet obligated itself to perfect the
rights to the mining claims and/or otherwise acquire the
mining rights to the mineral claims. Within 24 months
from the execution of the RAWOP, Benguet should also
cause the examination of the mining claims for the
purpose of determining whether or not they are worth
developing with reasonable probability of profitable
production. Benguet undertook also to furnish J.G.
Realty with a report on the examination, within a
reasonable time after the completion of the
examination. Moreover, also within the examination
period, Benguet shall conduct all necessary exploration
in accordance with a prepared exploration program. If it
examination period, Benguet may undertake to develop
the mining claims upon written notice to J.G. Realty.
Benguet must then place the mining claims into
_______________
 Id., at pp. 73-111.
4
 Id., at pp. 112-115.
5
200
200 SUPREME COURT REPORTS ANNOTATED
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
commercial productive stage within 24 months from the
written notice.  It is also provided in the RAWOP that if
6
the mining claims were placed in commercial production
by Benguet, J.G. Realty should be entitled to a royalty of
five percent (5%) of net realizable value, and to royalty
for any production done by Benguet whether during the
examination or development periods.
Thus, on August 9, 1989, the Executive Vice-
President of Benguet, Antonio N. Tachuling, issued a
letter informing J.G. Realty of its intention to develop the
mining claims. However, on February 9, 1999, J.G.
Realty, through its President, Johnny L. Tan, then sent a
letter to the President of Benguet informing the latter
that it was terminating the RAWOP on the following
grounds:
1.“a.The fact that your company has failed to
perform the obligations set forth in the
RAWOP, i.e., to undertake development works
within 2 years from the execution of the
Agreement;
2.b.Violation of the Contract by allowing high
graders to operate on our claim.
3.c.No stipulation was provided with respect to the
term limit of the RAWOP.
4. d.Non-payment of the royalties thereon as
provided in the RAWOP.” 7
In response, Benguet’s Manager for Legal Services,
Reynaldo P. Mendoza, wrote J.G. Realty a letter dated
March 8, 1999,  therein alleging that Benguet complied
8
with its obligations under the RAWOP by investing
PhP42.4 million to rehabilitate the mines, and that the
commercial operation was hampered by the non-
issuance of a Mines Temporary Permit by the Mines and
Geosciences Bureau (MGB) which must be considered
as force majeure, entitling Benguet to an
_______________
 Id., at pp. 75-78.
6
 Id., at p. 202.
7
 Id., at pp. 118-119.
8
201
VOL. 545, FEBRUARY 13, 2008 201
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
extension of time to prosecute such permit. Benguet
further claimed that the high graders mentioned by J.G.
Realty were already operating prior to Benguet’s taking
over of the premises, and that J.G. Realty had the
obligation of ejecting such small scale miners. Benguet
also alleged that the nature of the mining business
made it difficult to specify a time limit for the RAWOP.
Benguet then argued that the royalties due to J.G.
Realty were in fact in its office and ready to be picked
up at any time. It appeared that, previously, the
practice by J.G. Realty was to pick-up checks from
Benguet representing such royalties. However, starting
August 1994, J.G. Realty allegedly refused to collect
such checks from Benguet. Thus, Benguet posited that
there was no valid ground for the termination of the
RAWOP. It also reminded J.G. Realty that it should
submit the disagreement to arbitration rather than
unilaterally terminating the RAWOP.
On June 7, 2000, J.G. Realty filed a Petition for
Declaration of Nullity/Cancellation of the RAWOP  with 9
the Legaspi City POA, Region V, docketed as DENR Case
No. 2000-01 and entitled J.G. Realty v. Benguet.
On March 19, 2001, the POA issued a
Decision,  dwelling upon the issues of (1) whether the
10
arbitrators had jurisdiction over the case; and (2)
whether Benguet violated the RAWOP justifying the
unilateral cancellation of the RAWOP by J.G. Realty. The
dispositive portion stated:
“WHEREFORE, premises considered, the June 01, 1987
[RAWOP] and its Supplemental Agreement is hereby declared
cancelled and without effect. BENGUET is hereby excluded
from the joint MPSA Application over the mineral claims
denominated as “BONITO-I,” “BONITO-II,” “BONITO-III” and
“BONITO-IV.”
SO ORDERED.”
_______________
 Id., at pp. 215-219.
9
 Id., at pp. 42-47.
10
202
202 SUPREME COURT REPORTS ANNOTATED
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
Therefrom, Benguet filed a Notice of Appeal  with the
11
MAB on April 23, 2001, docketed as Mines
Administrative Case No. R-M-2000-01. Thereafter, the
MAB issued the assailed December 2, 2002 Decision.
Benguet then filed a Motion for Reconsideration of the
assailed Decision which was denied in the March 17,
2004 Resolution of the MAB. Hence, Benguet filed the
instant petition.
The Issues
1.1.There was serious and palpable error when the
Honorable Board failed to rule that the
contractual obligation of the parties to arbitrate
under the Royalty Agreement is mandatory.
2.2.The Honorable Board exceeded its jurisdiction
when it sustained the cancellation of the Royalty
Agreement for alleged breach of contract despite
the absence of evidence.
3. 3.The Questioned Decision of the Honorable Board
in cancelling the RAWOP prejudice[d] the
substantial rights of Benguet under the contract
to the unjust enrichment of JG Realty.
12
Restated, the issues are: (1) Should the controversy
have first been submitted to arbitration before the POA
took cognizance of the case?; (2) Was the cancellation
of the RAWOP supported by evidence?; and (3) Did the
cancellation of the RAWOP amount to unjust enrichment
of J.G. Realty at the expense of Benguet?
The Court’s Ruling
Before we dwell on the substantive issues, we find that
the instant petition can be denied outright as Benguet
resorted to an improper remedy.
The last paragraph of Section 79 of Republic Act No.
(RA) 7942 or the “Philippine Mining Act of 1995” states,
“A petition for review by certiorari and question of law
may be filed by
_______________
 Id., at p. 48.
11
 Id., at pp. 8, 14 & 18, respectively.
12
203
VOL. 545, FEBRUARY 13, 2008 203
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
the aggrieved party with the Supreme Court within
thirty (30) days from receipt of the order or decision of
the [MAB].”
However, this Court has already invalidated such
provision in Carpio v. Sulu Resources Development
Corp.,  ruling that a decision of the MAB must first be
13
appealed to the Court of Appeals (CA) under Rule 43 of
the Rules of Court, before recourse to this Court may be
had. We held, thus:
“To summarize, there are sufficient legal footings authorizing
a review of the MAB Decision under Rule 43 of the Rules of
Court. First, Section 30 of Article VI of the 1987 Constitution,
mandates that “[n]o law shall be passed increasing the
appellate jurisdiction of the Supreme Court as provided in
this Constitution without its advice and consent.” On the
other hand, Section 79 of RA No. 7942 provides that
decisions of the MAB may be reviewed by this Court on a
“petition for review by certiorari.” This provision is obviously
an expansion of the Court’s appellate jurisdiction, an
expansion to which this Court has not consented.
Indiscriminate enactment of legislation enlarging the
appellate jurisdiction of this Court would unnecessarily
burden it.
Second, when the Supreme Court, in the exercise of its
rulemaking power, transfers to the CA pending cases
involving a review of a quasi-judicial body’s decisions, such
transfer relates only to procedure; hence, it does not impair
the substantive and vested rights of the parties. The
aggrieved party’s right to appeal is preserved; what is
changed is only the procedure by which the appeal is to be
made or decided. The parties still have a remedy and a
competent tribunal to grant this remedy.
Third, the Revised Rules of Civil Procedure included Rule
43 to provide a uniform rule on appeals from quasi-judicial
agencies. Under the rule, appeals from their judgments and
final orders are now required to be brought to the CA on a
verified petition for review. A quasi-judicial agency or body
has been defined as an organ of government, other than a
court or legislature, which affects the rights of private parties
through either adjudication or rule-making. MAB falls under
this definition; hence, it is no different from the other quasi-
judicial bodies enumerated under Rule 43. Besides, the
_______________
 G.R. No. 148267, August 8, 2002, 387 SCRA 128.
13
204
204 SUPREME COURT REPORTS ANNOTATED
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
introductory words in Section 1 of Circular No. 1-91
——“among these agencies are”——indicate that the
enumeration is not exclusive or conclusive and acknowledge
the existence of other quasi-judicial agencies which, though
not expressly listed, should be deemed included therein.
Fourth, the Court realizes that under Batas
Pambansa (BP) Blg. 129 as amended by RA No. 7902, factual
controversies are usually involved in decisions of quasi-
judicial bodies; and the CA, which is likewise tasked to
resolve questions of fact, has more elbow room to resolve
them. By including questions of fact among the issues that
may be raised in an appeal from quasi-judicial agencies to
the CA, Section 3 of Revised Administrative Circular No. 1-95
and Section 3 of Rule 43 explicitly expanded the list of such
issues.
According to Section 3 of Rule 43, “[a]n appeal under this
Rule may be taken to the Court of Appeals within the period
and in the manner herein provided whether the appeal
involves questions of fact, of law, or mixed questions of fact
and law.” Hence, appeals from quasi-judicial agencies even
only on questions of law may be brought to the CA.
Fifth, the judicial policy of observing the hierarchy of
courts dictates that direct resort from administrative
agencies to this Court will not be entertained, unless the
redress desired cannot be obtained from the appropriate
lower tribunals, or unless exceptional and compelling
circumstances justify availment of a remedy falling within
and calling for the exercise of our primary jurisdiction.” 14
The above principle was reiterated in Asaphil
Construction and Development Corporation v. Tuason,
Jr. (Asaphil).  However, the Carpio ruling was not applied
15
to Asaphil as the petition in the latter case was filed in
1999 or three years before the promulgation
of Carpio in 2002. Here, the petition was filed on April
28, 2004 when the Carpio decision was already
applicable, thus Benguet should have filed the appeal
with the CA.
_______________
 Id., at pp. 138-141.
14
 G.R. No. 134030, April 25, 2006, 488 SCRA 126, 133.
15
205
VOL. 545, FEBRUARY 13, 2008 205
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
Petitioner having failed to properly appeal to the CA
under Rule 43, the decision of the MAB has become final
and executory. On this ground alone, the instant
petition must be denied.
Even if we entertain the petition although Benguet
skirted the appeal to the CA via Rule 43, still, the
December 2, 2002 Decision and March 17, 2004
Resolution of the DENR-MAB in MAB Case No. 0124-01
should be maintained.
First Issue: The case should have first been brought  to
voluntary arbitration before the POA
Secs. 11.01 and 11.02 of the RAWOP pertinently provide:
11.01 Arbitration
Any disputes, differences or disagreements between
BENGUET and the OWNER with reference to anything
whatsoever pertaining to this Agreement that cannot be
amicably settled by them shall not be cause of any action of
any kind whatsoever in any court or administrative agency
but shall, upon notice of one party to the other, be referred
to a Board of Arbitrators consisting of three (3) members, one
to be selected by BENGUET, another to be selected by the
OWNER and the third to be selected by the aforementioned
two arbitrators so appointed.
xxxx
11.02 Court Action
No action shall be instituted in court as to any matter in
dispute as hereinabove stated, except to enforce the decision
of the majority of the Arbitrators.
16
Thus, Benguet argues that the POA should have first
referred the case to voluntary arbitration before taking
cognizance of the case, citing Sec. 2 of RA 876 on
persons and matters subject to arbitration.
On the other hand, in denying such argument, the
POA ruled that:
_______________
 Rollo, p. 90.
16
206
206 SUPREME COURT REPORTS ANNOTATED
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
“While the parties may establish such stipulations clauses,
terms and conditions as they may deem convenient, the
same must not be contrary to law and public policy. At a
glance, there is nothing wrong with the terms and conditions
of the agreement. But to state that an aggrieved party
cannot initiate an action without going to arbitration would
be tying one’s hand even if there is a law which allows him to
do so.” 17
The MAB, meanwhile, denied Benguet’s contention on
the ground of estoppel, stating:
“Besides, by its own act, Benguet is already estopped in
questioning the jurisdiction of the Panel of Arbitrators to hear
and decide the case. As pointed out in the appealed Decision,
Benguet initiated and filed an Adverse Claim docketed as
MAC-R-M-2000-02 over the same mining claims without
undergoing contractual arbitration. In this particular case
(MAC-R-M-2000-02) now subject of the appeal, Benguet is
likewise in estoppel from questioning the competence of the
Panel of Arbitrators to hear and decide in the summary
proceedings J.G. Realty’s petition, when Benguet itself did not
merely move for the dismissal of the case but also filed an
Answer with counterclaim seeking affirmative reliefs from the
Panel of Arbitrators.” 18
Moreover, the MAB ruled that the contractual provision
on arbitration merely provides for an additional forum or
venue and does not divest the POA of the jurisdiction to
hear the case. 19
In its July 20, 2004 Comment,  J.G. Realty reiterated
20
the above rulings of the POA and MAB. It argued that RA
7942 or the “Philippine Mining Act of 1995” is a special
law which should prevail over the stipulations of the
parties and over a general law, such as RA 876. It also
argued that the POA cannot be considered as a “court”
under the contemplation of RA 876 and that
jurisprudence saying that there must be
_______________
  Id.,
17
at p. 44.
 Id.,
18
at p. 31.
 Id.,
19
at p. 32.
 Id.,
20
at pp. 150-273.
207
VOL. 545, FEBRUARY 13, 2008 207
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
prior resort to arbitration before filing a case with the
courts is inapplicable to the instant case as the POA is
itself already engaged in arbitration.
On this issue, we rule for Benguet.
Sec. 2 of RA 876 elucidates the scope of arbitration:
“Section 2. Persons and matters subject to arbitration.——
Two or more persons or parties may submit to the
arbitration of one or more arbitrators any controversy
existing between them at the time of the submission
and which may be the subject of an action, or the
parties to any contract may in such contract agree to
settle by arbitration a controversy thereafter arising
between them. Such submission or contract shall be
valid, enforceable and irrevocable, save upon such
grounds as exist at law for the revocation of any
contract.
Such submission or contract may include question[s]
arising out of valuations, appraisals or other controversies
which may be collateral, incidental, precedent or subsequent
to any issue between the parties.” (Emphasis supplied.)
In RA 9285 or the “Alternative Dispute Resolution Act of
2004,” the Congress reiterated the efficacy of
arbitration as an alternative mode of dispute resolution
by stating in Sec. 32 thereof that domestic arbitration
shall still be governed by RA 876. Clearly, a contractual
stipulation that requires prior resort to voluntary
arbitration before the parties can go directly to court is
not illegal and is in fact promoted by the State. Thus,
petitioner correctly cites several cases whereby
arbitration clauses have been upheld by this Court. 21
_______________
 BF Corporation v. Court of Appeals, G.R. No. 120105, March 27,
21
1998, 288 SCRA 267; Puromines v. Court of Appeals, G.R. No. 91228,
March 22, 1993, 220 SCRA 281; General Insurance and Surety
Corporation v. Union Insurance Society of Canton, et al., G.R. Nos.
30475-76, November 22, 1989, 179 SCRA 530; Gascon v. Arroyo, G.R.
No. 78389, October 16, 1989, 178 SCRA 582; Bengson v. Chan, No. L-
27283, July 29, 1977, 78 SCRA 113; Mindanao Portland Ce
208
208 SUPREME COURT REPORTS ANNOTATED
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
Moreover, the contention that RA 7942 prevails over RA
876 presupposes a conflict between the two laws. Such
is not the case here. To reiterate, availment of voluntary
arbitration before resort is made to the courts or quasi-
judicial agencies of the government is a valid
contractual stipulation that must be adhered to by the
parties. As stated in Secs. 6 and 7 of RA 876:
“Section 6. Hearing by court.——A party aggrieved by the
failure, neglect or refusal of another to perform under
an agreement in writing providing for arbitration may
petition the court for an order directing that such
arbitration proceed in the manner provided for in such
agreement. Five days notice in writing of the hearing of
such application shall be served either personally or by
registered mail upon the party in default. The court shall
hear the parties, and upon being satisfied that the
making of the agreement or such failure to comply
therewith is not in issue, shall make an order directing
the parties to proceed to arbitration in accordance
with the terms of the agreement. If the making of the
agreement or default be in issue the court shall
proceed to summarily hear such issue. If the finding
be that no agreement in writing providing for
arbitration was made, or that there is no default in
the proceeding thereunder, the proceeding shall be
dismissed. If the finding be that a written provision for
arbitration was made and there is a default in
proceeding thereunder, an order shall be made
summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof.
 xxxx
Section 7. Stay of civil action.——If any suit or proceeding
be brought upon an issue arising out of an agreement
providing for the arbitration thereof, the court in which such
suit or proceeding is pending, upon being satisfied that the
issue involved in such suit or proceeding is referable to
arbitration, shall stay the action or proceeding until an
arbitration has been had in accordance with the
_______________
ment Corporation v. McDonough Construction Company of Florida,
No. L-23390, April 24, 1967, 19 SCRA 808.
209
VOL. 545, FEBRUARY 13, 2008 209
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
terms of the agreement: Provided, That the applicant, for the
stay is not in default in proceeding with such arbitration.”
(Emphasis supplied.)
In other words, in the event a case that should properly
be the subject of voluntary arbitration is erroneously
filed with the courts or quasi-judicial agencies, on
motion of the defendant, the court or quasi-judicial
agency shall determine whether such contractual
provision for arbitration is sufficient and effective. If in
affirmative, the court or quasijudicial agency shall then
order the enforcement of said provision. Besides, in BF
Corporation v. Court of Appeals, we already ruled:
“In this connection, it bears stressing that the lower court has
not lost its jurisdiction over the case. Section 7 of Republic
Act No. 876 provides that proceedings therein have only
been stayed. After the special proceeding of arbitration has
been pursued and completed, then the lower court may
confirm the award made by the arbitrator.” 22
J.G. Realty’s contention, that prior resort to arbitration is
unavailing in the instant case because the POA’s
mandate is to arbitrate disputes involving mineral
agreements, is misplaced. A distinction must be made
between voluntary and compulsory arbitration. In Ludo
and Luym Corporation v. Saordino, the Court had the
occasion to distinguish between the two types of
arbitrations:
“Comparatively, in Reformist Union of R.B. Liner, Inc. vs.
NLRC, compulsory arbitration has been defined both as “the
process of settlement of labor disputes by a government
agency which has the authority to investigate and to
make an award which is binding on all the parties, and as a
mode of arbitration where the parties are compelled to
accept the resolution of their dispute through arbitration by a
third party.” While a voluntary arbitrator is not part of the
governmental unit or labor department’s per
_______________
 Supra at p. 285.
22
210
210 SUPREME COURT REPORTS ANNOTATED
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
sonnel, said arbitrator renders arbitration services provided
for under labor laws.”  (Emphasis supplied.)
23
There is a clear distinction between compulsory and
voluntary arbitration. The arbitration provided by the
POA is compulsory, while the nature of the arbitration
provision in the RAWOP is voluntary, not involving any
government agency. Thus, J.G. Realty’s argument on
this matter must fail.
As to J.G. Realty’s contention that the provisions of
RA 876 cannot apply to the instant case which involves
an administrative agency, it must be pointed out that
Section 11.01 of the RAWOP states that:
“[Any controversy with regard to the contract] shall not be
cause of any action of any kind whatsoever in any court
or administrative agency but shall, upon notice of one
party to the other, be referred to a Board of Arbitrators
consisting of three (3) members, one to be selected by
BENGUET, another to be selected by the OWNER and the
third to be selected by the aforementioned two arbiters so
appointed.”  (Emphasis supplied.)
24
There can be no quibbling that POA is a quasi-judicial
body which forms part of the DENR, an administrative
agency. Hence, the provision on mandatory resort to
arbitration, freely entered into by the parties, must be
held binding against them. 25
In sum, on the issue of whether POA should have
referred the case to voluntary arbitration, we find that,
indeed, POA has no jurisdiction over the dispute which is
governed by RA 876, the arbitration law.
However, we find that Benguet is already estopped
from questioning the POA’s jurisdiction. As it were, when
J.G. Realty filed DENR Case No. 2000-01, Benguet filed
its an-
_______________
 G.R. No. 140960, January 20, 2003, 395 SCRA 451, 457-458.
23
 Rollo, p. 90.
24
 Chan v. Court of Appeals, G.R. No. 147999, February 27,
25
2004, 424 SCRA 127, 134.
211
VOL. 545, FEBRUARY 13, 2008 211
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
swer and participated in the proceedings before the
POA, Region V. Secondly, when the adverse March 19,
2001 POA Decision was rendered, it filed an appeal with
the MAB in Mines Administrative Case No. R-M-2000-01
and again participated in the MAB proceedings. When
the adverse December 2, 2002 MAB Decision was
promulgated, it filed a motion for reconsideration with
the MAB. When the adverse March 17, 2004 MAB
Resolution was issued, Benguet filed a petition with this
Court pursuant to Sec. 79 of RA 7942 impliedly
recognizing MAB’s jurisdiction. In this factual milieu, the
Court rules that the jurisdiction of POA and that of MAB
can no longer be questioned by Benguet at this late
hour. What Benguet should have done was to
immediately challenge the POA’s jurisdiction by a
special civil action for certiorari when POA ruled that it
has jurisdiction over the dispute. To redo the
proceedings fully participated in by the parties after the
lapse of seven years from date of institution of the
original action with the POA would be anathema to the
speedy and efficient administration of justice.
Second Issue: The cancellation of the RAWOP  was
supported by evidence
The cancellation of the RAWOP by the POA was based
on two grounds: (1) Benguet’s failure to pay J.G.
Realty’s royalties for the mining claims; and (2)
Benguet’s failure to seriously pursue MPSA Application
No. APSA-V-0009 over the mining claims.
As to the royalties, Benguet claims that the checks
representing payments for the royalties of J.G. Realty
were available for pick-up in its office and it is the latter
which refused to claim them. Benguet then thus
concludes that it did not violate the RAWOP for
nonpayment of royalties. Further, Benguet reasons that
J.G. Realty has the burden of proving that the former did
not pay such royalties following the principle that the
complainants must prove their affirmative allegations.
212
212 SUPREME COURT REPORTS ANNOTATED
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
With regard to the failure to pursue the MPSA
application, Benguet claims that the lengthy time of
approval of the application is due to the failure of the
MGB to approve it. In other words, Benguet argues that
the approval of the application is solely in the hands of
the MGB.
Benguet’s arguments are bereft of merit.
Sec. 14.05 of the RAWOP provides:
14.05      Bank Account
OWNER shall maintain a bank account at ___________ or any
other bank from time to time selected by OWNER with notice
in writing to BENGUET where BENGUET shall deposit to the
OWNER’s credit any and all advances and payments which
may become due the OWNER under this Agreement as well
as the purchase price herein agreed upon in the event that
BENGUET shall exercise the option to purchase provided for
in the Agreement. Any and all deposits so made by
BENGUET shall be a full and complete acquittance and
release to [sic] BENGUET from any further liability to
the OWNER of the amounts represented by such
deposits.” (Emphasis supplied.)
Evidently, the RAWOP itself provides for the mode of
royalty payment by Benguet. The fact that there was
the previous practice whereby J.G. Realty picked-up the
checks from Benguet is unavailing. The mode of
payment is embodied in a contract between the parties.
As such, the contract must be considered as the law
between the parties and binding on both.  Thus, after
26
J.G. Realty informed Benguet of the bank account where
deposits of its royalties may be made, Benguet had the
obligation to deposit the checks. J.G. Realty had no
obligation to furnish Benguet with a Board Resolution
considering that the RAWOP itself provided for such
payment scheme.
_______________
 CIVIL CODE, Arts. 1159 & 1308.
26
213
VOL. 545, FEBRUARY 13, 2008 213
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
Notably, Benguet’s claim that J.G. Realty must prove
nonpayment of its royalties is both illogical and
unsupported by law and jurisprudence.
The allegation of nonpayment is not a positive
allegation as claimed by Benguet. Rather, such is a
negative allegation that does not require proof and in
fact transfers the burden of proof to Benguet. Thus, this
Court ruled in Jimenez v. National Labor Relations
Commission:
“As a general rule, one who pleads payment has the burden
of proving it. Even where the plaintiff must allege non-
payment, the general rule is that the burden rests on the
defendant to prove payment, rather than on the plaintiff to
prove non-payment. The debtor has the burden of
showing with legal certainty that the obligation has
been discharged by payment.”  (Emphasis supplied.)
27
In the instant case, the obligation of Benguet to pay
royalties to J.G. Realty has been admitted and supported
by the provisions of the RAWOP. Thus, the burden to
prove such obligation rests on Benguet.
It should also be borne in mind that MPSA Application
No. APSA-V-0009 has been pending with the MGB for a
considerable length of time. Benguet, in the RAWOP,
obligated itself to perfect the rights to the mining claims
and/or otherwise acquire the mining rights to the
mineral claims but failed to present any evidence
showing that it exerted efforts to speed up and have the
application approved. In fact, Benguet never even
alleged that it continuously followed-up the application
with the MGB and that it was in constant communication
with the government agency for the expeditious
resolution of the application. Such allegations would
show that, indeed, Benguet was remiss in prosecuting
the MPSA application and clearly failed to comply with
its obligation in the RAWOP.
_______________
 G.R. No. 116960, April 2, 1996, 256 SCRA 84, 89.
27
214
214 SUPREME COURT REPORTS ANNOTATED
Benguet Corporation vs. Department of Environment and
Natural Resources-Mines Adjudication Board
Third Issue: There is no unjust enrichment in the instant  G.R. No. 138088, January 23, 2006, 479 SCRA 404, 412-413.
28

215
case
Based on the foregoing discussion, the cancellation of VOL. 545, FEBRUARY 13, 2008 215
the RAWOP was based on valid grounds and is, TSPIC Corporation vs. TSPIC Employees Union (FFW)
therefore, justified. The necessary implication of the SO ORDERED.
cancellation is the cessation of Benguet’s right to      Quisumbing (Chairperson), Carpio and Carpio-
prosecute MPSA Application No. APSA-V-0009 and to Morales, JJ., concur.
further develop such mining claims.      Tinga, J., In the result.
In Car Cool Philippines, Inc. v. Ushio Realty and Petition dismissed, judgment and resolution affirmed.
Development Corporation, we defined unjust Note.—Findings of the Arbitration Board affirmed by
enrichment, as follows: the trial court and the Court of Appeals and supported
“We have held that “[t]here is unjust enrichment when a by substantial evidence should be accorded not only
person unjustly retains a benefit to the loss of another, or respect but finality. (National Power Corporation vs.
when a person retains money or property of another against Alonzo-Legasto, 443 SCRA 342 [2004])
the fundamental principles of justice, equity and good
conscience.” Article 22 of the Civil Code provides that ——o0o——
“[e]very person who through an act of performance by
another, or any other means, acquires or comes into © Copyright 2020 Central Book Supply, Inc. All rights reserved.
possession of something at the expense of the latter without
just or legal ground, shall return the same to him.” The
principle of unjust enrichment under Article 22 requires two
conditions: (1) that a person is benefited without a valid basis
or justification, and (2) that such benefit is derived at
another’s expense or damage.
There is no unjust enrichment when the person who
will benefit has a valid claim to such
benefit.”  (Emphasis supplied.)
28

Clearly, there is no unjust enrichment in the instant case

as the cancellation of the RAWOP, which left Benguet
without any legal right to participate in further
developing the mining claims, was brought about by its
violation of the RAWOP. Hence, Benguet has no one to
blame but itself for its predicament.
WHEREFORE, we DISMISS the petition, and AFFIRM
the December 2, 2002 Decision and March 17, 2004
Resolution of the DENR-MAB in MAB Case No. 0124-01
upholding the cancellation of the June 1, 1987 RAWOP.
No costs.
_______________
 
G.R. No. 143581. January 7, 2008. * committed itself to be bound by the Model Law; The Philip-
KOREA TECHNOLOGIES CO., LTD., petitioner, vs. HON.
ALBERTO A. LERMA, in his capacity as Presiding Judge of
Branch 256 of Regional Trial Court of Muntinlupa City,
and PACIFIC GENERAL STEEL MANUFACTURING
CORPORATION, respondents.
Contracts;  Arbitration;  Conflict of Laws;  While it is
established in this jurisdiction is the rule that the law of the
place where the contract is made governs—lex loci
contractus—Art. 2044 of the Civil Code sanctions the validity
of mutually agreed arbitral clause or the finality and binding
effect of an arbitral award.—Established in this jurisdiction is
the rule that the law of the place where the contract is
_______________
 SECOND DIVISION.
* to Establish the Office for Alternative Dispute Resolution, and
2 for Other Purposes, promulgated on April 2, 2004. Secs. 19
2 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
made governs. Lex loci contractus. The contract in this
case was perfected here in the Philippines. Therefore, our
laws ought to govern. Nonetheless, Art. 2044 of the Civil
Code sanctions the validity of mutually agreed arbitral clause
or the finality and binding effect of an arbitral award. Art.
2044 provides, “Any stipulation that the arbitrators’
award or decision shall be final, is valid, without
prejudice to Articles 2038, 2039 and 2040.” (Emphasis
supplied.) Arts. 2038, 2039, and 2040 abovecited refer to
instances where a compromise or an arbitral award, as
applied to Art. 2044 pursuant to Art. 2043, may be voided,
rescinded, or annulled, but these would not denigrate the
finality of the arbitral award.
Same;  Same; Same;  Model Law on International
Commercial Arbitration of the United Nations Commission on
International Trade Law (UNCITRAL Model Law); Alternative
Dispute Resolution Act of 2004 (R.A. 9285); As signatory to
the Arbitration Rules of the United Nations Commission on
International Trade Law (UN-CITRAL) Model Law on
International Commercial Arbitration of the UNCITRAL in the
New York Convention on 21 June 1985, the Phil-ippines
pines has incorporated the Model Law in Alternative Dispute
Resolution Act of 2004.—For domestic arbitration
proceedings, we have particular agencies to arbitrate
disputes arising from contractual relations. In case a foreign
arbitral body is chosen by the parties, the arbitration rules of
our domestic arbitration bodies would not be applied. As
signatory to the Arbitration Rules of the UNCITRAL Model Law
on International Commercial Arbitration of the United Nations
Commission on International Trade Law (UNCITRAL) in the
New York Convention on June 21, 1985, the Philippines
committed itself to be bound by the Model Law. We have
even incorporated the Model Law in Republic Act No. (RA)
9285, otherwise known as the Alternative Dispute Resolution
Act of 2004 entitled An Act to Institutionalize the Use of an
Alternative Dispute Resolution System in the Philippines and
and 20 of Chapter 4 of the Model Law are the pertinent
provisions.
Same;  Same; Same;  Same; Same;  Statutory
Construction;  RA 9285 is a procedural law which has a
retroactive effect.—While RA 9285 was passed only in 2004,
it nonetheless applies in the instant case since it is a
procedural law which has a retroactive effect. Like-
3
VOL. 542, JANUARY 7, 2008 3
Korea Technologies Co., Ltd. vs. Lerma
wise, KOGIES filed its application for arbitration before
the KCAB on July 1, 1998 and it is still pending because no
arbitral award has yet been rendered. Thus, RA 9285 is
applicable to the instant case. Well-settled is the rule that
procedural laws are construed to be applicable to actions
pending and undetermined at the time of their passage, and
are deemed retroactive in that sense and to that extent. As a
general rule, the retroactive application of procedural laws
does not violate any personal rights because no vested right
has yet attached nor arisen from them.
Same;  Same; Same;  Same; Same;  Under Sec. 24 of R.A.
9285, the Regional Trial Court does not have jurisdiction over
disputes that are properly the subject of arbitration pursuant
to an arbitration clause, and mandates the referral to
arbitration in such cases.—Under Sec. 24, the RTC does not
have jurisdiction over disputes that are properly the subject
of arbitration pursuant to an arbitration clause, and
mandates the referral to arbitration in such cases, thus: SEC.
24. Referral to Arbitration.—A court before 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
not later than the pre-trial conference, or upon the request of
both parties thereafter, refer the parties to arbitration unless
it finds that the arbitration agreement is null and void,
inoperative or incapable of being performed.
Same;  Same; Same;  Same; Same;  Judicial Review; Even
if foreign arbitral awards are mutually stipulated by the
parties in the arbitration clause to be final and binding, the
same are not immediately enforceable or cannot be
implemented immediately—they must still be confirmed by
the Regional Trial Court.—Foreign arbitral awards while
mutually stipulated by the parties in the arbitration clause to
be final and binding are not immediately enforceable or
cannot be implemented immediately. Sec. 35 of the
UNCITRAL Model Law stipulates the requirement for the
arbitral award to be recognized by a competent court for
enforcement, which court under Sec. 36 of the UNCITRAL
Model Law may refuse recognition or enforcement on the
grounds provided for. RA 9285 incorporated these provisos to
Secs. 42, 43, and 44 relative to Secs. 47 and 48.
Same;  Same; Same;  Same; Same;  Same; It is now clear
that foreign arbitral awards when confirmed by the Regional
Trial Court are deemed not as a judgment of a foreign court
but as a foreign
4 judicial review different in domestic and foreign arbitral
4 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
arbitral award, and when confirmed, are enforced as
final and executory decisions of our courts of law—the
concept of a final and binding arbitral award is similar to
judgments or awards given by some quasi-judicial bodies,
like the National Labor Relations Commission and the Mines
Adjudication Board.—It is now clear that foreign arbitral
awards when confirmed by the RTC are deemed not as a
judgment of a foreign court but as a foreign arbitral award,
and when confirmed, are enforced as final and executory
decisions of our courts of law. Thus, it can be gleaned that
the concept of a final and binding arbitral award is similar to
judgments or awards given by some of our quasi-judicial
bodies, like the National Labor Relations Commission and
Mines Adjudication Board, whose final judgments are
stipulated to be final and binding, but not immediately
executory in the sense that they may still be judicially
reviewed, upon the instance of any party. Therefore, the final
foreign arbitral awards are similarly situated in that they
need first to be confirmed by the RTC.
Same;  Same; Same;  Same; Same;  Same; While the
Regional Trial Court (RTC) does not have jurisdiction over
disputes governed by arbitration mutually agreed upon by
the parties, still the foreign arbitral award is subject to
judicial review by the RTC which can set aside, reject, or
vacate it.—While the RTC does not have jurisdiction over
disputes governed by arbitration mutually agreed upon by
the parties, still the foreign arbitral award is subject to
judicial review by the RTC which can set aside, reject, or
vacate it. In this sense, what this Court held in Chung Fu
Industries (Phils.), Inc., 206 SCRA 545 (1992), relied upon by
KOGIES is applicable insofar as the foreign arbitral awards,
while final and binding, do not oust courts of jurisdiction
since these arbitral awards are not absolute and without
exceptions as they are still judicially reviewable. Chapter 7 of
RA 9285 has made it clear that all arbitral awards, whether
domestic or foreign, are subject to judicial review on specific
grounds provided for.
Same;  Same; Same;  Same; Same;  Same; Grounds for
awards—for foreign or international arbitral awards, the
grounds for setting aside, rejecting or vacating the award by
the Regional Trial Court (RTC) are provided under Art. 34(2)
of the United Nations Commission on International Trade Law
(UNCITRAL) Model Law, while for final domestic arbitral
awards, they may only be assailed before the RTC
5
VOL. 542, JANUARY 7, 2008 5
 Korea Technologies Co., Ltd. vs. Lerma
and vacated on the grounds provided under Sec. 25 of
RA 876.—The differences between a final arbitral award from
an international or foreign arbitral tribunal and an award
given by a local arbitral tribunal are the specific grounds or
conditions that vest jurisdiction over our courts to review the
awards. For foreign or international arbitral awards which
must first be confirmed by the RTC, the grounds for setting
aside, rejecting or vacating the award by the RTC are
provided under Art. 34(2) of the UNCITRAL Model Law. For
final domestic arbitral awards, which also need confirmation
by the RTC pursuant to Sec. 23 of RA 876 and shall be
recognized as final and executory decisions of the RTC, they
may only be assailed before the RTC and vacated on the
grounds provided under Sec. 25 of RA 876.
Same;  Same; Same;  Same; Same;  Same; An arbitration
clause, stipulating that the arbitral award is final and binding,
does not oust our courts of jurisdiction as the international
arbitral award is still judicially reviewable under certain
conditions provided for by the United Nations Commission on
International Trade Law (UN-CITRAL) Model Law on
International Commercial Arbitration (ICA) as applied and
incorporated in RA 9285.—Petitioner is correct in its
contention that an arbitration clause, stipulating that the
arbitral award is final and binding, does not oust our courts of
jurisdiction as the international arbitral award, the award of
which is not absolute and without exceptions, is still judicially
reviewable under certain conditions provided for by the
UNCITRAL Model Law on ICA as applied and incorporated in
RA 9285.
Same;  Same; Rescission;  Where an arbitration clause in
a contract is availing, neither of the parties can unilaterally
treat the contract as rescinded since whatever infractions or
breaches by a party or differences arising from the contract
must be brought first and resolved by arbitration, and not
through an extrajudicial rescission or judicial action.—What
this Court held in University of the Philippines v. De Los
Angeles, 35 SCRA 102 (1970) and reiterated in succeeding
cases, that the act of treating a contract as rescinded on
account of infractions by the other contracting party is valid
albeit provisional as it can be judicially assailed, is not
applicable to the instant case on account of a valid
stipulation on arbitration. Where an arbitration clause in a
contract is availing, neither of the parties can unilaterally
treat the contract as rescinded since whatever infractions or
breaches by a party or differences arising from the con-
6
6 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
tract must be brought first and resolved by arbitration,
and not through an extrajudicial rescission or judicial action.
Same;  Same; Court Personnel;  Sheriffs; A sheriff is not
technically competent to ascertain the actual status of the
equipment and machineries as installed in the plant.—
Whatever findings and conclusions made by the RTC Branch
Sheriff from the inspection made on October 28, 1998, as
ordered by the trial court on October 19, 1998, is of no worth
as said Sheriff is not technically competent to ascertain the
actual status of the equipment and machineries as installed
in the plant.
Same;  Same; Alternative Dispute Resolution Act of 2004
(R.A. 9285);  The pendency of an arbitral proceeding does not
foreclose resort to the courts for provisional reliefs—the RTC
has authority and jurisdiction to grant interim measures of
protection.—In the recent 2006 case of Transfield Philippines,
Inc. v. Luzon Hydro Corporation, 490 SCRA 14 (2006), we
were explicit that even “the pendency of an arbitral
proceeding does not foreclose resort to the courts for
provisional reliefs.” We explicated this way: As a fundamental
point, the pendency of arbitral proceedings does not
foreclose resort to the courts for provisional reliefs. The Rules
of the ICC, which governs the parties’ arbitral dispute, allows
the application of a party to a judicial authority for interim or
conservatory measures. Likewise, Section 14 of Republic Act
(R.A.) No. 876 (The Arbitration Law) recognizes the rights of
any party to petition the court to take measures to safeguard
and/or conserve any matter which is the subject of the
dispute in arbitration. In addition, R.A. 9285, otherwise
known as the “Alternative Dispute Resolution Act of 2004,”
allows the filing of provisional or interim measures with the
regular courts whenever the arbitral tribunal has no power to
act or to act effectively. It is thus beyond cavil that the RTC
has authority and jurisdiction to grant interim measures of
protection.
PETITION for review on certiorari of a decision of the
Court of Appeals.
The facts are stated in the opinion of the Court.
     Santiago, Corpuz and Ejerciso Law Offices for
petitioner.
7
VOL. 542, JANUARY 7, 2008 7
Korea Technologies Co., Ltd. vs. Lerma
     Nicanor N. Lonzame & Associates Law Offices for
private respondent.
VELASCO, JR., J.:
In our jurisdiction, the policy is to favor alternative
methods of resolving disputes, particularly in civil and
commercial disputes. Arbitration along with mediation,
conciliation, and negotiation, being inexpensive, speedy
and less hostile methods have long been favored by this
Court. The petition before us puts at issue an arbitration
clause in a contract mutually agreed upon by the parties
stipulating that they would submit themselves to
arbitration in a foreign country. Regrettably, instead of
hastening the resolution of their dispute, the parties
wittingly or unwittingly prolonged the controversy.
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a
Ko-rean corporation which is engaged in the supply and
installation of Liquefied Petroleum Gas (LPG) Cylinder
manufacturing plants, while private respondent Pacific
General Steel Manufacturing Corp. (PGSMC) is a
domestic corporation.
On March 5, 1997, PGSMC and KOGIES executed a
Con-tract  whereby KOGIES would set up an LPG
1
Cylinder Manufacturing Plant in Carmona, Cavite. The
contract was executed in the Philippines. On April 7,
1997, the parties executed, in Korea, an Amendment for
Contract No. KLP-970301 dated March 5,
1997  amending the terms of payment. The contract and
2
its amendment stipulated that KOGIES will ship the
machinery and facilities necessary for manufacturing
LPG cylinders for which PGSMC would pay USD
1,224,000. KOGIES would install and initiate the
operation of the plant for which PGSMC bound itself to
pay USD 306,000 upon the plant’s production of the 11-
kg. LPG cylinder samples. Thus, the total contract price
amounted to USD 1,530,000.
_______________
 Id., at pp. 58-65; signed by KOGIES’ President Dae Hyun Kang and
1
PGSMC President Honorio Santiago.
 Id., at p. 94.
2
8
8 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
On October 14, 1997, PGSMC entered into a Contract of
Lease  with Worth Properties, Inc. (Worth) for use of
3
Worth’s 5,079-square meter property with a 4,032-
square meter warehouse building to house the LPG
manufacturing plant. The monthly rental was PhP
322,560 commencing on January 1, 1998 with a 10%
annual increment clause. Subsequently, the
machineries, equipment, and facilities for the
manufacture of LPG cylinders were shipped, delivered,
and installed in the Carmona plant. PGSMC paid KOGIES
USD 1,224,000.
However, gleaned from the Certificate  executed by
4
the parties on January 22, 1998, after the installation of
the plant, the initial operation could not be conducted
as PGSMC encountered financial difficulties affecting the
supply of materials, thus forcing the parties to agree
that KOGIES would be deemed to have completely
complied with the terms and conditions of the March 5,
1997 contract.
 For the remaining balance of USD306,000 for the
installation and initial operation of the plant, PGSMC
issued two postdated checks: (1) BPI Check No.
0316412 dated January 30, 1998 for PhP 4,500,000; and
(2) BPI Check No. 0316413 dated March 30, 1998 for
PhP 4,500,000. 5
When KOGIES deposited the checks, these were
dishonored for the reason “PAYMENT STOPPED.” Thus,
on May 8, 1998, KOGIES sent a demand letter  to PGSMC 6
threatening criminal action for violation of Batas
Pambansa Blg. 22 in case of nonpayment. On the same
date, the wife of PGSMC’s President faxed a letter dated
May 7, 1998 to KOGIES’ President who was then staying
at a Makati City hotel. She complained that not only did
KOGIES deliver a different brand of
_______________
 Id., at pp. 208-218; signed by PGSMC President Honorio Santiago
3
and Worth President Wilson L. Chua.
 Id., at p. 95; signed by KOGIES’ President Dae Hyun Kang and
4
PGSMC President Honorio Santiago.
 Id., at p. 207.
5
 Id., at p. 221.
6 Performance,
9 117   against PGSMC before the Muntinlupa City
VOL. 542, JANUARY 7, 2008
Korea Technologies Co., Ltd. vs. Lerma
hydraulic press from that agreed upon but it had not
delivered several equipment parts already paid for.
On May 14, 1998, PGSMC replied that the two checks
it issued KOGIES were fully funded but the payments
were stopped for reasons previously made known to
KOGIES. 7 Korea Technologies Co., Ltd. vs. Lerma
On June 1, 1998, PGSMC informed KOGIES that
PGSMC was canceling their Contract dated March 5,
1997 on the ground that KOGIES had altered the
quantity and lowered the quality of the machineries and
equipment it delivered to PGSMC, and that PGSMC
would dismantle and transfer the machineries,
equipment, and facilities installed in the Car-mona
plant. Five days later, PGSMC filed before the Office of
the Public Prosecutor an Affidavit-Complaint
for Estafa dock-eted as I.S. No. 98-03813 against Mr.
Dae Hyun Kang, President of KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing
the latter that PGSMC could not unilaterally rescind their
contract nor dismantle and transfer the machineries and
equipment on mere imagined violations by KOGIES. It
also insisted that their disputes should be settled by
arbitration as agreed upon in Article 15, the arbitration
clause of their contract.
On June 23, 1998, PGSMC again wrote KOGIES
reiterating the contents of its June 1, 1998 letter
threatening that the machineries, equipment, and
facilities installed in the plant would be dismantled and
transferred on July 4, 1998. Thus, on July 1, 1998,
KOGIES instituted an Application for Arbitration before
the Korean Commercial Arbitration Board (KCAB) in
Seoul, Korea pursuant to Art. 15 of the Contract as
amended.
On July 3, 1998, KOGIES filed a Complaint for Specific
docketed as Civil Case No. 98-
8
9 Regional Trial Court
_______________
 Id., at p. 222.
7
 Id., at pp. 47-51; dated July 1, 1998.
8
10
10 SUPREME COURT REPORTS ANNOTATED
(RTC). The RTC granted a temporary restraining order
(TRO) on July 4, 1998, which was subsequently
extended until July 22, 1998. In its complaint, KOGIES
alleged that PGSMC had initially admitted that the
checks that were stopped were not funded but later on
claimed that it stopped payment of the checks for the
reason that “their value was not received” as the former
allegedly breached their contract by “altering the
quantity and lowering the quality of the machinery and
equipment” installed in the plant and failed to make the
plant operational although it earlier certified to the
contrary as shown in a January 22, 1998 Certificate.
Likewise, KOGIES averred that PGSMC violated Art. 15 of
their Contract, as amended, by unilaterally rescinding
the contract without resorting to arbitration. KOGIES
also asked that PGSMC be restrained from dismantling
and transferring the machinery and equipment installed
in the plant which the latter threatened to do on July 4,
1998.
On July 9, 1998, PGSMC filed an opposition to the TRO
arguing that KOGIES was not entitled to the TRO since
Art. 15, the arbitration clause, was null and void for
being against public policy as it ousts the local courts of
jurisdiction over the instant controversy.
On July 17, 1998, PGSMC filed its Answer with
Compulsory Counterclaim  asserting that it had the full
9
right to dismantle and transfer the machineries and
equipment because it had paid for them in full as
stipulated in the contract; that KOGIES was not entitled
to the PhP 9,000,000 covered by the checks for failing
to completely install and make the plant operational;
and that KOGIES was liable for damages amounting to
PhP 4,500,000 for altering the quantity and lowering the
quality of the machineries and equipment. Moreover,
PGSMC averred that it has already paid PhP 2,257,920
in rent (covering January to July 1998) to Worth and it
was not willing to further shoulder the cost of renting
_______________
 Id., at pp. 66-82.
9
11
VOL. 542, JANUARY 7, 2008 11
Korea Technologies Co., Ltd. vs. Lerma
the premises of the plant considering that the LPG
cylinder manufacturing plant never became operational.
After the parties submitted their Memoranda, on July
23, 1998, the RTC issued an Order denying the
application for a writ of preliminary injunction, reasoning
that PGSMC had paid KOGIES USD 1,224,000, the value
of the machineries and equipment as shown in the
contract such that KOGIES no longer had proprietary
rights over them. And finally, the RTC held that Art. 15
of the Contract as amended was invalid as it tended to
oust the trial court or any other court jurisdiction over
any dispute that may arise between the parties.
KOGIES’ prayer for an injunctive writ was denied.  The 10
dis-positive portion of the Order stated:
“WHEREFORE, in view of the foregoing consideration, this
Court believes and so holds that no cogent reason exists for
this Court to grant the writ of preliminary injunction to
restrain and refrain defendant from dismantling the
machineries and facilities at the lot and building of Worth
Properties, Incorporated at Carmona, Cavite and transfer the
same to another site: and therefore denies plaintiff’s
application for a writ of preliminary injunction.”
On July 29, 1998, KOGIES filed its Reply to Answer and
Answer to Counterclaim.  KOGIES denied it had altered
11
the quantity and lowered the quality of the machinery,
equipment, and facilities it delivered to the plant. It
claimed that it had performed all the undertakings
under the contract and had already produced certified
samples of LPG cylinders. It averred that whatever was
unfinished was PGSMC’s fault since it failed to procure
raw materials due to lack of funds. KOGIES, relying
on Chung Fu Industries (Phils.), Inc. v. Court of
Appeals,  insisted that the arbitration clause was
12
without question valid.
_______________
 Id., at p. 97.
10
 Id., at pp. 83-89.
11
 G.R. No. 96283, February 25, 1992, 206 SCRA 545.
12
12
12 SUPREME COURT REPORTS ANNOTATED
 Korea Technologies Co., Ltd. vs. Lerma
After KOGIES filed a Supplemental Memorandum with
Motion to Dismiss  answering PGSMC’s memorandum of
13
July 22, 1998 and seeking dismissal of PGSMC’s counter-
claims, KOGIES, on August 4, 1998, filed its Motion for
Re-consideration  of the July 23, 1998 Order denying its
14
application for an injunctive writ claiming that the
contract was not merely for machinery and facilities
worth USD 1,224,000 but was for the sale of an “LPG
manufacturing plant” consisting of “supply of all the
machinery and facilities” and “transfer of technology”
for a total contract price of USD 1,530,000 such that the
dismantling and transfer of the machinery and facilities
would result in the dismantling and transfer of the very
plant itself to the great prejudice of KOGIES as the still
unpaid owner/seller of the plant. Moreover, KOGIES
points out that the arbitration clause under Art. 15 of
the Contract as amended was a valid arbitration
stipulation under Art. 2044 of the Civil Code and as held
by this Court in Chung Fu Industries (Phils.), Inc.  15
In the meantime, PGSMC filed a Motion for Inspection
of Things  to determine whether there was indeed
16
alteration of the quantity and lowering of quality of the
machineries and equipment, and whether these were
properly installed. KO-GIES opposed the motion positing
that the queries and issues raised in the motion for
inspection fell under the coverage of the arbitration
clause in their contract.
On September 21, 1998, the trial court issued an
Order (1) granting PGSMC’s motion for inspection; (2)
denying KO-GIES’ motion for reconsideration of the July
23, 1998 RTC Order; and (3) denying KOGIES’ motion to
dismiss PGSMC’s compulsory counterclaims as these
counterclaims fell within the requisites of compulsory
counterclaims.
_______________
 Rollo, pp. 108-111.
13
 Id., at pp. 98-100.
14
 Supra note 12.
15
 Rollo, pp. 101-105.
16
13
VOL. 542, JANUARY 7, 2008 13
Korea Technologies Co., Ltd. vs. Lerma
On October 2, 1998, KOGIES filed an Urgent Motion for
Reconsideration  of the September 21, 1998 RTC Order
17
granting inspection of the plant and denying dismissal
of PGSMC’s compulsory counterclaims.
Ten days after, on October 12, 1998, without waiting
for the resolution of its October 2, 1998 urgent motion
for reconsideration, KOGIES filed before the Court of
Appeals (CA) a petition for certiorari  docketed as CA-
18
G.R. SP No. 49249, seeking annulment of the July 23,
1998 and September 21, 1998 RTC Orders and praying
for the issuance of writs of prohibition, mandamus, and
preliminary injunction to enjoin the RTC and PGSMC
from inspecting, dismantling, and transferring the
machineries and equipment in the Carmona plant, and
to direct the RTC to enforce the specific agreement on
arbitration to resolve the dispute.
In the meantime, on October 19, 1998, the RTC
denied KOGIES’ urgent motion for reconsideration and
directed the Branch Sheriff to proceed with the
inspection of the machineries and equipment in the
plant on October 28, 1998. 19
Thereafter, KOGIES filed a Supplement to the
Petition  in CA-G.R. SP No. 49249 informing the CA
20
about the October 19, 1998 RTC Order. It also reiterated
its prayer for the issuance of the writs of prohibition,
mandamus and preliminary injunction which was not
acted upon by the CA. KOGIES asserted that the Branch
Sheriff did not have the technical expertise to ascertain
whether or not the machineries and equipment
conformed to the specifications in the contract and were
properly installed.
_______________
  Id.,
17
at pp. 113-115.
 Id.,
18
at pp. 120-146; dated October 9, 1998.
 Id.,
19
at p. 119.
 Id.,
20
at pp. 116-118.
14
14 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
On November 11, 1998, the Branch Sheriff filed his
Sheriff’s Report  finding 21
that the enumerated
machineries and equipment were not fully and properly
installed.
The Court of Appeals affirmed the trial court and
declared the arbitration clause against public policy
On May 30, 2000, the CA rendered the assailed
Decision  affirming the RTC Orders and dismissing the
22
petition for certiorari filed by KOGIES. The CA found that
the RTC did not gravely abuse its discretion in issuing
the assailed July 23, 1998 and September 21, 1998
Orders. Moreover, the CA reasoned that KOGIES’
contention that the total contract price for USD
1,530,000 was for the whole plant and had not been
fully paid was contrary to the finding of the RTC that
PGSMC fully paid the price of USD 1,224,000, which was
for all the machineries and equipment. According to the
CA, this determination by the RTC was a factual finding
beyond the ambit of a petition for certiorari.
On the issue of the validity of the arbitration clause,
the CA agreed with the lower court that an arbitration
clause which provided for a final determination of the
legal rights of the parties to the contract by arbitration
was against public policy.
On the issue of nonpayment of docket fees and non-
attachment of a certificate of non-forum shopping by
PGSMC, the CA held that the counterclaims of PGSMC
were compulsory ones and payment of docket fees was
not required since the Answer with counterclaim was
not an initiatory pleading. For the same reason, the CA
said a certificate of non-forum shopping was also not
required.
_______________
 Id., at pp. 266-268.
21
 Id., at p. 40. Penned by Associate Justice Elvi John S. Asuncion and
22
concurred in by Associate Justices Ma. Alicia Austria-Martinez and
Portia Aliño-Hormachuelos.
15
VOL. 542, JANUARY 7, 2008 15
Korea Technologies Co., Ltd. vs. Lerma
Furthermore, the CA held that the petition for certiorari
had been filed prematurely since KOGIES did not wait
for the resolution of its urgent motion for
reconsideration of the September 21, 1998 RTC Order
which was the plain, speedy, and adequate remedy
available. According to the CA, the RTC must be given
the opportunity to correct any alleged error it has
committed, and that since the assailed orders were
inter-locutory, these cannot be the subject of a petition
for certiorari.
Hence, we have this Petition for Review on Certiorari
under Rule 45.
The Issues
Petitioner posits that the appellate court committed the
following errors:
1.a.PRONOUNCING THE QUESTION OF OWNERSHIP
OVER THE MACHINERY AND FACILITIES AS “A
QUESTION OF FACT” “BEYOND THE AMBIT OF A
PETITION FOR CERTIORARI” INTENDED ONLY FOR
CORRECTION OF ERRORS OF JURISDICTION OR
GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF (SIC) EXCESS OF JURISDICTION, AND
CONCLUDING THAT THE TRIAL COURT’S FINDING
ON THE SAME QUESTION WAS IMPROPERLY
RAISED IN THE PETITION BELOW;
2.b.DECLARING AS NULL AND VOID THE
ARBITRATION CLAUSE IN ARTICLE 15 OF THE
CONTRACT BETWEEN THE PARTIES FOR BEING
 “CONTRARY TO PUBLIC POLICY” AND FOR
OUSTING THE COURTS OF JURISDICTION;
3.c.DECREEING PRIVATE RESPONDENT’S COUNTER-
CLAIMS TO BE ALL COMPULSORY NOT
NECESSITATING PAYMENT OF DOCKET FEES AND
CERTIFICATION OF NON-FORUM SHOPPING;
4.d.RULING THAT THE PETITION WAS FILED
PREMATURELY WITHOUT WAITING FOR THE
RESOLUTION OF THE MOTION FOR
RECONSIDERATION OF THE ORDER DATED
SEPTEMBER 21, 1998 OR WITHOUT GIVING THE
TRIAL COURT AN OPPORTUNITY TO CORRECT
ITSELF;
16
16 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
1.e.PROCLAIMING THE TWO ORDERS DATED JULY 23
AND SEPTEMBER 21, 1998 NOT TO BE PROPER
SUBJECTS OF CERTIORARI AND PROHIBITION FOR
BEING “INTERLOCUTORY IN NATURE;”
2. f.NOT GRANTING THE RELIEFS AND REMEDIES
PRAYED FOR IN HE (SIC) PETITION AND, INSTEAD,
DISMISSING THE SAME FOR ALLEGEDLY
“WITHOUT MERIT.”23
The Court’s Ruling
The petition is partly meritorious.
Before we delve into the substantive issues, we shall
first tackle the procedural issues.
The rules on the payment of docket fees for counter-
claims and cross claims were amended effective August
16, 2004
KOGIES strongly argues that when PGSMC filed the
counterclaims, it should have paid docket fees and filed
a certificate of non-forum shopping, and that its failure
to do so was a fatal defect.
We disagree with KOGIES.
As aptly ruled by the CA, the counterclaims of PGSMC
were incorporated in its Answer with Compulsory
Counter-claim dated July 17, 1998 in accordance with
Section 8 of Rule 11, 1997 Revised Rules of Civil
Procedure, the rule that was effective at the time the
Answer with Counterclaim was filed. Sec. 8 on existing
counterclaim or cross-claim states, “A compulsory
counterclaim or a cross-claim that a defending party has
at the time he files his answer shall be contained
therein.”
On July 17, 1998, at the time PGSMC filed its Answer
incorporating its counterclaims against KOGIES, it was
not liable to pay filing fees for said counterclaims being
compul-
_______________
 Id., at pp. 16-17; original in boldface.
23
17
VOL. 542, JANUARY 7, 2008 17
Korea Technologies Co., Ltd. vs. Lerma
sory in nature. We stress, however, that effective
August 16, 2004 under Sec. 7, Rule 141, as amended by
A.M. No. 04-2-04-SC, docket fees are now required to be
paid in compulsory counterclaim or cross-claims.
As to the failure to submit a certificate of forum
shopping, PGSMC’s Answer is not an initiatory pleading
which requires a certification against forum shopping
under Sec. 5  of Rule 7, 1997 Revised Rules of Civil
24
Procedure. It is a responsive pleading, hence, the
courts a quo did not commit reversible error in denying
KOGIES’ motion to dismiss PGSMC’s compulsory
counterclaims.
_______________
24
 SEC. 5. Certification against forum shopping.—The plaintiff or
principal party shall certify under oath in the complaint or other
initiatory pleading asserting a claim for relief, or in a sworn
certification annexed thereto and simultaneously filed therewith: (a)
that he has not theretofore commenced any action or filed any claim
involving the same issues in any court, tribunal or quasi-judicial agency
and, to the best of his knowledge, no such other action or claim is
pending therein; (b) if there is such other pending action or claim, a
complete statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has been filed
or is pending, he shall report that fact within five (5) days therefrom to
the court where his aforesaid complaint or initiatory pleading has been
filed. (Emphasis supplied.)
Failure to comply with the foregoing requirements shall not be
curable by mere amendment of the complaint or other initiatory
pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after hearing.
The submission of a false certification or non-compliance with any of
the undertakings therein shall constitute indirect contempt of court,
without prejudice to the corresponding administrative and criminal
actions. If the acts of the party or his counsel clearly constitute willful
and deliberate forum shopping, the same shall be ground for summary
dismissal with prejudice and shall constitute direct contempt, as well
as a cause for administrative sanctions.
18
18 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
Interlocutory orders proper subject of certiorari
Citing Gamboa v. Cruz,  the CA also pronounced that
25
“certiorari and Prohibition are neither the remedies to
question the propriety of an interlocutory order of the
trial court.”  The CA erred on its reliance on Gamboa.
26
Gamboa involved the denial of a motion to acquit in a
criminal case which was not assailable in an action for
certiorari since the denial of a motion to quash required
the accused to plead and to continue with the trial, and
whatever objections the accused had in his motion to
quash can then be used as part of his defense and
subsequently can be raised as errors on his appeal if the
judgment of the trial court is adverse to him. The
general rule is that interlocutory orders cannot be
challenged by an appeal.  Thus, in Yamaoka v.
27
Pescarich Manufacturing Corporation, we held:
“The proper remedy in such cases is an ordinary appeal from
an adverse judgment on the merits, incorporating in said
appeal the grounds for assailing the interlocutory orders.
Allowing appeals from interlocutory orders would result in the
‘sorry spectacle’ of a case being subject of a
counterproductive ping-pong to and from the appellate court
as often as a trial court is perceived to have made an error in
any of its interlocutory rulings. However, where the assailed
interlocutory order was issued with grave abuse of discretion
or patently erroneous and the remedy of appeal would not
afford ade-
_______________
 G.R. No. L-56291, June 27, 1988, 162 SCRA 642.
25
 Rollo, p. 45.
26
 La Tondeña Distillers, Inc. v. Ponferrada, G.R. No. 109656,
27
November 21, 1996, 264 SCRA 540; Mendoza v. Court of Appeals, G.R.
No. 81909, September 5, 1991, 201 SCRA 343; MB Finance Corporation
v. Abesamis, G.R. No. 93875, March 22, 1991, 195 SCRA
592; Quisumbing v. Gumban, G.R. No. 85156, February 5, 1991, 193
SCRA 520.
19
VOL. 542, JANUARY 7, 2008 19
Korea Technologies Co., Ltd. vs. Lerma
quate and expeditious relief, the Court allows certiorari as a
mode of redress.” 28
Also, appeals from interlocutory orders would open the
floodgates to endless occasions for dilatory motions.
Thus, where the interlocutory order was issued without
or in excess of jurisdiction or with grave abuse of
discretion, the remedy is certiorari. 29
The alleged grave abuse of discretion of the
respondent court equivalent to lack of jurisdiction in the
issuance of the two assailed orders coupled with the
fact that there is no plain, speedy, and adequate
remedy in the ordinary course of law amply provides the
basis for allowing the resort to a petition for certiorari
under Rule 65.
Prematurity of the petition before the CA
Neither do we think that KOGIES was guilty of forum
shopping in filing the petition for certiorari. Note that
KO-GIES’ motion for reconsideration of the July 23, 1998
RTC Order which denied the issuance of the injunctive
writ had already been denied. Thus, KOGIES’ only
remedy was to assail the RTC’s interlocutory order via a
petition for certiorari under Rule 65.
While the October 2, 1998 motion for reconsideration
of KOGIES of the September 21, 1998 RTC Order
relating to the inspection of things, and the allowance of
the compulsory counterclaims has not yet been
resolved, the circumstances in this case would allow an
exception to the rule that before certiorari may be
availed of, the petitioner must have filed a motion for
reconsideration and said motion should have been first
resolved by the court a quo. The reason behind the rule
is
_______________
 G.R. No. 146079, July 20, 2001, 361 SCRA 672, 680-681, citing Go
28
v. Court of Appeals, G.R. No. 128954, October 8, 1998, 297 SCRA 574.
 I Regalado, REMEDIAL LAWCOMPENDIUM 502 (2002).
29
20
20 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
“to enable the lower court, in the first instance, to pass
upon and correct its mistakes without the intervention
of the higher court.” 30
The September 21, 1998 RTC Order directing the
branch sheriff to inspect the plant, equipment, and
facilities when he is not competent and knowledgeable
on said matters is evidently flawed and devoid of any
legal support. Moreover, there is an urgent necessity to
resolve the issue on the dismantling of the facilities and
any further delay would prejudice the interests of
KOGIES. Indeed, there is real and imminent threat of
irreparable destruction or substantial damage to
KOGIES’ equipment and machineries. We find the resort
to certiorari based on the gravely abusive orders of the
trial court sans the ruling on the October 2, 1998 motion
for reconsideration to be proper.
The Core Issue: Article 15 of the Contract
We now go to the core issue of the validity of Art. 15 of
the Contract, the arbitration clause. It provides:
“Article 15. Arbitration.—All disputes, controversies, or
differences which may arise between the parties, out of or in
relation to or in connection with this Contract or for the
breach thereof, shall finally be settled by arbitration in Seoul,
Korea in accordance with the Commercial Arbitration Rules of
the Korean Commercial Arbitration Board. The award
rendered by the arbitration(s) shall be final and
binding upon both parties concerned.” (Emphasis
supplied.)
Petitioner claims the RTC and the CA erred in ruling that
the arbitration clause is null and void.
Petitioner is correct.
Established in this jurisdiction is the rule that the law
of the place where the contract is made governs. Lex
loci con-tractus. The contract in this case was perfected
here in the
_______________
 Id., at p. 721 (8th rev. ed.).
30
21
VOL. 542, JANUARY 7, 2008 21
Korea Technologies Co., Ltd. vs. Lerma
Philippines. Therefore, our laws ought to govern.
Nonetheless, Art. 2044 of the Civil Code sanctions the
validity of mutually agreed arbitral clause or the finality
and binding effect of an arbitral award. Art. 2044
provides, “Any stipulation that the arbitrators’
award or decision shall be final, is valid, without
prejudice to Articles 2038, 2039 and 2040.” (Emphasis
supplied.)
Arts. 2038,  2039,  and 2040  abovecited refer to
31 32 33
instances where a compromise or an arbitral award, as
applied to Art. 2044 pursuant to Art. 2043,  may be 34
voided, rescinded, or annulled, but these would not
denigrate the finality of the arbitral award.
 The arbitration clause was mutually and voluntarily
agreed upon by the parties. It has not been shown to be
con-
_______________
 Art. 2038. A compromise in which there is mistake, fraud,
31
violence, intimidation, undue influence, or falsity of documents is
subject to the provisions of Article 1330 [voidable] of this Code.
However, one of the parties cannot set up a mistake of fact as against
the other if the latter, by virtue of the compromise, has withdrawn from
a litigation already commenced.
 Art. 2039. When the parties compromise generally on all
32
differences which they might have with each other, the discovery of
documents referring to one or more but not to all of the questions
settled shall not itself be a cause for annulment or rescission of the
compromise, unless said documents have been concealed by one of
the parties.
But the compromise may be annulled or rescinded if it refers only to
one thing to which one of the parties has no right, as shown by the
newly-discovered documents.
 Art. 2040. If after a litigation has been decided by a final
33
judgment, a compromise should be agreed upon, either or both parties
being unaware of the existence of the final judgment, the compromise
may be rescinded.
Ignorance of a judgment which may be revoked or set aside is not a
valid ground for attacking a compromise.
 Art. 2043. The provisions of the preceding Chapter upon
34
compromises shall also be applicable to arbitrations.
22
22 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
trary to any law, or against morals, good customs,
public order, or public policy. There has been no
showing that the parties have not dealt with each other
on equal footing. We find no reason why the arbitration
clause should not be respected and complied with by
both parties. In Gonzales v. Climax Mining Ltd.,  we held 35
that submission to arbitration is a contract and that a
clause in a contract providing that all matters in dispute
between the parties shall be referred to arbitration is a
contract.  Again in Del Monte Corporation-USA v. Court
36
of Appeals, we likewise ruled that “[t]he provision to
submit to arbitration any dispute arising therefrom and
the relationship of the parties is part of that contract
and is itself a contract.” 37
Arbitration clause not contrary to public policy
The arbitration clause which stipulates that the
arbitration must be done in Seoul, Korea in accordance
with the Commercial Arbitration Rules of the KCAB, and
that the arbitral award is final and binding, is not
contrary to public policy. This Court has sanctioned the
validity of arbitration clauses in a catena of cases. In the
1957 case of Eastboard Navigation Ltd. v. Juan Ysmael
and Co., Inc.,  this Court had occasion to rule that an
38
arbitration clause to resolve differences and breaches of
mutually agreed contractual terms is valid. In BF
Corporation v. Court of Appeals, we held that “[i]n this
jurisdiction, arbitration has been held valid and
constitutional. Even before the approval on June 19,
1953 of Republic Act No. 876, this Court has
countenanced the settlement of disputes through
arbitration. Republic Act No. 876 was adopted to
supplement the New Civil Code’s provisions on arbitra-
_______________
35
 G.R. No. 161957 and G.R. No. 167994, January 22, 2007, 512
SCRA 148; citing Manila Electric Co. v. Pasay Transportation Co., 57
Phil. 600 (1932).
36
 Id., at p. 603.
37
 G.R. No. 136154, February 7, 2001, 351 SCRA 373, 381.
38
 102 Phil. 1 (1957).
23
VOL. 542, JANUARY 7, 2008 23
Korea Technologies Co., Ltd. vs. Lerma
tion.”  And in LM Power Engineering Corporation v.
39
Capitol Industrial Construction Groups, Inc., we declared
that:
“Being an inexpensive, speedy and amicable method of
settling disputes, arbitration—along with mediation,
conciliation and negotiation––is encouraged by the Supreme
Court. Aside from unclogging judicial dockets, arbitration also
hastens the resolution of disputes, especially of the
commercial kind. It is thus regarded as the “wave of the
future” in international civil and commercial disputes.
Brushing aside a contractual agreement calling for arbitration
between the parties would be a step backward.
Consistent with the above-mentioned policy
encouraging alternative dispute resolution methods, courts
should liberally construe arbitration clauses. Provided such
clause is susceptible of an interpretation that covers the
asserted dispute, an order to arbitrate should be granted.
Any doubt should be resolved in favor of arbitration.”40
Having said that the instant arbitration clause is not
against public policy, we come to the question on what
governs an arbitration clause specifying that in case of
any dispute arising from the contract, an arbitral panel
will be constituted in a foreign country and the
arbitration rules of the foreign country would govern
and its award shall be final and binding.
RA 9285 incorporated the UNCITRAL Model law to which
we are a signatory
For domestic arbitration proceedings, we have particular
agencies to arbitrate disputes arising from contractual
relations. In case a foreign arbitral body is chosen by
the parties, the arbitration rules of our domestic
arbitration bodies would not be applied. As signatory to
the Arbitration Rules of the UNCITRAL Model Law on
International Commercial Arbitra-
_______________
 G.R. No. 120105, March 27, 1998, 288 SCRA 267, 286.
39
 G.R. No. 141833, March 26, 2003, 399 SCRA 562, 569-570;
40
citations omitted.
24
24 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
tion  of the United Nations Commission on International
41
Trade Law (UNCITRAL) in the New York Convention on
June 21, 1985, the Philippines committed itself to be
bound by the Model Law. We have even incorporated
the Model Law in Republic Act No. (RA) 9285, otherwise
known as the Alternative Dispute Resolution Act of 2004
entitled An Act to Institutionalize the Use of an
Alternative Dispute Resolution System in the Philippines
and to Establish the Office for Alternative Dispute
of
Resolution, and for Other Purposes, promulgated on
April 2, 2004. Secs. 19 and 20 of Chapter 4 of the Model
Law are the pertinent provisions:
CHAPTER 4—INTERNATIONAL COMMERCIAL ARBITRATION
SEC. 19. Adoption of the Model Law on International
Commercial Arbitration.––International commercial
arbitration shall be governed by the Model Law on
International Commercial Arbitration (the “Model Law”)
adopted by the United Nations Commission on International
Trade Law on June 21, 1985 (United Nations Document
A/40/17) and recommended for enactment by the General
Assembly in Resolution No. 40/72 approved on December 11,
1985, copy of which is hereto attached as Appendix “A.”
SEC. 20. Interpretation of Model Law.––In interpreting the
Model Law, regard shall be had to its international origin and
to the need for uniformity in its interpretation and resort may
be made to the travaux preparatories and the report of the
Secretary General of the United Nations Commission on
International Trade Law dated March 25, 1985 entitled,
“International Commercial Arbitration: Analytical
Commentary on Draft Trade identified by reference number
A/CN. 9/264.”
While RA 9285 was passed only in 2004, it nonetheless
applies in the instant case since it is a procedural law
which has a retroactive effect. Likewise, KOGIES filed its
application for
_______________
 Adopted by the UNCITRAL on June 21, 1985 (United Nations
41
Document A/40/17) and recommended for enactment by the General
Assembly in Resolution No. 40/72, approved on 11 December 1985.
Subsequently amended on July 7, 2006.
25
 VOL. 542, JANUARY 7, 2008
Korea Technologies Co., Ltd. vs. Lerma
arbitration before the KCAB on July 1, 1998 and it is still
pending because no arbitral award has yet been
rendered. Thus, RA 9285 is applicable to the instant
case. Well-settled is the rule that procedural laws are
construed to be applicable to actions pending and
undetermined at the time of their passage, and are
deemed retroactive in that sense and to that extent. As
a general rule, the retroactive application of procedural
laws does not violate any personal rights because no
vested right has yet attached nor arisen from them. 42
Among the pertinent features of RA 9285 applying
and incorporating the UNCITRAL Model Law are the
following:
1.(1)The RTC must refer to arbitration in
proper cases
Under Sec. 24, the RTC does not have jurisdiction over
disputes that are properly the subject of arbitration
pursuant to an arbitration clause, and mandates the
referral to arbitration in such cases, thus:
“SEC. 24. Referral to Arbitration.—A court before 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 not later than the pre-trial conference, or upon the
request of both parties thereafter, refer the parties to
arbitration unless it finds that the arbitration agreement is
null and void, inoperative or incapable of being performed.
1.(2)Foreign arbitral awards must
confirmed by the RTC
Foreign arbitral awards while mutually stipulated by the
parties in the arbitration clause to be final and binding
are
_______________
25  In the Matter to Declare in Contempt of Court Hon. Simeon A.
42
Datumanong, Secretary of DPWH, G.R. No. 150274, August 4,
2006, 497 SCRA 626, 636-637; citing Calacala v. Republic, G.R. No.
154415, July 28, 2005, 464 SCRA 438, 446.
26
26 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
not immediately enforceable or cannot be implemented
immediately. Sec. 35  of the UNCITRAL Model Law
43
stipulates the requirement for the arbitral award to be
recognized by a competent court for enforcement,
which court under Sec. 36 of the UNCITRAL Model Law
may refuse recognition or enforcement on the grounds
provided for. RA 9285 incorporated these provisos to
Secs. 42, 43, and 44 relative to Secs. 47 and 48, thus:
“SEC. 42. Application of the New York Convention.––The New
York Convention shall govern the recognition and
enforcement of arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards
shall be filed with the Regional Trial Court in accordance
with the rules of procedure to be promulgated by the
Supreme Court. Said procedural rules shall provide that the
party relying on the award or applying for its enforcement
shall file with the court the original 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 thereof into any
of such languages.
The applicant shall establish that the country in which
foreign arbitration award was made in party to the New York
Convention.
xxxx
SEC. 43. Recognition and Enforcement of Foreign Arbitral
be 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 with procedural rules to be promulgated by the
Supreme Court. The Court may, on grounds of comity and
reciprocity, recognize and enforce a non-convention award as
a convention award.
_______________
43
 Id., Art. 35(1) provides:
Article 35. Recognition and enforcement
(1) An arbitral award, irrespective of the country in which it was
made, shall be recognized as binding and, upon application in writing
to the competent court, shall be enforced subject to the provisions of
this article and of article 36.
27
VOL. 542, JANUARY 7, 2008 27
Korea Technologies Co., Ltd. vs. Lerma
SEC. 44. Foreign Arbitral Award Not Foreign Judgment.—A
foreign arbitral award when confirmed by a court of a foreign
country, shall be recognized and enforced as a foreign
arbitral award and not as a judgment of a foreign court.
A foreign arbitral award, when confirmed by the Regional
Trial Court, shall be enforced in the same manner as final and
executory decisions of courts of law of the Philippines
xxxx
SEC. 47. Venue and Jurisdiction.—Proceedings for
recognition and enforcement of an arbitration agreement or
for vacations, setting aside, correction or modification of an
arbitral award, and any application with a court for
arbitration assistance and supervision shall be deemed as
special proceedings and shall be filed with the Regional Trial
Court (i) where arbitration proceedings are conducted; (ii)
where the asset to be attached or levied upon, or the act to
be enjoined is located; (iii) where any of the parties to the
dispute resides or has his place of business; or (iv) in the
National Judicial Capital Region, at the option of the
applicant.
SEC. 48. Notice of Proceeding to Parties.—In a special
proceeding for recognition and enforcement of an arbitral
award, the Court shall send notice to the parties at their
address of record in the arbitration, or if any part cannot be
served notice at such address, at such party’s last known
address. The notice shall be sent at least fifteen (15) days
before the date set for the initial hearing of the application.”
It is now clear that foreign arbitral awards when
confirmed by the RTC are deemed not as a judgment of
a foreign court but as a foreign arbitral award, and when
confirmed, are enforced as final and executory decisions
of our courts of law.
Thus, it can be gleaned that the concept of a final
and binding arbitral award is similar to judgments or
awards given by some of our quasi-judicial bodies, like
the National Labor Relations Commission and Mines
Adjudication Board, whose final judgments are
stipulated to be final and binding, but not immediately
executory in the sense that they may still be judicially
reviewed, upon the instance of any party. Therefore,
28
28 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
the final foreign arbitral awards are similarly situated in
that they need first to be confirmed by the RTC.
1.(3)The RTC has jurisdiction to review foreign
arbitral awards
Sec. 42 in relation to Sec. 45 of RA 9285 designated and
vested the RTC with specific authority and jurisdiction to
set aside, reject, or vacate a foreign arbitral award on
grounds provided under Art. 34(2) of the UNCITRAL
Model Law. Secs. 42 and 45 provide:
“SEC. 42. Application of the New York Convention.––The New
York Convention shall govern the recognition and
enforcement of arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards
shall be filed with the Regional Trial Court in
accordance with the rules of procedure to be promulgated
by the Supreme Court. Said procedural rules shall provide
that the party relying on the award or applying for its
enforcement shall file with the court the original 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 thereof into any of such languages.
 The applicant shall establish that the country in which
foreign arbitration award was made is party to the New York
Convention.
If the application for rejection or suspension of
enforcement of an award has been made, the Regional Trial
Court may, if it considers it proper, vacate its decision and
may also, on the application of the party claiming recognition
or enforcement of the award, order the party to provide
appropriate security.
xxxx
SEC. 45. Rejection of a Foreign Arbitral Award.—A party to
a foreign arbitration proceeding may oppose an application
for recognition and enforcement of the arbitral award in
accordance with the procedures and rules to be promulgated
by the Supreme Court only on those grounds enumerated
under Article V of the New York Convention. Any other
ground raised shall be disregarded by the Regional Trial
Court.”
29
VOL. 542, JANUARY 7, 2008 29
Korea Technologies Co., Ltd. vs. Lerma
Thus, while the RTC does not have jurisdiction over
disputes governed by arbitration mutually agreed upon
by the parties, still the foreign arbitral award is subject
to judicial review by the RTC which can set aside, reject,
or vacate it. In this sense, what this Court held in Chung
Fu Industries (Phils.), Inc. relied upon by KOGIES is
applicable insofar as the foreign arbitral awards, while
final and binding, do not oust courts of jurisdiction since
these arbitral awards are not absolute and without
exceptions as they are still judicially reviewable.
Chapter 7 of RA 9285 has made it clear that all arbitral
awards, whether domestic or foreign, are subject to
judicial review on specific grounds provided for.
1.(4)Grounds for judicial review different in
domestic and foreign arbitral awards
The differences between a final arbitral award from an
international or foreign arbitral tribunal and an award
given by a local arbitral tribunal are the specific grounds
or conditions that vest jurisdiction over our courts to
review the awards.
For foreign or international arbitral awards which
must first be confirmed by the RTC, the grounds for
setting aside, rejecting or vacating the award by the
RTC are provided under Art. 34(2) of the UNCITRAL
Model Law.
For final domestic arbitral awards, which also need
confirmation by the RTC pursuant to Sec. 23 of RA
876  and shall be recognized as final and executory
44
decisions of the RTC,  they may only be assailed before
45
the RTC and vacated on the grounds provided under
Sec. 25 of RA 876. 46
_______________
 “An Act to Authorize the Making of Arbitration and Submission
44
Agreements, to Provide for the Appointment of Arbitrators and the
Procedure for Arbitration in Civil Controversies, and for Other
Purposes” (1953).
 RA 9285, Sec. 40.
45
 Id., Sec. 41.
46
30
30 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
1.(5)RTC decision of assailed foreign arbitral
award appealable
Sec. 46 of RA 9285 provides for an appeal before the CA
as the remedy of an aggrieved party in cases where the
RTC sets aside, rejects, vacates, modifies, or corrects an
arbitral award, thus:
“SEC. 46. Appeal from Court Decision or Arbitral Awards.—A
decision of the Regional Trial Court confirming, vacating,
setting aside, modifying or correcting an arbitral award may
be appealed to the Court of Appeals in accordance with the
rules and procedure to be promulgated by the Supreme
Court.
 The losing party who appeals from the judgment of the
court confirming an arbitral award shall be required by the
appellate court to post a counterbond executed in favor of
the prevailing party equal to the amount of the award in
accordance with the rules to be promulgated by the Supreme
Court.”
Thereafter, the CA decision may further be appealed or
reviewed before this Court through a petition for review
under Rule 45 of the Rules of Court.
PGSMC has remedies to protect its interests
Thus, based on the foregoing features of RA 9285,
PGSMC must submit to the foreign arbitration as it
bound itself through the subject contract. While it may
have misgivings on the foreign arbitration done in Korea
by the KCAB, it has available remedies under RA 9285.
Its interests are duly protected by the law which
requires that the arbitral award that may be rendered
by KCAB must be confirmed here by the RTC before it
can be enforced.
With our disquisition above, petitioner is correct in its
contention that an arbitration clause, stipulating that
the arbitral award is final and binding, does not oust our
courts of jurisdiction as the international arbitral award,
the award of which is not absolute and without
exceptions, is still judicially
31
VOL. 542, JANUARY 7, 2008 31
Korea Technologies Co., Ltd. vs. Lerma
reviewable under certain conditions provided for by the
UNCITRAL Model Law on ICA as applied and
incorporated in RA 9285.
Finally, it must be noted that there is nothing in the
subject Contract which provides that the parties may
dispense with the arbitration clause.
Unilateral rescission improper and illegal
Having ruled that the arbitration clause of the subject
contract is valid and binding on the parties, and not
contrary to public policy; consequently, being bound to
the contract of arbitration, a party may not unilaterally
rescind or terminate the contract for whatever cause
without first resorting to arbitration.
What this Court held in University of the Philippines v.
De Los Angeles   and reiterated in succeeding
47
cases,  that the act of treating a contract as rescinded
48
on account of infractions by the other contracting party
is valid albeit provisional as it can be judicially assailed,
is not applicable to the instant case on account of a
valid stipulation on arbitration. Where an arbitration
clause in a contract is availing, neither of the parties
can unilaterally treat the contract as rescinded since
whatever infractions or breaches by a party or
differences arising
_______________
 G.R. No. L-28602, September 29, 1970, 35 SCRA 102.
47
 See Lorenzo Shipping Corp. v. BJ Marthel International, Inc., G.R.
48
No. 145483. November 19, 2004, 443 SCRA 163; Subic Bay
Metropolitan Authority v. Universal International Group of Taiwan, G.R.
No. 131680, September 14, 2000, 340 SCRA 359; Philippine National
Construction Corp. v. Mars Construction Enterprises, Inc., G.R. No.
133909, February 15, 2000, 325 SCRA 624; Cheng v. Genato, G.R. No.
129760, December 29, 1998, 300 SCRA 722; Gold-enrod, Inc. v. Court
of Appeals, G.R. No. 126812, November 24, 1998, 299 SCRA
141; Adelfa Properties, Inc. v. Court of Appeals, G.R. No. 111238,
January 25, 1995; 240 SCRA 565; Bowe v. Court of Appeals, G.R. No.
95771, March 19, 1993, 220 SCRA 158; Lim v. Court of Appeals, G.R.
No. 85733, February 23, 1990, 182 SCRA 564.
32
32 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
from the contract must be brought first and resolved by
arbitration, and not through an extrajudicial rescission
or judicial action.
The issues arising from the contract between PGSMC
and KOGIES on whether the equipment and machineries
delivered and installed were properly installed and
operational in the plant in Carmona, Cavite; the
ownership of equipment and payment of the contract
price; and whether there was substantial compliance by
KOGIES in the production of the samples, given the
alleged fact that PGSMC could not supply the raw
materials required to produce the sample LPG cylinders,
are matters proper for arbitration. Indeed, we note that
on July 1, 1998, KOGIES instituted an Application for
Arbitration before the KCAB in Seoul, Korea pursuant to
Art. 15 of the Contract as amended. Thus, it is
incumbent upon PGSMC to abide by its commitment to
arbitrate.
Corollarily, the trial court gravely abused its
discretion in granting PGSMC’s Motion for Inspection of
Things on September 21, 1998, as the subject matter of
the motion is under the primary jurisdiction of the
mutually agreed arbitral body, the KCAB in Korea.
In addition, whatever findings and conclusions made
by the RTC Branch Sheriff from the inspection made on
October 28, 1998, as ordered by the trial court on
October 19, 1998, is of no worth as said Sheriff is not
technically competent to ascertain the actual status of
the equipment and machineries as installed in the plant.
For these reasons, the September 21, 1998 and
October 19, 1998 RTC Orders pertaining to the grant of
the inspection of the equipment and machineries have
to be recalled and nullified.
Issue on ownership of plant proper for arbitration
Petitioner assails the CA ruling that the issue petitioner
raised on whether the total contract price of USD
1,530,000
33
VOL. 542, JANUARY 7, 2008 33
Korea Technologies Co., Ltd. vs. Lerma
was for the whole plant and its installation is beyond the
ambit of a Petition for Certiorari.
Petitioner’s position is untenable.
It is settled that questions of fact cannot be raised in
an original action for certiorari.  Whether or not there
49
was full payment for the machineries and equipment
and installation is indeed a factual issue prohibited by
Rule 65.
However, what appears to constitute a grave abuse
of discretion is the order of the RTC in resolving the
issue on the ownership of the plant when it is the
arbitral body (KCAB) and not the RTC which has
jurisdiction and authority over the said issue. The RTC’s
determination of such factual issue constitutes grave
abuse of discretion and must be reversed and set aside.
RTC has interim jurisdiction to protect the rights of the
parties
Anent the July 23, 1998 Order denying the issuance of
the injunctive writ paving the way for PGSMC to
dismantle and transfer the equipment and machineries,
we find it to be in order considering the factual milieu of
the instant case.
Firstly, while the issue of the proper installation of the
equipment and machineries might well be under the
primary jurisdiction of the arbitral body to decide, yet
the RTC under Sec. 28 of RA 9285 has jurisdiction to
hear and grant interim measures to protect vested
rights of the parties. Sec. 28 pertinently provides:
“SEC. 28. Grant of interim Measure of Protection.—(a) It is
not incompatible with an arbitration agreement for a
party to request, before constitution of the tribunal,
from a Court to grant such measure. After constitution of
the arbitral tribunal and during arbitral proceedings, a
request for an interim measure of
_______________
 Suarez v. National Labor Relations Commission, G.R. No. 124723,
49
July 31, 1998, 293 SCRA 496, 502.
34
34 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
protection, or modification thereof, may be made with the
arbitral or to the extent that the arbitral tribunal has
no power to act or is unable to act effectivity, the
request may be made with the Court. The arbitral
tribunal is deemed constituted when the sole arbitrator or the
third arbitrator, who has been nominated, has accepted the
nomination and written communication of said nomination
and acceptance has been received by the party making the
request.
(b) The following rules on interim or provisional relief shall
be observed:
Any party may request that provisional relief be granted
against the adverse party.
Such relief may be granted:
1. (i)to prevent irreparable loss or injury;
2. (ii)to provide security for the performance of any
obligation;
3. (iii)to produce or preserve any evidence; or
4. (iv)to compel any other appropriate act or omission.
1. (c)The order granting provisional relief may be
conditioned upon the provision of security or any act
or omission specified in the order.
2. (d)Interim or provisional relief is requested by written
application transmitted by reasonable means to the
Court or arbitral tribunal as the case may be and the
party against whom the relief is sought, describing in
appropriate detail the precise relief, the party against
whom the relief is requested, the grounds for the
relief, and the evidence supporting the request.
3. (e)The order shall be binding upon the parties.
4. (f)Either party may apply with the Court for assistance
in implementing or enforcing an interim measure
ordered by an arbitral tribunal.
5. (g)A party who does not comply with the order shall be
liable for all damages resulting from noncompliance,
including all expenses, and reasonable attorney’s
fees, paid in obtaining the or-der’s judicial
enforcement. (Emphasis ours.)
Art. 17(2) of the UNCITRAL Model Law on ICA defines an
“interim measure” of protection as:
35
VOL. 542, JANUARY 7, 2008 35
Korea Technologies Co., Ltd. vs. Lerma
Article 17.Power of arbitral tribunal to order interim measures
x x x      x x x      x x x
(2) Aninterim measure is any temporary measure,
whether in the form of an award or in another form, by
which, at any time prior to the issuance of the award by
which the dispute is finally decided, the arbitral tribunal
orders a party to:
1. (a)Maintain or restore the status quo pending
determination of the dispute;
2. (b)Take action that would prevent, or refrain from
taking action that is likely to cause, current or
imminent harm or prejudice to the arbitral process
itself;
3. (c)Provide a means of preserving assets out of which a
subsequent award may be satisfied; or
4. (d)Preserve evidence that may be relevant and
material to the resolution of the dispute.
Art. 17 J of UNCITRAL Model Law on ICA also grants
courts power and jurisdiction to issue interim measures:
Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an interim
measure in relation to arbitration proceedings, irrespective of
whether their place is in the territory of this State, as it has in
relation to proceedings in courts. The court shall exercise
such power in accordance with its own procedures in
consideration of the specific features of international
arbitration.
In the recent 2006 case of Transfield Philippines, Inc. v.
Luzon Hydro Corporation, we were explicit that even
“the pendency of an arbitral proceeding does not
foreclose resort to the courts for provisional reliefs.” We
explicated this way:
“As a fundamental point, the pendency of arbitral
proceedings does not foreclose resort to the courts for
provisional reliefs. The Rules of the ICC, which governs the
parties’ arbitral dispute, allows the application of a party to a
judicial authority for interim or conservatory measures.
Likewise, Section 14 of Republic Act (R.A.) No. 876
36
36 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma
(The Arbitration Law) recognizes the rights of any party to
petition the court to take measures to safeguard and/or
conserve any matter which is the subject of the dispute in
arbitration. In addition, R.A. 9285, otherwise known as the
“Alternative Dispute Resolution Act of 2004,” allows the filing
of provisional or interim measures with the regular courts
whenever the arbitral tribunal has no power to act or to act
effectively.”
50
It is thus beyond cavil that the RTC has authority and
jurisdiction to grant interim measures of protection.
Secondly, considering that the equipment and
machineries are in the possession of PGSMC, it has the
right to protect and preserve the equipment and
machineries in the best way it can. Considering that the
LPG plant was non-operational, PGSMC has the right to
dismantle and transfer the equipment and machineries
either for their protection and preservation or for the
better way to make good use of them which is
ineluctably within the management discretion of
PGSMC.
Thirdly, and of greater import is the reason that
maintaining the equipment and machineries in Worth’s
property is not to the best interest of PGSMC due to the
prohibitive rent while the LPG plant as set-up is not
operational. PGSMC was losing PhP322,560 as monthly
rentals or PhP3.87M for 1998 alone without considering
the 10% annual rent increment in maintaining the plant.
Fourthly, and corollarily, while the KCAB can rule on
motions or petitions relating to the preservation or
transfer of the equipment and machineries as an interim
measure, yet on hindsight, the July 23, 1998 Order of
the RTC allowing the transfer of the equipment and
machineries given the nonrecognition by the lower
courts of the arbitral clause, has accorded an interim
measure of protection to PGSMC which would otherwise
been irreparably damaged.
_______________
 G.R. No. 146717, May 19, 2006, 490 SCRA 14, 20-21.
50
37
VOL. 542, JANUARY 7, 2008 37
Korea Technologies Co., Ltd. vs. Lerma
Fifth, KOGIES is not unjustly prejudiced as it has already
been paid a substantial amount based on the contract.
Moreover, KOGIES is amply protected by the arbitral
action it has instituted before the KCAB, the award of
which can be enforced in our jurisdiction through the
RTC. Besides, by our decision, PGSMC is compelled to
submit to arbitration pursuant to the valid arbitration
clause of its contract with KOGIES.
PGSMC to preserve the subject equipment and
machineries
Finally, while PGSMC may have been granted the right
to dismantle and transfer the subject equipment and
machineries, it does not have the right to convey or
dispose of the same considering the pending arbitral
proceedings to settle the differences of the parties.
PGSMC therefore must preserve and maintain the
subject equipment and machineries with the diligence of
a good father of a family  until final resolution of the
51
arbitral proceedings and enforcement of the award, if
any.
WHEREFORE, this petition is PARTLY GRANTED, in
that:
1.(1)The May 30, 2000 CA Decision in CA-G.R. SP
No. 49249 is REVERSED and SET ASIDE;
2.(2)The September 21, 1998 and October 19, 1998
RTC Orders in Civil Case No. 98-117 are
REVERSED and SET ASIDE;
3.(3)The parties are hereby ORDERED to submit
themselves to the arbitration of their dispute and
 differences arising from the subject Contract 39
before the KCAB; and © Copyright 2020 Central Book Supply, Inc. All rights reserved.
4.(4)PGSMC is hereby ALLOWED to dismantle and
transfer the equipment and machineries, if it had
not done so, and

_______________

 Cf. Article 1173 of the Civil Code.

51

38
38 SUPREME COURT REPORTS ANNOTATED
Korea Technologies Co., Ltd. vs. Lerma

1.ORDERED to preserve and maintain them until the

finality of whatever arbitral award is given in the
arbitration proceedings.

No pronouncement as to costs.
SO ORDERED.
     Quisumbing (Chairperson), Carpio, Carpio-
Morales and Tinga, JJ., concur.
Petition partly granted.
Notes.—E.O. No. 1008 which vests jurisdiction to the
Construction Industry Arbitration Commission (CIAC)
over construction disputes is a special law—hence, it
takes precedence over Batas Pambansa Blg. 129 or the
Judiciary Reorganization Act of 1980, a general law
which vests jurisdiction to the Regional Trial Courts over
civil actions in which the subject of the litigation is
incapable of pecuniary estimation. (Reyes vs. Balde
II, 498 SCRA 186 [2006])
The parties, in incorporating an arbitration clause in
their contract with regard to energy fees, expressly
intended that the said matter in dispute must first be
resolved by an arbitration panel before it reaches the
courts. (Fiesta World Mall Corporation vs. Linberg
Philippines, Inc., 499 SCRA 332 [2006])

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