Alternative Dispute

Resolutions

CASE DIGEST

CRISTY C. BANGAYAN
18-01733
 LIST OF CASES:

1. DFA vs. BCA

2. Heirs of Salas vs. Laperal Realty
3. Home Bankers Savings vs. CA
4. LM Power Engineering Corp vs. Capitol Industrial Corp
5. Luzon vs. Bridestone
6. Steamship vs. Sulpicio Lines
7. DPWH vs. CMC
8. BCDA vs. DMCI
9. Fruehaf vs. Technology
10. Lanuza vs. BF Corp
11. Koppel vs. Makati Rotary
12. Korea vs. Lerma
13. Gonzales vs.Climax
14. Del Monte Corp. vs. CA
15. Sea-Land vs. CA
16. Magellan Capital vs. Rolando Zosa
17. Cargill vs. San Fernando Regala
18. RCBC vs. BDO
19. BF Corp. vs. CA
20. Steamship vs. Sulpicio Lines
21. Cargill Philippines Inc vs San Fernando Regala Trading Inc (same as #17)
22. PEZA vs Edison (Bataan) Cogeneration Corp
23. Benguet Corp vs DENR - Mines Adjudication Board
24. Bengson vs Chan
25. General Insurance & Surety Corp vs Union Insurance Society of Canton Ltd
26. Tuna Processing Inc vs Philippine Kingford Inc
27. Mabuhay Holdings Corp vs Sembcorp Logistics Ltd
28. DFA vs BCA International Corporation (same as #1A)
29. Federal Express Corp vs Airfreight 2100 Inc
30. Dale Strickland vs Ernst & Young LLP
31. Cargill Philippines Inc vs San Fernando Regala Trading Inc (same as #17 & #21)
32. Aboitiz Transport System Corp vs Carlos A. Gothong Lines Inc
33. Home Bankers Savings & Trust Co vs CA

34. DFA vs BCA International Corporation (same as #1)

35. Transfield Philippines Inc vs Luzon Hydro Corp

36. DFA vs BCA International Corporation (same as #1A)

37. PSALM vs CIR

38. Phil. Veterans Investment Devt Corp vs Velez

39. Chavez vs CA

40. CHINA CHANG JIANG ENERGY CORPORATION vs ROSAL

INFRASTRUCTURE BUILDERS
41. NIA V CA
42. DENR V UPCIUE
43. Fruehaf vs. Technology
44. Gadrinab v Salmanca
45. Sonley v Anchor Savings Bank
CASE NO. 1

DEPARTMENT OF FOREIGN AFFAIRS (DFA), petitioner, Vs. BCA

INTERNATIONAL CORPORATION & AD HOC ARBITRAL TRIBUNAL,
composed of Chairman Danilo L. Concepcion and members, Custodio O. Parlad
and Antonio P. Jamon, Jr., respondents
G.R. No. 225051. July 19, 2017.*

FACTS:
In an Amended Build-Operate-Transfer Agreement in 2002, DFA awarded the Machine
Readable Passport and Visa Project (MRPN Project) to respondent BCA International
Corporation (BCA), a domestic corporation. During the implementation of
the MRPN Project, DFA sought to terminate the Agreement. However, BCA opposed the
termination and requested for Arbitration, pursuant to its Section 19.02 which provides
that in case of failure to settle amicably the dispute, this shall be referred to a
"Tribunal", under the UNCITRAL Arbitration Rules adopted by the United Nations
General Assembly in 1976.
In June 2009, an ad hoc arbitral tribunal was constituted. It approved BCA's request to
apply in court for the issuance of subpoena. BCA also filed before the RTC a Petition for
Assistance in Taking Evidence pursuant to the IRR of the ADR Law or RA 9285. In its
petition, BCA sought the issuance of subpoena ad testificandum and subpoena duces
tecum on several witnesses and documents in DFA’s custody. 
DFA alleged that the presentation of the witnesses and documents was prohibited by law
and protected by the deliberative process privilege.
RTC ruled for BCA and held that the evidence sought to be produced was no longer
covered by the deliberative process privilege. They held that in Chavez v. Public Estates
Authority: acts, transactions or decisions are privileged only before a definite proposition
is reached by the agency and since DFA already made a definite proposition and entered
into a contract, DFA's acts, transactions or decisions were no longer privileged.
Thus, the RTC issued the subpoena due es tecum and subpoena ad testificandum.  DFA
filed a motion to quash these which RTC denied. It held that the motion was actually a
motion for reconsideration, which is prohibited under Rule 9.9 of the Special ADR Rules.
Undersecretary Franklin M. Ebdalin and others testified before the arbitral tribunal
pursuant to the subpoena. DFA petitioned in SC an urgent prayer for the issuance of a
temporary restraining order and/or a writ of preliminary injunction. The Court issued a
temporary restraining order enjoining the arbitral tribunal from taking cognizance of the
testimonies of Usec. Ebdalin, Atty. Mauricio, and Mr. Ucab.

ISSUES:
I. Whether the 1976 UNCITRAL Arbitration Rules and the Rules of Court apply to the
present arbitration proceedings, not RA 9285 and the Special ADR Rules
II. Whether the witnesses presented during the 2013 hearings before the ad hoc arbitral
tribunal are prohibited from disclosing information on the basis of the deliberative
process privilege.

HELD:
The petition was partially granted.
I. Yes. Arbitration is deemed a special proceeding and governed by the special provisions
of RA 9285, its IRR, and the Special ADR Rules. RA 9285 is the general law applicable
to all matters and controversies to be resolved through ADR methods. While enacted only
in 2004, it applies in this case since it is a procedural law which has a retroactive effect. 
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. 
Thus, contrary to DFA's contention, RA 9285, its IRR, and the Special ADR Rules are
applicable to the present arbitration proceeding. RA 9285, its IRR, and the Special ADR
Rules provide that any party to an arbitration, whether domestic or foreign, may request
the court to provide assistance in taking evidence such as the issuance of subpoena ad
testificandum and subpoena duces tecum.
An appeal with the CA is only possible where the RTC denied a petition for assistance in
taking evidence.  An appeal to the Supreme Court from the CA is allowed only under any
of the grounds specified in the Special ADR Rules. DFA failed to follow the procedure
and the hierarchy of courts provided by said laws when it directly appealed before the SC
the RTC Resolution and Orders granting assistance in taking evidence.
Even without applying RA 9285 and the Special ADR Rules, the RTC still has the
authority to issue the subpoenas to assist the parties in taking evidence.
The 1976 UNCITRAL Arbitration Rules, agreed upon by the parties to govern them,
state that the "arbitral tribunal shall apply the law designated by the parties as applicable
to the substance of the dispute. Failing such designation by the parties, the arbitral
tribunal shall apply the law determined by the conflict of laws rules which it considers
applicable." Established in this jurisdiction is the rule that the law of the place where the
contract is made governs, or lex loci contractus. Since there is no law designated by the
parties as applicable and the Agreement was perfected in the Philippines, "The
Arbitration Law," or Republic Act No. 876 (RA 876), applies.
RA 876 empowered arbitrators to subpoena witnesses and documents when the
materiality of the testimony has been demonstrated to them. 
Considering that this petition was not filed in accordance with RA 9285, the Special
ADR Rules and 1976 UNCITRAL Arbitration Rules, this petition should normally be
denied. However, ends of justice are better served when cases are determined on the
merits after all parties are given full opportunity to ventilate their causes and defenses
rather than on technicality or some procedural imperfections.  This also involved
production of evidence in an arbitration case where the deliberative process privilege is
invoked.
II. Yes, partially.
The deliberative process privilege typically covers recommendations, advisory opinions,
draft documents, proposals, suggestions, and other subjective documents that reflect the
personal opinions of the writer rather than the policy of the agency. Court records which
are "predecisional" and "deliberative" in nature - in particular, documents and other
communications which are part of or related to the deliberative process, i.e., notes, drafts,
research papers, internal discussions, internal memoranda, records of internal
deliberations, and similar papers - are protected and cannot be the subject of a subpoena
if judicial privilege is to be preserved.
The deliberative process privilege can also be invoked in arbitration proceedings under
RA 9285. If an official is compelled to testify before an arbitral tribunal and the order of
an arbitral tribunal is appealed to the courts, such official can be inhibited by fear of later
being subject to public criticism, preventing such official from making candid discussions
within his or her agency.
DFA did not waive the privilege in arbitration proceedings under the Agreement. Section
20.02 of the Agreement merely allows, with the consent of the other party, disclosure by
a party to a court arbitrator or administrative tribunal of the contents of the "Amended
BOT Agreement or any information relating to the negotiations concerning the
operations, contracts, commercial or financial arrangements or affair[s] of the other
parties hereto." Section 20.03 merely allows a party, if it chooses, without the consent of
the other party, to disclose to the tribunal privileged information in such disclosing
party's possession. However, a party cannot be compelled by the other party to disclose
privileged information to the tribunal, where such privileged information is in its
possession and not in the possession of the party seeking the compulsory disclosure.
Rights cannot be waived if it is contrary to law, public order, public policy, morals, or
good customs. There is a public policy involved in a claim of deliberative process
privilege - "the policy of open, frank discussion between subordinate and chief
concerning administrative action."Thus, the deliberative process privilege cannot be
waived.
CASE NO. 2

Heirs of Augusto L. Salas, Jr. vs. Laperal Realty Corporation

G.R. No. 135362. December 13, 1999.*

FACTS:
Salas entered into an Owner-Contractor Agreement with Laperal Realty Corporation to
render and provide complete construction services on his land. Salas, Jr. executed a
Special Power of Attorney in favor of Laperal Realty to exercise general control,
supervision and management of the sale of his land, for cash or on installment basis.
Salas, Jr. left his home in the morning for a business trip to Nueva Ecija and never
returned.
Teresita Diaz Salas filed with the RTC Makati City a verified petition for the declaration
of presumptive death of her husband, Salas, Jr., who had then been missing for more than
7 years. It was granted on December 12, 1996. Meantime, Laperal Realty subdivided the
land of Salas, Jr. and sold subdivided portions thereof to Rockway Real Estate
Corporation and South Ridge Village, Inc. in 1990; to spouses Abrajano and Lava and
Oscar Dacillo in 1991; and to Eduardo Vacuna, Florante de la Cruz and Jesus Vicente
Capalan in 1996 (lot buyers).
Heirs of Salas, Jr. filed in the RTC Lipa City a Complaint for declaration of nullity of
sale, reconveyance, cancellation of contract, accounting and damages against Laperal.
Lapreal Realty filed a Motion to Dismiss on the ground that Salas Heirs failed to submit
their grievance to arbitration as required under Article VI of the Agreement. Spouses
Abrajano and Lava and Dacillo in a Joint Answer prayed for dismissal for the same
reason. The trial court dismissed the Complaint for non-compliance with the arbitration
clause.

ISSUE:
Whether the case must be submitted for arbitration

HELD:
A submission to arbitration is a contract. As such, the Agreement, containing the
stipulation on arbitration, binds the parties thereto, as well as their assigns and heirs. But
only they. heirs of Salas, Jr., and Laperal Realty are certainly bound by the Agreement. If
Laperal Realty had assigned its rights under the Agreement to a third party, making the
former, the assignor, and the latter, the assignee, such assignee would also be bound by
the arbitration provision since assignment involves such transfer of rights as to vest in the
assignee the power to enforce them to the same extent as the assignor could have
enforced them against the debtor or in this case, against the heirs of the original party to
the Agreement.
However, the lot buyers are not assignees of the rights of Laperal Realty but are buyers of
the land that to be developed and sold under the Agreement. As such, they are not
"assigns" contemplated in Article 1311 of the New Civil Code which provides that
contracts take effect only between the parties, their assigns and heirs.
For while rescission, as a general rule, is an arbitrable issue, Salas impleaded in the suit
for rescission the lot buyers who are neither parties to the Agreement nor the latter's
assigns or heirs. Consequently, the right to arbitrate as provided in Article VI of the
Agreement was never vested in the lot buyers.
Laperal Realty, as a contracting party to the Agreement, has the right to compel heirs to
first arbitrate before seeking judicial relief. However, to split the proceedings into
arbitration for Laperal Realty and trial for the lot buyers, or to hold trial in abeyance
pending arbitration between heirs and Laperal Realty, would in effect result in
multiplicity of suits, duplicitous procedure and unnecessary delay. It would be in the
interest of justice if the trial court hears the complaint against all respondents and
adjudicates heirs' rights as against theirs in a single and complete proceeding.
CASE NO. 3

Home Bankers Savings and Trust Company vs. CA

G.R. No. 115412. November 19, 1999

FACTS:
Victor Tancuan issued Home Bankers Savings and Trust Company a check while Eugene
Arriesgado issued Far East Bank and Trust Company 3 checks. Tancuan and Arriesgado
exchanged each other’s checks and deposited them with their respective banks for
collection. When FEBTC presented Tancuan’s HBSTC check for clearing, it was
dishonored for being “Drawn Against Insufficient Funds” (DIAF).
HBSTC sent Arriesgado’s 3 FEBTC checks through the Philippine Clearing House
Corporation (PCHC) to FEBTC but was returned for being DAIF. HBSTC received the
notice of dishonor but refused to accept the checks and returned them to FEBTC through
the PCHC for the reason “Beyond Reglementary Period,” implying that HBSTC already
treated the 3 checks as cleared and allowed the proceeds thereof to be withdrawn. FEBTC
demanded reimbursement for the returned checks but HBSTC refused. FEBTC submitted
the dispute for arbitration before the PCHC Arbitration Committee, under the PCHC’s
Supplementary Rules on Regional Clearing to which FEBTC and HBSTC are bound as
participants in the regional clearing operations administered by the PCHC.
While the arbitration proceeding was still pending, FEBTC filed an action for sum of
money and damages with preliminary attachment against HBSTC, Robert Young,
Tancuan and Arriesgado. HBSTC. The trial court denied HBSTC’s motion to dismiss and
the MR. CA dismissed their petition for Certiorari. FEBTC concludes that the prevailing
doctrine is that the civil action must be stayed rather than dismissed pending arbitration.

ISSUE:
Whether a separate case in court over the same subject matter of arbitration be filed
despite the pending arbitration to obtain provisional remedy of attachment against the
bank

HELD:
Section 14 of RA 876 or the Arbitration Law allows any party to the arbitration
proceeding to petition the court to take measures to safeguard and/or conserve any matter
which is the subject of the dispute in arbitration, thus: Section 14 provides: Subpoena and
subpoena duces tecum- Arbitrators shall have the power to require any person to attend a
hearing as a witness. They shall have the power to subpoena witnesses and documents
when the relevancy of the testimony and the materiality thereof has been demonstrated to
the arbitrators. Arbitrators may also require the retirement of any witness during the
testimony of any other witness. All of the arbitrators appointed in any controversy must
attend all the hearings in that matter and hear all the allegations and proofs of the parties;
xxx The arbitrator or arbitrators shall have the power at any time, before rendering the
award, without prejudice to 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.
Participants in the regional clearing operations of the PCHC cannot bypass the arbitration
process laid out by the body and seek relief directly from the courts. Here, FEBTC
initiated arbitration proceedings as required by the PCHC rules and regulations, and
pending arbitration has sought relief from the trial court for measures to safeguard and/or
conserve the subject of the dispute under arbitration, as sanctioned by section 14 of the
Arbitration Law, and otherwise not shown to be contrary to the PCHC rules and
regulations.
Arbitration, as an alternative method of dispute resolution, is encouraged by the Court.
Aside from unclogging judicial dockets, it also hastens solutions especially of
commercial disputes. The Court looks with favor upon such amicable arrangement and
will only interfere with great reluctance to anticipate or nullify the action of the arbitrator.
CASE NO. 4

LM Power Engineering Corp. vs. Capitol Industries Groups, Inc.

G.R. No. 141833. March 26, 2003

FACTS:
LM Power Engineering Corporation and Capitol Industrial Construction Groups Inc.
executed a "Subcontract Agreement" involving electrical work at the Third Port of
Zamboanga. Capitol took over some of the work. Allegedly, Capitol had failed to finish it
because of its inability to procure materials.
Upon completing its task under the contract, LM Power billed Capitol P6,711,813.90.
Capitol refused to pay, questioning the accuracy of the amount of advances and billable
accomplishments listed. It invoked the termination clause of the agreement. The clause
allowed it to set off the cost of the work that LM Power had failed to undertake due to
termination or take-over against the amount it owed.
LM Power sued with the RTC Makati a Complaint for the collection of the amount
representing the alleged balance due it under the Subcontract. Capitol filed a Motion to
Dismiss, alleging that the Complaint was premature, because there was no prior recourse
to arbitration. RTC denied the Motion on the ground that the dispute did not involve the
interpretation or the implementation of the Agreement and was, therefore, not covered by
the arbitral clause.

ISSUES:
I. Whether a controversy/dispute regarding the interpretation and implementation of the
Sub-Contract Agreement that requires prior recourse to voluntary arbitration exists.
II. Whether requirements in Article III-1 of CIAC Arbitration Rules regarding request for
arbitration have been complied.

HELD:
I. Yes. The instant case involves technical discrepancies that are better left to an arbitral
body that has expertise in those areas. The dispute arose from the parties’ differing
positions on whether certain provisions of their agreement could be applied to the facts.
In any event, the inclusion of an arbitration clause in a contract does not ipso facto divest
the courts of jurisdiction to pass upon the findings of arbitral bodies, because the awards
are still judicially reviewable under certain conditions.
Within the scope of the arbitration clause are discrepancies as to the amount of advances
and billable accomplishments, the application of the provision on termination, and the
consequent set-off of expenses. The resolution of the dispute between the parties herein
requires a referral to the provisions of their Agreement.
II. Yes. There is no more need to file a request with the CIAC in order to vest it with
jurisdiction to decide a construction dispute. The arbitral clause in the Agreement is a
commitment on the part of the parties to submit to arbitration the disputes covered
therein. Because that clause is binding, they are expected to abide by it in good faith.
Because it covers the dispute between the parties in this case, either of them may compel
the other to arbitrate. Since LM Power has already filed a Complaint with the RTC
without prior recourse to arbitration, the proper procedure to enable the CIAC to decide
on the dispute is to request the stay or suspension of such action, as provided under RA
876.
CASE NO. 5

Luzon Iron and Development Groups and Iron Consolidated Lands vs. Bridestone
and Anaconda Corp.
G.R. No. 220546. December 7, 2006

FACTS:
Bridestone and Anaconda filed separate complaints before the RTC for rescission of
contract and damages against petitioners Luzon Iron Co. and Consolidated Iron Co. Both
complaints sought the rescission of the Tenement Partnership and Acquisition Agreement
(TPAA) entered into by Luzon Iron and Consolidated Iron, on one hand, and Bridestone
and Anaconda for the assignment of the Exploration Permit Application of the former in
favor of the latter. The complaints also sought the return of the Exploration Permits to
respondents.
Luzon Iron and Consolidated Iron filed a motion to dismiss, contending that the RTC
could not acquire jurisdiction over Consolidated Iron because it was a foreign corporation
that had never transacted business in the Philippines. Luzon and Consolidated further
alleged that respondents are guilty of forum shopping by filing a case with the RTC and
the DENR.
Bridestone asserted that the trial court had jurisdiction over the complaints because the
TPAA itself allowed a direct resort before the courts in exceptional circumstances. They
cited paragraph 14.8 thereof as basis explaining that when a direct and/or blatant
violation of the TPAA had been committed, a party could go directly to the courts. RTC
consolidated the cases and ruled in favor of Bridestone and Anaconda. The Court of
Appeals affirmed. CA also sustained the jurisdiction of the RTC over the subject matter
opining that the arbitration clause in the TPAA provided for an exception where parties
could directly go to court.

ISSUE:
Whether the case must be referred for arbitration

HELD:
Yes, the controversy must be referred to arbitration as laid down in the Agreement.
Paragraphs 14.8 and 15.1 of the TPAA should be harmonized in such a way that the
arbitration clause is given life.
The Court disagreed that Paragraph 14.8 of the TPAA should be construed as an
exception to the arbitration clause where direct court action may be resorted to in case of
direct and/or blatant violation of the TPAA occurs. If such interpretation is to be
espoused, the arbitration clause would be rendered inutile as practically all matters may
be directly brought before the courts. Such construction is antahema to the policy
favoring arbitration, the Court said.
The complaints filed before the RTC should have been dismissed, because Luzon Inc
were able to establish that respondents violated the prohibition on forum shopping. The
parties, nevertheless, are directed to initiate arbitration proceedings as provided under
Paragraph 15.1 of the TPAA.
CASE NO. 6. and 20.

Steamship Mutual Underwriting Association Limited vs. Sulpicio Lines

G.R. No. 196072. September 20, 2017
G.R. No. 208603. September 20, 2017.

FACTS:
Steamship seeks to set aside the Decision and Resolution of the Court of Appeals.
Sulpicio Lines filed for Indirect Contempt against Steamship Mutual Underwriting
Association Limited (Steamship). Steamship is a Bermuda-based Protection and
Indemnity Club, managed outside London, England. It insures its members-shipowners
against "third party risks and liabilities" for claims arising from (a) death or injury to
passengers; (b) loss or damage to cargoes; and (c) loss or damage from collisions.
Sulpicio insured its fleet of inter-island vessels with Steamship for Protection &
Indemnity risks through local insurance agents, Pioneer Insurance or Seaboard-Eastern.
One of these vessels was the M/V Princess of the World which has Class 1 Protection
Indemnity from Noon 20th February 2005 to Noon 20th February 2006. On July 7, 2005,
M/V Princess of the World was gutted by fire accidentally while on voyage from Iloilo to
Zamboanga City, resulting in total loss of its cargoes. Sulpicio claimed indemnity from
Steamship under the saids insurance policy. Steamship denied the claim and subsequently
rescinded the insurance coverage of Sulpicio's other vessels on ground that "Sulpicio was
grossly negligent in conducting its business regarding safety, maintaining the
seaworthiness of its vessels as well as proper training of its crew."
Sulpicio sued Steamship in RTC Makati City for specific performance and damages.
Steamship Motioned to Refer Case to Arbitration and to Rule 47 of the 2005/2006 Club
Rules, which supposedly provided for arbitration in London of disputes between
Steamship and its members.
Branch 149, RTC Makati City denied the motions to dismiss, holding that "arbitration
[did] not appear to be the most prudent action considering that the other defendants had
already filed their answers.” CA denied Steamship’s petition to refer case to arbitration.
Sulpicio accuses Steamship of indirect contempt for its "improper conduct tending
directly, or indirectly, to impede, obstruct, or degrade the administration of justice"
Steamship contends that the arbitration agreement set forth in its Club Rules, which in
turn is incorporated by reference in the Certificate of Entry and Acceptance of M/V
Princess of the World, is valid and binding upon Sulpicio, pursuant to this Court's ruling
in BF Corporation v. CA. It also argued that a referral of the case to arbitration is
imperative pursuant to the mandates of RA 9285 or the ADR Law. Section 25 of the
ADR Law specifically provides that "the court shall refer to arbitration those parties who
are bound by the arbitration agreement although the civil action may continue as to those
who are not bound by such arbitration agreement."
Steamship further submits that "a Philippine court is an inconvenient forum to thresh out
the issues involved in Sulpicio's claim." First, Sulpicio's claim is governed by the English
Law, as expressly stated in the 2005/2006 Club Rules. Second, a Philippine court would
be "an ineffective venue" to enforce any judgment that may be obtained against
Steamship, a foreign corporation. Thus, on the basis of the doctrine of forum non
conveniens alone, Steamship contends that the claim against it should be referred to
arbitration in London.
Sulpicio counters that CA was correct in ruling that there was no arbitration agreement.
The arbitration clause in the 2005/2006 Club Rules is not valid and binding for failure to
comply with Section 4 of the ADR Law, which requires that an arbitration agreement be
in writing and subscribed by the parties or their lawful agent. It further contends that the
Certificate of Entry and Acceptance did not provide for arbitration as a mode of dispute
resolution, that the rules referred to was not particularly identified or described, and that
it never received a copy of the Club Rules.

ISSUES:
I. whether Steamship’s petition is proper under the Rules of Court;
II. Whether there is a valid and binding arbitration agreement
III. Whether CA gravely erred in affirming the RTC Order denying referral of Sulpicio
Lines, Inc.'s complaint to arbitration in London in accordance with the 2005/2006 Club
Rules; and
IV. Whether Steamship is guilty of indirect contempt.

HELD:
I. Yes. Sulpicio contends that Steamship's Petition for Review should be dismissed
outright on procedural grounds. This Court finds for Steamship. The basic issues raised in
the petition are questions of law that are cognizable by the SC. A reversal of some factual
findings is warranted because CA committed a grave abuse of discretion in concluding
that Sulpicio was ignorant of the 2005/2006 Club Rules and its arbitration clause, when
Steamship had presented ample evidence to establish otherwise. Court may exercise its
power of review to reverse errors committed by the lower courts including grave abuse of
discretion of the CA. A Rule 45 petition is the proper remedy to reverse a decision or
resolution of the Court of Appeals even if the error assigned is grave abuse of discretion
in the findings of fact or of law.
II. It is the State's policy to promote party autonomy in the mode of resolving disputes.
Under the freedom of contract principle, parties to a contract may stipulate on a particular
method of settling any conflict between them. Arbitration and other alternative dispute
resolution methods like mediation, negotiation, and conciliation are favored over court
action, pursuant to RA 9285. Consistent with State policy, "arbitration agreements are
liberally construed in favor of proceeding to arbitration." "Any doubt should be resolved
in favor of arbitration."
There was a valid arbitration agreement. The contract between Sulpicio and Steamship is
more than a contract of insurance between a marine insurer and a shipowner. By entering
its vessels in Steamship, Sulpicio not only obtains insurance coverage for its vessels but
also becomes a member of Steamship. A protection and indemnity club, like Steamship,
is an association composed of shipowners generally formed for the specific purpose of
providing insurance cover against third-party liabilities of its members. Thus, a contract
of insurance is perfected between the parties upon Steamship's issuance of the Certificate
of Entry and Acceptance.
CA ruled that the arbitration agreement in the 2005/2006 Club Rules is not valid because
it was not signed by the parties. In domestic arbitration, the formal requirements of an
arbitration agreement are that it must "be in writing and subscribed by the party sought to
be charged, or by his lawful agent. In international commercial arbitration, it is likewise
required that the arbitration agreement must be in writing.
An arbitration agreement is in writing if it is contained (1) in a document signed by the
parties, (2) in an exchange of letters, telex, telegrams or other means of
telecommunication which provide a record of the agreement, or (3) in an exchange of
statements of claim and defense in which the existence of an agreement is alleged by a
party and not denied by another. The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement provided that the contract is in
writing and the reference is such as to make that clause part of the contract.
A contract need not be contained in a single writing. It may be collected from several
different writings which do not conflict with each other and which, when connected,
show the parties, subject matter, terms and consideration, as in contracts entered into by
correspondence. A contract may be encompassed in several instruments even though
every instrument is not signed by the parties, since it is sufficient if the unsigned
instruments are clearly identified or referred to and made part of the signed instrument or
instruments. Thus, an arbitration agreement that was not embodied in the main agreement
but set forth in another document is binding upon the parties, where the document was
incorporated by reference to the main agreement. The arbitration agreement contained in
the Club Rules, which in turn was referred to in the Certificate of Entry and Acceptance,
is binding upon Sulpicio even though there was no specific stipulation on dispute
resolution in this Certificate. Sulpicio's agreement to abide by Steamship's Club Rules,
including its arbitration clause, can be reasonably inferred from its submission of an
application for entry of its vessels to Steamship "subject to the Rules.”
Here, by its act of entering its fleet of vessels to Steamship and accepting without
objection the Certificate of Entry and Acceptance covering its vessels, Sulpicio manifests
its consent to be bound by the Club Rules. The contract between Sulpicio and Steamship
gives rise to reciprocal rights and obligations. Steamship undertakes to provide protection
and indemnity cover to Sulpicio's fleet. On the other hand, Sulpicio, as a member, agrees
to observe Steamship's rules and regulations, including its provisions on arbitration.
III. Sulpicio cannot feign ignorance of the arbitration clause since it was already charged
with notice of the Club Rules due to an appropriate reference to it in the Certificate of
Entry and Acceptance. Assuming its contentions were true that it was not furnished a
copy of the 2005/2006 Club Rules, by the exercise of ordinary diligence, it could have
easily obtained a copy of them from Pioneer Insurance or Seaboard-Eastern.
These foregoing affidavits and the attached supporting documents consistently declared
that Sulpicio was given copies of the Rulebook on an annual basis and had even invoked
its provisions in making a claim from Steamship. Sulpicio's previous letters to Steamship
referring to provisions of the Club Rules show its knowledge. Sulpicio was also reminded
of the arbitration clause during the negotiations preceding the institution of the present
case.
Thus, there is preponderance of evidence showing that Sulpicio was given a copy and had
knowledge of the 2005/2006 Club Rules. Moreover, the 2005/2006 Club Rules' provision
on arbitration is valid and binding upon Sulpicio.
RTC should suspend proceedings to give way to arbitration. Even if there are other
defendants who are not parties to the arbitration agreement, arbitration is still proper. RA
9285 was approved on April 2, 2004 and was the controlling law at the time the original
and amended complaints were filed. The present rule on multiple parties manifests due
regard to the policy of in favor of arbitration. Where a motion is filed in court for the
referral of a dispute to arbitration, Section 24 of the ADR law ordains that the dispute
shall be referred "to arbitration unless it finds that the arbitration agreement is null and
void, inoperative or incapable of being performed."
The RTC acted in excess of its jurisdiction in determining only the issue of whether there
was a valid arbitration agreement between the parties when it denied Steamship's Motion
to Dismiss and/or to Refer Case to Arbitration solely on the ground that it would not be
the most prudent action under the circumstances of the case, going against the express
mandate of RA 9285. Consequently, the CA in denying referral to arbitration erred in
finding no grave abuse of discretion on the part of the trial court.
IV. Petition for indirect contempt is not the proper action to determine the validity of the
set-off and to make a factual determination relating to the propriety of ordering
restitution. The RTC and CA decisions are set aside. The dispute between Sulpicio Lines
and Steamship is referred to arbitration in London in accordance with Rule 47 of the
2005/2006 Club Rules.
CASE NO. 7

DPWH vs. CMC/Monark/Hi-Tri JV

G.R. No. 179732. September 13, 2017.

FACTS:
The Philippines, through the DPWH, and CMC/Monark/Pacific/Hi-Tri J.V. executed
"Contract Agreement for the Construction of Contract Package 6MI-9, Pagadian-Buug
Section, Zamboanga del Sur, Sixth Road Project, Road Improvement Component Loan
No. 1473-PHI” for P713,330,885.28.
In 2002, the Joint Venture's truck and equipment were set on fire after suspected MILF
bombed the Joint Venture's hatching in West Boyogan, Kumalarang, Zamboanga del
Sur. The Joint Venture made several written demands for extension and payment of the
foreign component of the Contract. There were efforts between the parties to settle the
unpaid Payment Certificates amounting to P26,737,029.49. Thus, only the foreign
component of US$358,227.95 was up for negotiations subject to further reduction of the
amount on account of payments subsequently received by the Joint Venture from DPWH.
BCEOM French Engineering Consultants recommended that DPWH promptly pay the
outstanding monies due the Joint Venture. The letter also stated that the project was 80%
complete when it was halted. The JV then filed a Complaint against DPWH before CIAC.
It also sent a "Notice of Mutual Termination of Contract", to DPWH requesting for a
mutual termination of the contract subject of the arbitration case.
Then-DPWH Acting Secretary Florante Soriquez accepted the Joint Venture's request for
mutual termination of the contract. CIAC later promulgated an Award directing DPWH
to pay the Joint Venture its money claims plus legal interest. CIAC, however, denied the
Joint Venture's claim for price adjustment due to the delay in the issuance of a Notice to
Proceed under Presidential Decree No. 1594 or the "Policies, Guidelines, Rules, and
Regulations for Government Infrastructure Contracts."
The Court of Appeals sustained CIAC's Award with certain modifications and remanded
the case to CIAC for the determination of the number of days' extension that the Joint
Venture is entitled to. It also held that CIAC did not commit reversible error in not
awarding the price adjustment sought by the Joint Venture under Presidential Decree No.
1594.
CA also held that CIAC did not err in not awarding actual damages in the form of interest
at the rate of 24%. However, it ruled that CIAC was correct when it awarded legal
interest. It sustained the JV’s argument on the non-inclusion of a clear finding of its
entitlement to time extensions in the dispositive portion of the CIAC Award.

ISSUE:
Whether the present case is an exception to the rule that only questions of law may be
raised in a Petition for Review under Rule 45 of the Rules of Court

HELD:
In distinguishing between commercial arbitration, voluntary arbitration under Article
219(14) of the Labfor Code, and construction arbitration, the Freuhauf case ruled that
commercial arbitral tribunals are purely ad hoc bodies operating through contractual
consent, hence, they are not quasi-judicial agencies.
In contrast, voluntary arbitration under the Labor Code and construction arbitration
derive their authority from statute in recognition of the public interest inherent in their
respective spheres. Furthermore, voluntary arbitra tion under the Labor Code and
construction arbitration exist inde pendently of the will of the contracting parties:
Voluntary Arbitrators resolve labor disputes and grievances arising from the
interpretation of Collective Bargaining Agreements. These disputes were specifically
excluded from the coverage of both the Arbitration Law and the ADR Law.
Unlike purely commercial relationships, the relationship between capital and labor are
heavily impressed with public interest. Because of this, Voluntary Arbitrators authorized
to resolve labor disputes have been clothed with quasi-judicial authority. On the other
hand, commercial relationships covered by our commercial arbitration laws are purely
private and contractual in nature. Unlike labor relationships, they do not possess the same
compelling state interest that would justify state interference into the autonomy of
contracts.
Hence, commercial arbitration is a purely private system of adjudication facilitated by
private citizens instead of government instrumentalities wielding quasi-judicial powers.
Moreover, judicial or quasi-judicial jurisdiction cannot be conferred upon a tribunal by
the parties alone. The Labor Code itself confers subject-matter jurisdiction to Voluntary
Arbitrators. Notably, the other arbitration body listed in Rule 43 — the Construction
Industry Arbitration Commission (CIAC) — is also a government agency attached to the
Department of Trade and Industry. Its jurisdiction is likewise conferred by statute. By
contrast, the subject matter jurisdiction of commercial arbitrators is stipulated by the
parties.
CASE NO. 8

Bases Conversion Development Authority vs. DMCI Project Developers, Inc.

G.R. No. 173137. January 11, 2016

FACTS:
BCDA entered into a Joint Venture Agreement PNR and other foreign corporations.
Under the  Joint Venture Agreement, the parties agreed to construct a railroad system
from Manila to Clark with possible extensions to Subic Bay and La Union and later,
possibly to Ilocos Norte and Nueva Ecija. BCDA shall establish North Luzon Railways
Corporation for purposes of constructing, operating, and managing the railroad system.
BCDA invited investors to participate in the railroad project’s financing and
implementation. The Joint Venture Agreement contained an arbitration clause. Among
those invited were D.M. Consunji, Inc. and Metro Pacific Corporation. Joint Venture
Agreement was amended to include D.M. Consunji, Inc. and/or its nominee as party.
D.M. Consunji, Inc. informed PNR and the other parties that DMCI-PDI shall be its
designated nominee for all the agreements it entered and would enter with them in
connection with the railroad project. Later, Northrail withdrew from the Securities and
Exchange Commission its application for increased authorized capital stock. Moreover,
according to DMCIPDI, BCDA applied for Official Development Assistance from
Obuchi Fund of Japan. This required Northrail to be a 100% government-owned and
-controlled corporation. DMCI-PDI started demanding from BCDA and Northrail the
return of its P300 million deposit due to Northrail’s failure to increase its authorized
capital stock. BCDA and Northrail refused to return the deposit. DMCI-PDI reiterated the
request for the refund of its P300 million deposit for future Northrail subscription.
BCDA denied DMCI-PDI’s request. DMCI-PDI served a demand for arbitration to
BCDA and Northrail, citing the arbitration clause in the June 10, 1995 Joint Venture
Agreement. BCDA and Northrail failed to respond. DMCI-PDI filed before RTC Makati
a Petition to Compel Arbitration against BCDA and Northrail, pursuant to the alleged
arbitration clause in the Joint Venture Agreement. DMCI-PDI prayed for “an order
directing the parties to proceed to arbitration in accordance with the terms and conditions
of the agreement.” BCDA filed a Motion to Dismiss on the ground that there was no
arbitration clause that DMCI-PDI could enforce since DMCI-PDI was not a party to the
Joint Venture Agreement containing the arbitration clause. Northrail filed a separate
Motion to Dismiss on the ground that the court did not have jurisdiction over it and that
DMCI-PDI had no cause for arbitration against it. The trial court granted DMCI-PDI’s
Petition to Compel Arbitration, denying the Motions to Dismiss.

ISSUE:
Whether DMCI-PDI may compel BCDA and Northrail to submit to arbitration

HELD:
Yes. DMCI-PDI is a party to all the agreements, including the arbitration agreement. It
may, thus, invoke the arbitration clause against all the parties. Northrail, although not a
signatory to the contracts, is also bound by the arbitration agreement. that if the Civil
Code113 gives third party beneficiaries to a contract the right to demand the contract's
fulfillment in its favor, the reverse should also be true. A beneficiary who communicated
his or her acceptance to the terms of the agreement before its revocation may be
compelled to abide by the terms of an agreement, including the arbitration clause. In this
case, Northrail is deemed to have communicated its acceptance of the terms of the
agreements when it accepted D.M. Consunji, Inc.'s funds.
Arbitration is a mode of settling disputes between parties. Like many alternative dispute
resolution processes, it is a product of the meeting of minds of parties submitting a
predefined set of disputes. The state adopts a policy in favor of arbitration. As such, the
State shall provide means for the use of ADR as an efficient tool and an alternative
procedure for the resolution of appropriate cases. Likewise, the State shall enlist active
private sector participation in the settlement of disputes through ADR.
CASE NO. 9

Fruehaf Electronics Phil. Corp. vs. Technology Electronics Assembly and

Management Pacific Corp.

G.R. No. 204197. November 23, 2016

FACTS:
Fruehauf leased several parcels of land in Pasig City to Signetics Filipinas Corporation
for a period of 25 years until May 28, 2003. Team Holdings Limited bought Signetics
and changed its name to TEAM. Freuhaf filed an unlawful detainer case against TEAM.
To attempt to settle this, both entered into a MOA with an arbitration clause. When the
lease was not renewed, Fruehauf instituted Special Proceeding before the RTC for
"Submission of an Existing Controversy for Arbitration” which RTC granted.
The arbitral tribunal awarded Fruehauf: P8.2 million as the balance of unpaid rent from
June 9, 2003 until March 5, 2005; and P 46.8 million as damages. RTC denied the
petition. It found insufficient legal grounds under Sections 24 and 25 of the Arbitration
Law to modify or vacate the award. The CA initially affirmed and held that Section 29 of
the Arbitration Law does not preclude the aggrieved party from resorting to other judicial
remedies. It further held that the mere filing of a notice of appeal is sufficient as the
issues raised in the appeal were not purely questions of law. It cited Section 46 of the
ADR Law but made no further reference to A.M. No. 07-11-08-SC, the Special ADR
Rules which govern the appeal procedure. Later, CA reversed.

ISSUES:
I. What are the remedies or modes of appeal against unfavorable arbitral award and what
are the available remedies from an RTC decision confirming, vacating, modifying, or
correcting an arbitral award

HELD:
I. This risk of error is compounded by the absence of an effective appeal mechanism. The
errors of an; arbitral tribunal are not subject to correction by the judiciary. As a private
alternative to court proceedings, arbitration is meant to be an end, not the beginning, of
litigation. Thus, the arbitral award is final and binding on the parties by reason of their
contract - the arbitration agreement.
As a contractual and consensual: body, the arbitral tribunal does not have any inherent
powers over the parties. It has no power to issue coercive writs or compulsory processes.
Thus, there is a need to resort to the regular courts for interim measures of protection 82
and for the recognition or enforcement of the arbitral award.
The arbitral tribunal acquires jurisdiction over the parties and the subject matter through
stipulation. Simply put, an arbitral tribunal is a creature of contract. Arbitral tribunals and
the RTC are not co-equal bodies because the RTC is authorized to confirm or to vacate
(but not reverse) arbitral awards. As a rule, the award of an arbitrator cannot be set aside
for mere errors of judgment either as to the law or as to the facts. Courts are without
power to amend or overrule merely because of disagreement with matters of law or facts
determined by the arbitrators. They will not review the findings of law and fact contained
in an award, and will not undertake to substitute their judgment for that of the
arbitrators, since any other rule would make an award the commencement, not the end, of
litigation. Errors of law and fact, or an erroneous decision of matters submitted to the
judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly
made. Judicial review of an arbitration is, thus, more limited than judicial review of a
trial. Nonetheless, an arbitral award is not absolute. Rule 19.10 of the Special ADR Rules
recognizes the very limited exceptions to the autonomy of arbitral awards.
In sum, the only remedy against; a final domestic arbitral award is to file petition to
vacate or to modify/correct the award not later than 30 days from the receipt of the award.
Unless a ground to vacate has been established, the RTC must confirm the arbitral award
as a matter of course.
CASE NO. 10

Lanuza v BF Corporation
G.R. No. 174938. October 1, 2014

FACTS:
BF Corp. entered into an agreement with Shangri-La wherein it undertook to construct
for the latter a mall and a multilevel parking structure along EDSA. Shangri-La had
always been consistent in paying, but it started defaulting in the later payments. Shangri-
La induced BF to continue using its own funds, but the construction has ended and
Shangri still has not paid its outstanding balance. Hence, BF filed a complaint against
Shangri and its directors, including the Lanuza & Olbes. The directors were in bad faith
in directing Shari’s affairs. The remaining directors file a motion to suspend the
proceeding in view of BF Corp’s failure to submit its dispute to arbitration, as stated in
their agreement. However, the motion was denied. Petitioners alleged that they have
already resigned from Shangri-La. CA granted the petition for certiorari and ordered the
submission of the dispute to arbitration. Aggrieved by the CA's decision, BF Corp filed a
petition for review on certiorari with SC.

BF both sought to clarify the term, "parties," and whether Shangri-La's directors should
be included in the arbitration proceedings. The trial court issued the order directing
service of demands for arbitration upon all the said directors. The CA affirmed the
decision and ruled that Shangri-La’s directors were necessary parties to the proceedings.
Later, petitioners informed the court that the Arbitral Tribunal had already promulgated
its decision and denied BF Corp's claims against them.

ISSUE:
Whether Lanuza and co. should be made parties to the arbitration proceedings pursuant to
the arbitration clause provided in the contract between BF Corporation and Shangri-La

HELD:
Yes. The Arbitral Tribunal’s decision, absolving petitioners from liability have rendered
the case moot and academic. In Heirs of Salas Jr vs. Laperal Realty Corp., an arbitration
clause shall not apply to persons who were neither parties to the contract nor assignees of
previous parties. Clearly, only parties to the agreement are bound by the agreement and
its arbitration clause as they are the only signatories.

As a general rule, a corporation’s representative who did not personally bind himself or
herself to an arbitration agreement cannot be forced to participate in arbitration
proceedings made pursuant to an agreement entered into by the corporation. He is
generally not considered a party to that agreement. However, there are instances when the
distinction between personalities of directors, officers, and representatives, and of the
corporation, are disregarded. This is piercing the veil of corporate fiction.
Piercing the corporate veil is warranted when the separate personality of a corporation is
used as a means to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an
existing obligation, the circumvention of statutes, or to confuse legitimate issues. When
corporate veil is pierced, the corporation and persons who are normally treated as distinct
from the corporation are treated as one person, such that when the corporation is
adjudged liable, these persons, too, become liable as if they were the corporation.

When there are allegations of bad faith or malice against corporate directors or
representatives, it becomes the duty of courts or tribunals to determine if these persons
and the corporation should be treated as one. It is because Lanuzas’ and the corp’s
personalities may later be found to be indistinct that the Court ruled that petitioners may
be compelled to submit to arbitration.

However, in ruling that petitioners may be compelled to submit to the arbitration

proceedings, the Court is not overturning Heirs of Augusto Salas Case wherein it
affirmed the basic arbitration principle that only parties to an arbitration agreement may
be compelled to submit to arbitration. In that case, the Court recognized that persons
other than the main party may be compelled to submit to arbitration, such as assignees
and heirs. Assignees and heirs may be considered parties to an arbitration agreement
entered into by their assignor because the assignor’s rights and obligations are transferred
to them upon assignment. In other words, the assignor’s rights and obligations become
their own rights and obligations. In the same way, the corporation’s obligations are
treated as the representative’s obligations when the corporate veil is pierced.
While the facts of that case prompted the Court to direct the trial court to proceed to
determine the issues of that case, it did not prohibit courts from allowing the case to
proceed to arbitration, when circumstances warrant.

The Arbitral Tribunal rendered a decision, finding that BF Corporation failed to prove the
existence of circumstances that render petitioners and the other directors solidarily liable.
It ruled that petitioners and Shangri-La’s other directors were not liable for the
contractual obligations of Shangri-La to BF Corporation. The Arbitral Tribunal’s
decision was made with the participation of petitioners, albeit with their continuing
objection. The Court ruled that petitioners are bound by such decision.
CASE NO. 11

Koppel, Inc. vs. Makati Rotary Club Foundation, Inc.

G.R. No. 198075. September 4, 2013

FACTS:
FKI was the registered owner of the subject land. Within the subject land are buildings
and other improvements dedicated to the business of FKI. FKI bequeathed the subject
land (exclusive of the improvements thereon) in favor of Makati Rotary Club Foundation,
Incorporated by way of a conditional donation. Makati Rotary accepted the donation with
all of its conditions. FKI and Makati Rotary executed a Deed of Donation evidencing
their consensus.
One of the conditions of the donation required Makati Rotary to lease the subject land
back to FKI under terms specified in their Deed of Donation. With the respondent’s
acceptance of the donation, a lease agreement between FKI and the respondent was
effectively incorporated in the Deed of Donation. The Deed of Donation also stipulated
that the lease over the subject property is renewable for another period of 25 years “upon
mutual agreement” of FKI and the respondent. In which case, the amount of rent shall be
determined in accordance with item 2(g) of the Deed of Donation which has an
arbitration clause. FKI and the respondent executed an Amended Deed of Donation that
reiterated the provisions of the Deed of Donation, including those relating to the lease of
the subject land.
By virtue of the lease agreement contained in the Deed of Donation and Amended Deed
of Donation, FKI was able to continue in its possession and use of the subject land. Two
(2) days before the lease incorporated in the Deed of Donation and Amended Deed of
Donation was set to expire FKI and respondent executed another contract of lease (2000
Lease Contract) covering the subject land. In this 2000 Lease Contract, FKI and
respondent agreed on a new five-year lease to take effect on the 26th of May 2000, with
annual rents ranging from P4,000,000 for the first year up to P4,900,000 for the fifth
year. The 2000 Lease Contract also contained an arbitration clause enforceable in the
event the parties come to disagreement about the “interpretation, application and
execution” of the lease. After the 2000 Lease Contract expired, FKI and respondent
agreed to renew their lease for another five (5) years. This new lease (2005 Lease
Contract) required FKI to pay a fixed annual rent of P4,200,000. In addition to paying the
fixed rent, however, the 2005 Lease Contract also obligated FKI to make a yearly
“donation” of money to the respondent. Such donations ranged from P3,000,000 for the
first year up to P3,900,000 for the fifth year. Notably, the 2005 Lease Contract contained
an arbitration clause similar to that in the 2000 Lease Contract.
From 2005 to 2008, FKI faithfully paid the rentals and “donations” due it per the 2005
Lease Contract. But in June of 2008, FKI sold all its rights and properties relative to its
business in favor of herein petitioner Koppel, Incorporated. FKI and petitioner executed
an Assignment and Assumption of Lease and Donation — wherein FKI, with the
conformity of the respondent, formally assigned all of its interests and obligations under
the Amended Deed of Donation and the 2005 Lease Contract in favor of petitioner. The
following year, petitioner discontinued the payment of the rent and “donation” under the
2005 Lease Contract. Petitioner’s refusal to pay such rent and “donation” emanated from
its belief that the rental stipulations of the 2005 Lease Contract, and even of the 2000
Lease Contract, cannot be given effect because they violated one of the “material
conditions” of the donation of the subject land, as stated in the Deed of Donation and
Amended Deed of Donation. Respondent sent a letter (First Demand Letter) to petitioner
notifying the latter of its default “per Section 12 of the 2005 Lease Contract” and
demanding for the settlement of the rent and “donation” due for the year 2009.
Respondent, in the same letter, further intimated of cancelling the 2005 Lease Contract
should petitioner fail to settle the said obligations. Petitioner received the First Demand
Letter on 2 June 2009. Petitioner sent a reply to respondent expressing its disagreement
over the rental stipulations of the 2005 Lease Contract — calling them “severely
disproportionate,” “unconscionable” and “in clear violation to the nominal rentals
mandated by the Amended Deed of Donation.” Respondent sent another letter (Second
Demand Letter) to petitioner, reiterating its demand for the payment of the obligations
already due under the 2005 Lease Contract. Petitioner refused to comply with the
demands of the respondent. Instead, on 30 September 2009, petitioner filed with the
Regional Trial Court (RTC) of Parañaque City a complaint for the rescission or
cancellation of the Deed of Donation and Amended Deed of Donation against the
respondent. Respondent filed an unlawful detainer case against the petitioner before the
Metropolitan Trial Court (MeTC) of Parañaque City.

ISSUES:
I. Whether the dispute should have been referred to arbitration instead of filing it in court
II. Whether the validity of the contract can be a subject of arbitration proceedings

HELD:
I. Yes. It is clear that under the law, the instant unlawful detainer action should have been
stayed; the petitioner and the respondent should have been referred to arbitration pursuant
to the arbitration clause of the 2005 Lease Contract. The MeTC, however, did not do so
in violation of the law — which violation was, in turn, affirmed by the RTC and Court of
Appeals on appeal.
II. Arbitration before the Panel of Arbitrators is proper only when there is a disagreement
between the parties as to some provisions of the contract between them, which needs the
interpretation and the application of that particular knowledge and expertise possessed by
members of that Panel. It is not proper when one of the parties repudiates the existence or
validity of such contract or agreement on the ground of fraud or oppression as in this
case. The validity of the contract cannot be subject of arbitration proceedings.
Allegations of fraud and duress in the execution of a contract are matters within the
jurisdiction of the ordinary courts of law. These questions are legal in nature and require
the application and interpretation of laws and jurisprudence which is necessarily a
judicial function. Under the doctrine of separability, an arbitration agreement is
considered as independent of the main contract. Being a separate contract in itself, the
arbitration agreement may thus be invoked regardless of the possible nullity or invalidity
of the main contract.
CASE NO. 12

Korea Technologies vs. Lerma

G.R. No. 143581. January 7, 2008.

FACTS:
PGSMC and KOGIES executed a Contract whereby KOGIES would set up an LPG
Cylinder Manufacturing Plant in Carmona, Cavite. The contract was executed in the
Philippines. The parties executed, in Korea, an Amendment for Contract amending the
terms of payment.
KOGIES is a Korean corporation which is engaged in the supply and installation of LPG
Cylinder manufacturing plants, while respondent PGSMC is a domestic corporation.
The contract and its amendment stipulated that KOGIES will ship the machinery and
facilities necessary for manufacturing LPG cylinders for which PGSMC would pay
US$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.
PGSMC entered into a Contract of Lease with Worth Properties, Inc.for use of Worth’s
5,079-square meter property with a 4,032-square meter warehouse building to house the
LPG manufacturing plant. 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 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.
When KOGIES deposited the checks, these were dishonored for the reason “PAYMENT
STOPPED.” Thus, KOGIES sent a demand letter to PGSMC threatening criminal action
for violation of Batas Pambansa Blg. 22 in case of nonpayment. PGSMC replied that the
two checks it issued KOGIES were fully funded but the payments were stopped for
reasons previously made known to KOGIES.
PGSMC informed KOGIES that PGSMC was canceling their March 1997 Contract 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 Carmona plant.
Five days later, PGSMC filed before the Office of the Public Prosecutor an Affidavit
Complaint for Estafa against Mr. Dae Hyun Kang, President of KOGIES. 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. 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.
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. KOGIES filed a Complaint for Specific Performance gainst
PGSMC before the Muntinlupa City Regional Trial Court. The RTC granted a temporary
restraining order (TRO) on July 4, 1998, which was subsequently extended until July 22,
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.

ISSUE:
Is the arbitration clause in Article 15 under the contract null and void for being “contrary
to public policy” and for ousting the court of its jurisdiction?

HELD:
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. Art. 2044 provides, “Any stipulation that the arbitrators’ award or decision shall
be final, is valid, without prejudice to Articles 2038, 2039 and 2040.”
For domestic arbitration proceedings, there are 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. Incorporated also is 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 Resolution, and for Other
Purposes. Secs. 19 and 20 of Chapter 4 of the Model Law are the pertinent provisions.
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.
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. 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.
Korea 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. 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. 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.
CASE NO. 13

Gonzales vs. Climax

G.R. No. 161957. February 28, 2005

FACTS:
Climax-Arimco sent Gonzales a Demand for Arbitration to petitioner, Gonzales, pursuant
to Clause 19.1 of their Addendum Contract and also in accordance with Sec. 5 of R.A.
No. 876 (Arbitration Law). A petition for arbitration was subsequently filed by
respondent and sought an order to compel the parties to arbitrate. In his Answer with
Counterclaim, petitioner questioned the validity of the contract alleging that it is void in
view of respondent’s acts of fraud, oppression and violation of the Constitution; he
moved for the dismissal of the petition. The trial court denied the petition to dismiss.
Petitioner asked the court to set the case for pre-trial and was granted. Respondent filed a
motion to inhibit the trial judge after having his motion to resolve his pending motion to
compel arbitration be denied. Thus, the case was raffled to public respondent judge’s
sala.
Climax argued that R.A. No. 876 does not authorize a pre-trial or trial for a motion to
compel arbitration but directs the court to hear the motion summarily and resolve it
within ten days from hearing. RTC granted the motion and directed the parties to
arbitration.
Gonzales filed a petition for certiorari under Rule 65, contending that the judge acted
with grave abuse of discretion in immediately ordering the parties to proceed with
arbitration despite the proper, valid, and timely raised argument in his Answer with
Counterclaim that the Addendum Contract, containing the arbitration clause, is null and
void. He invoked Sec. 6 of R.A 876 and Sec. 24 of R.A 9285.
Climax assailed the mode of review availed of by petitioner citing Sec. 29 of R.A. No.
876. He averred that the special civil action for certiorari employed by petitioner is
available only where there is no appeal or any plain, speedy, and adequate remedy in the
ordinary course of law against the challenged orders or acts and further noted that
petitioner’s attack on or repudiation of the Addendum Contract also is not a ground to
deny effect to the arbitration clause in the Contract.

ISSUE:
Whether the trial court is correct in compelling the parties to arbitrate pending the issue
on the Addendum Contract’s validity

HELD:
Yes. A clause in a contract providing that all matters in dispute between the parties shall
be referred to arbitration is a contract (Manila Electric Co. v. Pasay Transportation Co.).
The provision to submit to arbitration any dispute arising therefrom and the relationship
of the parties is part of that contract and is itself a contract. Contracts are respected as the
law between the contracting parties and produce effect as between them, their assigns and
heirs.
Implicit in the summary nature of the judicial proceedings is the separable or
independent character of the arbitration clause or agreement. The doctrine of separability,
or severability as other writers call it, enunciates that an arbitration agreement is
independent of the main contract. The arbitration agreement is to be treated as a separate
agreement and the arbitration agreement does not automatically terminate when the
contract of which it is part comes to an end.
The separability of the arbitration agreement is especially significant to the determination
of whether the invalidity of the main contract also nullifies the arbitration clause. Indeed,
the doctrine denotes that the invalidity of the main contract, also referred to as the
"container" contract, does not affect the validity of the arbitration agreement. Irrespective
of the fact that the main contract is invalid, the arbitration clause/agreement still remains
valid and enforceable.
Untenable is Gonzales’ argument that the Addendum Contract is null and void and,
therefore the arbitration clause therein is void as well. First, the proceeding in a petition
for arbitration under R.A. No. 876 is limited only to the resolution of the question of
whether the arbitration agreement exists. Second, the separability of the arbitration clause
from the Addendum Contract means that validity or invalidity of the Addendum Contract
will not affect the enforceability of the agreement to arbitrate.
CASE NO. 14

Del Monte Corporation-USA vs. CA

G.R. No. 136154. February 7, 2001.

FACTS:
Del Monte Corp. and Montebueno Marketing Inc. entered into a distributorship
agreement on 1 July 1994. Under this agreement, MMI was assigned as the sole and
exclusive distributor of its Del Monte Products in the country for a period of five years.
The agreement also provided for an arbitration clause which states that all disputes
arising out of or relating to the said agreement shall be resolved by Arbitration in San
Francisco, California.
MMI appointed Sabrosa Foods (SFI) as their Marketing arm. After two years, SFI and
MMI filed a complaint against Del Monte alleging that the latter's products were being
brought in the country by other importers despite the existing agreement causing them
great embarrassment and initial damage. Del Monte filed a Motion to suspend
proceedings on the ground of their arbitration clause agreement with MMI.
In December 1996 the trial court deferred consideration of the Motion to Suspend
Proceedings as the grounds alleged therein did not warrant suspension of the proceedings
considering that the action was for damages with prayer for the issuance of a Writ of
Preliminary Attachment and not on the Distributorship Agreement. It denied the Motion
to Suspend Proceedings on the ground that it "will not serve the ends of justice and to
allow said suspension will only delay the determination of the issues, frustrate the quest
of the parties for a judicious determination of their respective claims, and/or deprive and
delay their rights to seek redress."
Court of Appeals affirmed the decision of the trial court, ruling that the damaging acts
recited in the complaint, constituting petitioners' causes of action, required the
interpretation of Art. 21 of the Civil Code, and that in determining whether petitioners
had violated it "would require a full blown trial" thus making arbitration "out of the
question."

ISSUES:
I. Whether the dispute can be a subject for arbitration
II. Whether the motion to suspend the proceeding be granted

HELD:
I. Yes. The dispute between Delmonte and MMI is arbitrable. The agreement is a
contract. As a rule, contracts are respected as the law between the contracting parties and
produce effects as between them, their assigns and heirs. However, only Delmonte and
MMI are bound by the Agreement and the arbitration clause because they are only
signatories thereto.

Daniel Collins and Luis Hidalgo, and SFI, not parties to the Agreement and cannot even
be considered assigns or heirs of the parties, are not bound by the Agreement and the
arbitration clause therein. Consequently, referral to arbitration in California pursuant to
the arbitration clause and the suspension of the proceedings pending the return of the
arbitral award could be called for but only as to DMC-USA and Paul E. Derby, Jr., and
MMI and LILY Sy, and not as to the other parties in this case.
II. No. The court denied the petition to suspend. The object of arbitration is to allow the
expeditious determination of a dispute. Clearly, the issues at hand could not be speedily
and efficiently resolved in its entirety if simultaneous arbitration proceedings and trial
OR suspension of trial pending arbitration is to be allowed.
CASE NO. 15

Sea Land Service vs. CA

G.R. No. 126212. March 2, 2000

FACTS:
By executing a “Co-operation in the Pacific” contract which is a vessel sharing
agreement, Sea-Land Services, Inc. and A.P. Moller/Maersk (AMML), both carriers of
cargo in container-ships as well as common carriers, agreed to purchase, share, and
exchange needed space for cargo in their respective containerships. Under this, they
could be, depending on the occasion, either a principal carrier or a containership operator.
A cargo of various foodstuffs were delivered to AMML by Florex International, Inc.
Pursuant to the Agreement, AMML loaded the subject cargo on MS Sealand Pacer, Sea-
Land’s vessel. Thus, AMML was the principal carrier while Sea-Land was the
containership operator. The consignee refused to pay for the cargo, and alleged that
delivery was delayed.
Florex sued Maersk- Tabacalera Shipping Agency for reimbursement of the value of the
cargo and other charges. AMML alleged that should Florex be entitled, it should be Sea-
Land who is liable. AMML filed a Third Party Complaint against Sea-Land, saying that
damages sustained by Florex were caused by Sea-Land, which actually received and
transported Florex’s cargo on its vessels and unloaded them. Sea-Land filed a Motion to
Dismiss on the ground of failure to state a cause of action and lack of jurisdiction, as the
amount of damages were not specified, praying either for dismissal or suspension of the
Third Party Complaint because there exists an arbitration agreement. RTC denied the
motion to dismiss. CA affirmed and said the terms of the Agreement required that the
principal carrier’s claim against the containership operator first be finally determined by,
among others, a court judgment, before the right to arbitration accrues.

ISSUE:
Whether the denial of the prayer for arbitration violated the arbitration clause in the
agreement

HELD:
Yes. If AMML’s Third Party Claim against Sea-Land be allowed to proceed, this will
violate Clause 16.2 of the Agreement which provides that whatever dispute there may be
between the Principal Carrier and the Containership Operator arising from contracts of
carriage shall be governed by the provisions of the bills of lading deemed issued to the
Principal Carrier by the Containership Operator.
It is clear that Arbitration is the mode by which the liability of the Containership
Operator may be finally determined under Clause 16.3: “(T)he Principal Carrier shall
have the right to seek damages and/or an indemnity from the Containership Operator by
arbitration” and that it “shall be entitled to commence such arbitration at any time until
one year after its liability has been finally determined by agreement, arbitration award or
judgment.” From the Agreement clauses, it is clear that arbitration is the mode provided
by which AMML as Principal Carrier can seek damages and/or indemnity from Sea-
Land, as Containership Operator. AMML is barred from taking judicial action against
Sea-Land by the clear terms of their Agreement.
As the Principal Carrier with which Florex directly dealt with, AMML can and should be
held accountable by Florex in the event that it has a valid claim. In turn, AMML can seek
damages and/or indemnity from Sea-Land as Containership Operator for whatever final
judgment adjudged against it under Florex’s Complaint. Collection of said damages
and/or indemnity from Sea-Land should be by arbitration. Arbitration being the mode of
settlement between the parties expressly provided for by their Agreement, the Third Party
Complaint should have been dismissed.
CASE NO. 16

Magellan Capital Holdings vs. Rolando M. Zosa

G.R. No. 129916. March 26, 2001

FACTS:
Under a management in March 1994, Magellan Capital Holdings Corporation [MCHC]
appointed Magellan Capital Management Corporation [MCMC] as manager for the
operation of its business and affairs. Through an “Employment Agreement” with MCHC
and MCMC Rolando M. Zosa was designated as President and Chief Executive Officer
of MCHC.
Majority of MCHC’s Board of Directors on May 10, 1995 did not re-elect Zosa because
of loss of trust and confidence due to alleged violation of MCHC’s board of directors’
resolution and the non-competition clause of the agreement. Zosa was elected to a new
position as MCHC’s Vice-Chairman/Chairman for New Ventures Development.
In Sept. 1995, Zosa communicated his resignation for good reason under paragraph 7 of
the agreement on the ground that said position had less responsibility and scope than
President and CEO. He demanded that he be given termination benefits as provided for in
Section 8 (c) (i) (ii) and (iii) of the agreement. MCHC did not accept this, but informed
him that the agreement is terminated for cause, effective November 19, 1995, in
accordance with Section 7 (a) (v) of the said agreement, on account of his breach of its
Section 12.
Zosa invoked the Arbitration Clause of the agreement under Sec. 23. Yet, instead of
submitting the dispute to arbitration, Zosa, filed an action for damages against MCM/HC
before RTC Cebu to enforce his benefits under the agreement.
A motion to dismiss was filed by MCM/HC arguing among others that the trial court has
no jurisdiction since Zosa’s claims should be resolved through arbitration pursuant to the
agreement’s Section 23. Zosa filed an amended complaint. RTC Branch 58 of Cebu City
denied petitioners’ motion to dismiss saying that (1) the validity and legality of the
arbitration provision can only be determined after trial on the merits; and (2) the amount
of damages claimed, which is over P100,000.00, falls within the jurisdiction of the RTC.
RTC denied the motion ad cautelam. CA later directed the RTC to settle the issue of
validity of the arbitration clause.
Complying with the decision of the CA, the trial court, declared that the “arbitration
clause” in the Employment Agreement is partially void and of no effect. It ruled such
insofar as it concerns the composition of the panel of arbitrators, and directing the parties
to proceed to arbitration in accordance with the agreement under the panel of 3
arbitrators, one for the plaintiff, one for the defendants, and the third to be chosen by
both.

ISSUES:
I. Whether the trial court erred in ruling that the employment agreement was partially
void and of no effect considering that, among others, Zosa is estopped from questioning
the validity of the arbitration clause, including the right MCMC to nominate its own
arbitrator
II. Whether the nature of the action or suit since involves an issue in the election or
appointment of officers or managers of a corporation, which fall within the original and
exclusive jurisdiction of the Securities and Exchange Commission

HELD:
Petition has no merit. The controversy does not involve the election/appointment of
officers of MCHC, as they claimed in their assignment of errors. Zosa’s amended
complaint focuses heavily on the illegality of the Employment Agreement’s “Arbitration
Clause” initially invoked by him in seeking his termination benefits under Section 8 of
the employment contract.
Under Republic Act No. 876, otherwise known as the “Arbitration Law,” it is the
regional trial court which exercises jurisdiction over questions relating to arbitration.
Further, CA’s affirming trial court’s assumption of jurisdiction over the case has become
the “law of the case” which now binds the petitioners. This doctrine provides that when
an appellate court passes on a question and remands the cause to the lower court for
further proceedings, the question there settled becomes the law of the case upon
subsequent appeal, as in this case.
The issue of estoppel, as likewise noted by the Court of Appeals, found its way for the
first time only on appeal. Well-settled is the rule that issues not raised below cannot be
resolved on review in higher courts. Where a contract of employment, being a contract of
adhesion, is ambiguous, any ambiguity therein should be construed strictly against the
party who prepared it. Zosa submitted himself to arbitration proceedings (as there was
none yet) before bewailing the composition of the panel of arbitrators. He in fact, lost no
time in assailing the “arbitration clause” upon realizing the inequities that may mar the
arbitration proceedings if the existing line-up of arbitrators remained unchecked.
Arbitration proceedings are designed to level the playing field among the parties in
pursuit of a mutually acceptable solution to their conflicting claims. Any arrangement or
scheme that would give undue advantage to a party in the negotiating table is anathema to
the very purpose of arbitration and should, therefore, be resisted.
CASE NO. 17

Cargill Philippines vs. San Fernando Regala Trading Inc.

G.R. No. 175404. January 31, 2011.

FACTS:
San Fernando Regala Trading filed with the Regional Trial Court Makati City a
Complaint for Rescission of Contract with Damages against Cargill Philippines. It
alleged that it was engaged in buying and selling molasses with Cargill as one of its
various sources of molasses. They agreed in a 1996 contract that San Fernando would
buy from Cargill 12,000 metric tons of Thailand origin cane blackstrap molasses at
US$192 per metric ton. Cargill failed to comply with its obligations under the contract,
despite demands from San Fernando.
Cargill filed a Motion to Dismiss/Suspend Proceedings and To Refer Controversy to
Voluntary Arbitration, arguing that the issue was whether the alleged contract was legally
in existence and the RTC was not the proper forum to ventilate such issue. It claimed that
the contract contained an arbitration clause.
San Fernando filed an Opposition, arguing that RTC has jurisdiction over the action for
rescission of contract and could not be changed by the subject arbitration clause. San
Fernando argued that the arbitration clause is invalid and unenforceable, considering that
the requirements imposed by the provisions of the Arbitration Law had not been
complied with. Cargill contended that the arbitration clause did not violate the arbitration
law.
RTC denied the motion, finding no clear basis to dismiss the case, pursuant to Section 7
of the Arbitration Law. RTC also found that the arbitration clause contravened
procedures, i.e., when arbitration proceeding is in New York before a non-resident
arbitrator; that the arbitral award shall be final and binding on both parties. MR denied.
CA affirmed, noting the clause violated no law. Yet, it ruled that arbitration cannot be
ordered and is not proper when one of the parties, Cargill, repudiated the existence or
validity of the contract. MR denied.

ISSUE:
Whether the arbitration clause is valid and enforceable even if the validity of the whole
contract containing such clause is assailed and as such this case cannot be brought under
the arbitration law for the purpose of suspending the proceedings

HELD:
R.A. No. 87617 authorizes arbitration of domestic disputes. Foreign arbitration, as a
system of settling commercial disputes of an international character, is likewise
recognized. R.A. No. 9285 further institutionalized the use of alternative dispute
resolution systems, including arbitration, in the settlement of disputes.
The provision to submit to arbitration any dispute arising therefrom and the relationship
of the parties is part of the contract and is itself a contract. Here, San Fernando is suing
upon a contract which provides for an arbitration clause.
An arbitration agreement which forms part of the main contract shall not be regarded as
invalid or non-existent just because the main contract is invalid or did not come into
existence, since the arbitration agreement shall be treated as a separate agreement
independent of the main contract. To reiterate a contrary ruling would suggest that a
party’s mere repudiation of the main contract is sufficient to avoid arbitration and that is
exactly the situation that the separability doctrine sought to avoid. Thus, even the party
who has repudiated the main contract is not prevented from enforcing its arbitration
clause.
The arbitration agreement clearly expressed the parties’ intention that any dispute
between them as buyer and seller should be referred to arbitration. It is for the arbitrator
and not the courts to decide whether a contract between the parties exists or is valid.
The Court clarified in its resolution on Gonzales’ motion for reconsideration that “when
we declared that the case should not be brought for arbitration, it should be clarified that
the case referred to is the case actually filed by Gonzales before the DENR Panel of
Arbitrators, which was for the nullification of the main contract on the ground of fraud,
as it had already been determined that the case should have been brought before the
regular courts involving as it did judicial issues.”
The parties in the Gonzales case can proceed to arbitration under the Arbitration Law, as
provided under the Arbitration Clause in their Addendum Contract.
CASE NO. 18

RCBC Capital Corporation vs. Banco De Oro Unibank

G.R. No. 196171. December 10, 2012

FACTS:
In a 2000 Share Purchase Agreement (SPA), RCBC bought from Equitable-PCI Bank,
Inc. (EPCIB), George L. Go, and individual shareholders of Bankard 226,460,000 shares
of Bankard, constituting 67% of the latter’s capital stock withP1,786,769,400 as contract
price.
RCBC informed EPCIB and the other selling shareholders of an overpayment of the
subject shares, claiming there was an overstatement of valuation of accounts amounting
to P478 million and that the sellers violated their warranty under Section 5(g) of the SPA.
Pursuant to Section 10 of the SPA, RCBC commenced arbitration proceedings with the
ICC-ICA. It charged Bankard with deviating from and contravening generally accepted
accounting principles and practices, that financial statements of Bankard prior to the
stock purchase were far from fair and accurate, and resulted in the overpayment of P556
million. RCBC sought its rescission, as well as payment of actual damages of
P573,132,110, among others with alternative prayer for damages in the of at least
P809,796,082 plus legal interest.
EPCIB, Go, and shareholders denied allegations as RCBC’s claim is one for overpayment
or price reduction under Section 5(h) of the SPA which is already time-barred, the
remedy of rescission is unavailable, and even assuming that rescission is permitted by the
SPA, RCBC failed to file its claim within a reasonable time.
ICC-ICA increased the advances on costs from US$350,000 to US$450,000 subject to
later readjustments, and again invited the Respondents to pay the US$100,000 increment
within 30 days from notice. Respondents, however, refused to pay the increment.
RCBC paid the additional US$100,000 under the second assessment to avert suspension
of the Arbitration Tribunal’s proceedings. EPCIB changed its name to BDO. In 2007, the
Arbitration Tribunal rendered a Partial Award. The Claimant is not entitled to rescission
of the SPA. Later, RCBC filed with the Makati City RTC, Branch 148 a motion to
confirm the First Partial Award, while Respondents filed a motion to vacate the same.
ICC-ICA increased the advance on costs from US$450,000 to US$580,000. Under this
third assessment, RCBC paid US$130,000 as its share on the increment. Respondents
declined to pay its adjudged total share of US$290,000 on account of its filing in the RTC
of a motion to vacate the First Partial Award. The ICC-ICA then invited RCBC to
substitute for Respondents in paying the balance of US$130,000 by December 21,
2007.27 RCBC complied with the request, making its total payments in the amount of
US$580,000.
On January 8, 2008, the Makati City RTC, Branch 148 issued an order confirming the
First Partial Award and denying Respondents’ separate motions to vacate and to suspend
and inhibit Barker and Kaplan. Respondents’ motion for reconsideration was likewise
denied. In a decision in 2008, SC denied the petition and affirmed the RTC’s ruling
confirming the First Partial Award. Branch 148 confirmed the Final Award “subject to
the correction/interpretation thereof by the Arbitral Tribunal pursuant to the ICC Rules
and the UNCITRAL Model Law,” and denying BDO’s Opposition with Motion to
Dismiss.
EPCIB/BDO, in moving to vacate the Second Partial Award claimed that the Arbitration
Tribunal exceeded its powers in deciding the issue of advance cost not contemplated in
the TOR, and that Chairman Barker acted with evident partiality in making such award.
The RTC held that BDO failed to substantiate these allegations. On appeal, the CA
likewise found that the Arbitration Tribunal did not go beyond the submission of the
parties because the phrasing of the scope of the agreed issues in the TOR is broad
enoughto accommodate a finding on the liability and therepercussions of BDO’s failure
to share in the advances on costs. Section 10 of the SPA also gave the Arbitration
Tribunal authority to decide how the costs should be apportioned between them.
However, CA found factual support in BDO’s charge of partiality on Chairman Barker.

ISSUE:
Whether evident partiality exists in the case which is a legal ground to vacate the Second
Partial Award

HELD:
Yes. The Court affirmed the CA’s findings and conclusion except for its ruling that
arbitrators are held to the same standard of conduct imposed on judges, as held in
Commonwealth Coatings. Instead, the Court adopts the reasonable impression of
partiality standard, which requires a showing that a reasonable person would have to
conclude that an arbitrator was partial to the other party to the arbitration. Such interest or
bias, moreover, “must be direct, definite and capable of demonstration rather than remote,
uncertain, or speculative.”
The act of Chairman Barker of furnishing the parties with copies of Matthew Secomb’s
article is indicative of partiality such that a reasonable man would have to conclude that
he was favoring the Claimant, RCBC. Even before the issuance of the Second Partial
Award for the reimbursement of advance costs paid by RCBC, Chairman Barker
exhibited strong inclination to grant such relief to RCBC, notwithstanding his categorical
ruling that the Arbitration Tribunal “has no power under the ICC Rules to order the
Respondents to pay the advance on costs sought by the ICC or to give the Claimant any
relief against the Respondents’ refusal to pay.”
Mr. Secomb’s article, “Awards and Orders Dealing With the Advance on Costs in ICC
Arbitration: Theoretical Questions and Practical Problems” specifically dealt with the
situation when one of the parties to international commercial arbitration refuses to pay its
share on the advance on costs.
By furnishing the parties with a copy of this article, Chairman Barker practically armed
RCBC with supporting legal arguments under the “contractual approach” discussed by
Secomb. Though done purportedly to assist both parties, Chairman Barker’s act clearly
violated Article 15 of the ICC Rules declaring that “[i]n all cases, the Arbitral Tribunal
shall act fairly and impartially and ensure that each party has a reasonable opportunity to
present its case.” Having pre-judged the matter in dispute, Chairman Barker had lost his
objectivity in the issuance of the Second Partial Award.
The Court clarified that the merits of the parties’ arguments as to the propriety of the
issuance of the Second Partial Award was not in issue in this case. Courts are generally
without power to amend or overrule merely because of disagreement with matters of law
or facts determined by the arbitrators. They will not review the findings of law and fact
contained in an award, and will not undertake to substitute their judgment for that of the
arbitrators. A contrary rule would make an arbitration award the commencement, not the
end, of litigation. It is the finding of evident partiality which constitutes legal ground for
vacating the Second Partial Award and not the Arbitration Tribunal’s application of the
ICC Rules adopting the “contractual approach” tackled in Secomb’s article.
CASE NO. 19

BF Corporation vs. CA
G.R. No. 120105. March 27, 1998

FACTS:
BF Corp. and Shangri-la Properties Inc executed an agreement whereby SPI engaged BF
Corp. to construct the main structure of the “EDSA Plaza Project,” a shopping mall
complex in Mandaluyong City. SPI decided to expand the project with BF, entering into a
new agreement.
BF incurred delay in the construction work that SPI considered as “serious and
substantial.” BF said the construction works “progressed in faithful compliance with the
First Agreement until a fire on November 30, 1990 damaged Phase I. A renegotiated
agreement covered the work. SPI said BF “failed to complete the construction works and
abandoned the project.” Parties had disagreements on the respective liabilities under the
contract. BF sued with the Regional Trial Court of Pasig for collection of the balance due
under the construction agreement. SPI and its co-defendants filed a motion to suspend
proceedings instead of filing an answer, alleging that the formal trade contract
contained/provided for an arbitration clause. BF said the agreement did not provide for
arbitration and therefore the court could not be deprived of jurisdiction conferred by law
by the mere allegation of the existence of an arbitration clause.
Under the “Articles of Agreement, page D/6 , the signatures of Rufo B. Colayco, SPI
president, and Bayani Fernando, president of BF appear, while page D/7 shows that the
agreement is a public document duly notarized. Hence, the lower court ruled that
assuming that the arbitration clause was valid and binding, still, it was “too late in the day
for defendants to invoke arbitration” as a demand for arbitration must be made within a
reasonable time, when no such was filed and that in no case later than the time of final
payment which apparently, had elapsed, and SPI had taken possession of the finished
works.
CA reversed, stating that the notarized copy of the articles of agreement attached with
conditions of contract containing the arbitration clause bear only the initials of BF’s
representatives, Bayani Fernando and Reynaldo de la Cruz, without that of the
representative of SPI does not militate against its effectivity. Such is the agreement
between the parties, the initial or signature of SPI’s representative to signify conformity
to arbitration is no longer necessary. The parties, therefore, should be allowed to submit
their dispute to arbitration in accordance with their agreement.
On the late invocation of the prayer for arbitration, the same clause provides that the
demand for arbitration shall be made within a reasonable time after the dispute has arisen
and attempts to settle amicably had failed. An earlier conference proved futile.
SPI, while not denying the arbitration clause, asserts that in contemplation of law there
could not have been one since the trial court found that the “conditions of contract”
embodying the arbitration clause is not duly signed by the parties and SPI misrepresented
before the CA that they produced in the trial court a notarized duplicate original copy of
the construction agreement because what were submitted were mere photocopies and are
of dubious authenticity as the Agreement for the Execution of Builder’s Work for the
EDSA Plaza Project does not contain an arbitration clause, SPI “surreptitiously attached
as Annexes to their petition before CA but these documents are not parts of the
Agreement of the parties as “there was no formal trade contract executed, among others.
ISSUE:
Whether the contract for the construction of the EDSA Plaza between BF Corporation
and Shangri-la Properties, Inc. embodies an arbitration clause in case of disagreement
between the parties in the implementation of contractual provisions.

HELD:
Yes. Under Republic Act No. 876, the formal requisites of an arbitration agreement are:
a) it must be in writing and (b) it must be subscribed by the parties or their
representatives.
The parties entered into a written contract that was submitted in evidence before the
lower court. To “subscribe” means to write underneath, as one’s name or to sign at the
end of a document. That word may sometimes be construed to mean to give consent to or
to attest.
These requisites were complied with in the contract in question. The Articles of
Agreement, which incorporates all the other contracts and agreements between the
parties, was signed by representatives of both parties and duly notarized. The failure of
the SPI’s representative to initial the ‘Conditions of Contract’ would not affect
compliance with the formal requirements for arbitration agreements because that
particular portion of the covenants between the parties was included by reference in the
Articles of Agreement.
A contract need not be contained in a single writing. It may be collected from several
different writings which do not conflict with each other and which, when connected,
show the parties, subject matter, terms and consideration, as in contracts entered into by
correspondence.
A contract may be encompassed in several instruments even though every instrument is
not signed by the parties, since it is sufficient if the unsigned instruments are clearly
identified or referred to and made part of the signed instrument or instruments. Similarly,
a written agreement of which there are two copies, one signed by each of the parties, is
binding on both to the same extent as though there had been only one copy of the
agreement and both had signed it.
BF ironically admits the execution of the Articles of Agreement. Lower court also found
that the said Articles of Agreement “also provides that the ‘Contract Documents’ listed
‘shall be deemed an integral part of this Agreement,’ and one of the said documents is the
‘Conditions of Contract’ which contains the Arbitration Clause.’ ”
The agreement signed by BF and SPI was duly subscribed before notary public. The
subscription of the principal agreement effectively covered the other documents
incorporated by reference therein.
SPI should have paid its liabilities under the contract in accordance with its terms.
However, misunderstandings appeared to have cropped up between the parties ostensibly
brought about by either delay in the completion of the construction work or by force
majeure or the fire that partially gutted the project. The almost two-year delay in paying
its liabilities may not therefore be wholly ascribed to SPI. Besides, private respondent
SPI’s initiative in calling for a conference between the parties was a step towards the
agreed resort to arbitration. However, BF posthaste filed the complaint before the lower
court. Thus, while SPI’s request for arbitration might appear an afterthought as it was
made after it had filed the motion to suspend proceedings, it was because BF also
appeared to act hastily in order to resolve the controversy through the courts.
The arbitration clause provides for a “reasonable time” within which the parties may
avail of the relief under that clause. Here, a one-month period from the time the parties
held a conference until SPI notified BF that it was invoking the arbitration clause, is a
reasonable time. Its denial of the existence of the arbitration clause is an attempt to cover
up its misstep in hurriedly filing the complaint before the lower court.
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.
*No. 20 (Steamship vs. Sulpicio Lines) is consolidated with no. 6, same case.
CASE NO. 21

CARGILL PHILIPPINES, INC., petitioner, vs. SAN FERNANDO REGALA

TRADING, INC., respondent.
G.R. No. 175404. January 31, 2011.

FACTS:
On June 18, 1998, San Fernando Regala Trading, Inc. filed with the Regional Trial
Court (RTC) of Makati City a Complaint for Rescission of Contract with Damages
against Cargill Philippines, Inc. Sometime prior to September 15, 1996, the parties
agreed that instead of January/February 1997, the delivery would be made in
April/May 1997 and that payment would be by an Irrevocable Letter of Credit
payable at sight, to be opened upon Cargill’s advice. Cargill, as seller, failed to
comply with its obligations under the contract, despite demands from San
Fernando , thus, the latter prayed for rescission of the contract and payment of
damages. On July 24, 1998, Cargill filed a Motion to Dismiss/Suspend Proceedings
and To Refer Controversy to Voluntary Arbitration. San Fernando filed an
Opposition, wherein it argued that the RTC has jurisdiction over the action for
rescission of contract and could not be changed by the subject arbitration clause.
The RTC denied the motion of Cargill, it contended that did not find the suspension of
the proceedings warranted, since the Arbitration Law contemplates an arbitration
proceeding that must be conducted in the Philippines under the jurisdiction and
control of the RTC; and before an arbitrator who resides in the country; and that
the arbitral award is subject to court approval, disapproval and modification, and
that there must be an appeal from the judgment of the RTC. The RTC found that
the arbitration clause in question contravened these procedures, i.e., the arbitration
clause contemplated an arbitration proceeding in New York before a non-resident
arbitrator (American Arbitration Association); that the arbitral award shall be final
and binding on both parties. Petitioner filed its Motion for Reconsideration, which the
RTC denied in an Order10 dated November 25, 1998. On appeal to the Court of Appeals,
the CA still held that the case cannot be brought under the Arbitration Law for
the purpose of suspending the proceedings before the RTC, since in its Motion to
Dismiss/Suspend proceedings, petitioner alleged, as one of the grounds thereof, that
the subject contract between the parties did not exist or it was invalid; that the
said contract bearing the arbitration clause was never consummated by the parties,
thus, it was proper that such issue be first resolved by the court through an
appropriate trial; that the issue involved a question of fact that the RTC should
first resolve. Arbitration is not proper when one of the parties repudiated the existence or
validity of the contract.

ISSUE:
Whether the CA erred in finding that the case cannot be brought under the
arbitration law for the purpose of suspending the proceedings in the RTC.

HELD:
YES.
Arbitration, as an alternative mode of settling disputes, has long been recognized
and accepted in our jurisdiction.16 R.A. No. 876 authorizes arbitration of domestic
disputes. Foreign arbitration, as a system of settling commercial disputes of an
international character, is likewise recognized. The enactment of R.A. No. 9285 on
April 2, 2004 further institutionalized the use of alternative dispute resolution systems,
including arbitration, in the settlement of disputes.
The Court of Appeals’ reliance to the case of Gonzales v. Climax Mining Ltd, which
held that the question of validity of the contract containing the agreement to submit
to arbitration will affect the applicability of the arbitration clause itself, a party
cannot rely on the contract and claim rights or obligations under it and at the
same time impugn its existence or validity was wrong since the said ruling was
modified by the Court. The doctrine of separability, or severability as other writers
call it, enunciates that an arbitration agreement is independent of the main
contract. The arbitration agreement is to be treated as a separate agreement and
the arbitration agreement does not automatically terminate when the contract of
which it is a part comes to an end. The separability of the arbitration agreement is
especially significant to the determination of whether the invalidity of the main
contract also nullifies the arbitration clause. Indeed, the doctrine denotes that the
invalidity of the main contract, also referred to as the “container” contract, does
not affect the validity of the arbitration agreement. Irrespective of the fact that the
main contract is invalid, the arbitration clause/agreement still remains valid and
enforceable. Thus, applying the Gonzales ruling, an arbitration agreement which
forms part of the main contract shall not be regarded as invalid or non-existent
just because the main contract is invalid or did not come into existence, since
the arbitration agreement shall be treated as a separate agreement independent of
the main contract. To reiterate a contrary ruling would suggest that a party’s
mere repudiation of the main contract is sufficient to avoid arbitration and that
is exactly the situation that the separability doctrine sought to avoid. Thus, we
find that even the party who has repudiated the main contract is not prevented
from enforcing its arbitration clause.
It is worthy to note that San Fernando filed a complaint for rescission of contract
and damages with the RTC. In so doing, San Fernando alleged that a contract exists
between San Fernando and Cargill. It is that contract which provides for an
arbitration clause which states that “any dispute which the Buyer and Seller may
not be able to settle by mutual agreement shall be settled before the City of New
York by the American Arbitration Association. The arbitration agreement clearly
expressed the parties’ intention that any dispute between them as buyer and seller
should be referred to arbitration. It is for the arbitrator and not the courts to
decide whether a contract between the parties exists or is valid.
WHEREFORE, the petition is GRANTED. The parties are hereby ORDERED to
SUBMIT themselves to the arbitration of their dispute, pursuant to their July 11, 1996
agreement.
CASE NO. 22

PHILIPPINE ECONOMIC ZONE AUTHORITY, petitioner, vs. EDISON

(BATAAN) CORPORATION, respondent.
G.R. No. 179537. October 23, 2009.

FACTS:
Philippine Economic Zone Authority (PEZA) and (Bataan) Cogeneration Corporation
(respondent) entered into a Power Supply and Purchase Agreement (PSPA or
agreement) for a 10-year period effective October 25, 1997 whereby Edison
undertook to construct, operate, and maintain a power plant which would sell,
supply and deliver electricity to PEZA for resale to business locators in the Bataan
Economic Processing Zone. In the course of the discharge of its obligation, Edison
requested from PEZA a tariff increase with a mechanism for adjustment of the
cost of fuel and lubricating oil, which request it reiterated on March 5, 2004. After
the lapse of 90 days, Edison terminated the PSPA, invoking its right thereunder,
and demanded P708,691,543.00 as pre-termination fee. PEZA disputed Edison’s
right to terminate the agreement and refused to pay the pre-termination fee,
prompting Edison to request PEZA to submit the dispute to arbitration pursuant to
the arbitration clause of the PSPA. PEZA refused to submit to arbitration, however,
prompting Edison to file a Complaint against PEZA for specific performance before
the Regional Trial Court (RTC) of Pasay, alleging that, inter alia: “x x x x 4. Under
Clauses 14.1 and 14.2 of the Agreement, the dispute shall be resolved through
arbitration before an Arbitration Committee composed of one representative of each
party and a third member who shall be mutually acceptable to the parties: x x
By Order of April 5, 2005, Branch 118 of the Pasay City RTC granted
respondent’s Motion to Render Judgment on the Pleadings. On appeal, the Court of
Appeals, by Decision of April 10, 2007, affirmed the RTC Order and the Motion
for Reconsideration was subsequently having denied.
ISSUE:
Whether CA erred when it affirmed the order of the Trial Court which referred Edison’s
request for arbitration despite the fact that the issue presented by Edison is not an
arbitrable issue

HELD:
NO.
R.A. No. 876 “explicitly confines the court’s authority only to the determination of
whether or not there is an agreement in writing providing for arbitration.” Given
PEZA’s admission of the material allegations of Edison’s complaint including the
existence of a written agreement to resolve disputes through arbitration, the assailed
CA’s affirmance of the trial court’s grant of Edison’s Motion for Judgment on the
Pleadings is in order. PEZA argues that it tendered an issue in its Answer as it
disputed the legality of the pre-termination fee clause of the PSPA. Even assuming
arguendo that the clause is illegal, it would not affect the agreement between
PEZA and Edison to resolve their dispute by arbitration. “The doctrine of separability,
or severability as other writers call it, enunciates that an arbitration agreement
is independent of the main contract. The arbitration agreement is to be treated
as a separate agreement and the arbitration agreement does not automatically
terminate when the contract of which it is a part comes to an end. The
separability of the arbitration agreement is especially significant to the
determination of whether the invalidity of the main contract also nullifies the
arbitration clause. Indeed, the doctrine denotes that the invalidity of the main
contract, also referred to as the “container” contract, does not affect the validity
of the arbitration agreement. Irrespective of the fact that the main contract is
invalid, the arbitration clause/agreement still remains valid and enforceable.
It bears noting that Edison does not seek to nullify the main contract. It merely
submits these issues for resolution by the arbitration committee, viz.: a. Whether or
not the interest of Claimant in the project or its economic return in its investment was
materially reduced as a result of any laws or regulations of the Philippine
Government or any agency or body under its control; b. Whether or not the parties
failed to reach an agreement on the amendments to the Agreement within 90 days
from notice to respondent on May 3, 2004 of the material reduction in claimant’s
economic return under the Agreement; c. Whether or not as a result of (a) and (b)
above, Edison is entitled to terminate the Agreement; d. Whether or not Edison
accorded preferential treatment to EAUC in violation of the Agreement; e. f. g.
Whether or not as a result of (d) above, Edison is entitled to terminate the
Agreement; Whether or not Edison is entitled to a termination fee equivalent to
P708,691,543.00; and Who between PEZA and Edison shall bear the cost and
expenses of the arbitration, including arbitrator’s fees, administrative expenses and
legal fees. In fine, the issues raised by Edison are subject to arbitration in
accordance with the arbitration clause in the parties’ agreement.
WHEREFORE, the petition is DENIED.
CASE NO. 23

BENGUET CORPORATION, petitioner, vs. DEPARTMENT OF

ENVIRONMENT AND NATURAL RESOURCES-MINES ADJUDICATION
BOARD and J.G. REALTY AND MINING CORPORATION, respondents.
G.R. No. 163101. February 13, 2008

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 BonitoI, 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, 1987. The mining claims were covered by MPSA Application No.
APSA-V0009 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. 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. 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 with its obligations under the RAWOP. 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
the Legaspi City POA, Region V. The POA rendered a decision that [RAWOP] and
its Supplemental Agreement is hereby declared cancelled and without effect.
BENGUET is excluded from the joint MPSA Application over the mineral claims
denominated as “BONITO-I,” “BONITO-II,” “BONITO-III” and “BONITO-IV.”
Therefrom, Benguet filed a Notice of Appeal with the MAB on April 23, 2001,
docketed as Mines Administrative Case No. R-M-2000-01.

ISSUE:
Whether the controversy should have first submitted to arbitration before the POA
took cognizance of the case

HELD:
YES.
Secs. 11.01 and 11.02 of the RAWOP pertinently provide: 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. x x x x 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.
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. The 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. 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.
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: 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. 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. 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.
However, the Court 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 answer 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 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.
CASE NO. 24

SOLEDAD F. BENGSON, plaintiff-appellant, vs.MARIANO M CHAN.

UNIVERSAL CONSTRUCTIONSUPPLY and LEONCIO CHAN, both of San
Fernando, LaUnion; MUTUAL SECURITY INSURANCECORPORATION and
KRAUSE A. IGNACIO of Manila,defendants-appellees.
No. L-27283. July 29, 1977

FACTS:
On June 21, 1965 Soledad F. Bengson and Mariano M. Chan entered into a
contract for the construction of a six-story building on Bengson’s lot located at
Rizal Avenue, San Fernando, La Union. In that contract Soledad F. Bengson
bound herself to pay Chan, the contractor, the sum of P352,000 for the materials,
labor and construction expenses. The contract contains the following arbitration clause:
“ Any and all questions, disputes or differences arising between the parties hereto
relative to the construction of the BUILDING shall be determined by arbitration of
two persons, each chosen by the parties themselves. The determination of said
arbitration shall be final, conclusive and binding upon both parties hereto, unless
they choose to go to court, in which case the determination by arbitration is a
condition precedent for taking any court action. The expenses of arbitration shall
be borne by both parties equally.”
On May 24, 1966 Soledad F. Bengson filed an action tor damages against
Mariano M. Chan and the sureties on his performance bond. She alleged that
Mariano M. Chan violated the contract by not constructing the first and second
stories within the stipulated five-month period. On November 16, 1966 the
defendants filed an amended answer wherein they alleged as an additional
affirmative defense that the complaint states no cause of action because Soledad F.
Bengson did not first submit the controversy for arbitration as required in the
aforequoted paragraph 15 of the construction contract. After holding a hearing, the
trial court in its order of November 24, 1966 sustained that new defense and
dismissed the complaint. Bengson appealed.

ISSUE:
Whether the trial court erred in holding that the cause of action in Bengson’s
complaint are embraced in the requirement for arbitration as a condition precedent
to a court action.

HELD:
YES.
The Court held that the terms of paragraph 15 clearly express the intention of the parties
that all disputes between them should first be arbitrated before court action can be taken
by the aggrieved party is not convincing. Although the causes of action in Bengson’s
complaint are covered by paragraph 15, her failure to resort to arbitration does not
warrant the dismissal of her complaint. The Court agree with her alternative contention
that arbitration may be resorted to during the pendency of the case. The Arbitration
Law provides
SEC. 6. Hearing by court.—A party aggrieved by the failure, neglect or refusal of another
to perform under an agreement in writing providing for arbitration may petition the court
for an order directing that such arbitration proceed in the manner provided for in such
agreement. Five days’ notice in writing of the hearing of such application shall be served
either personally or by registered mail upon the party in default. The court shall hear the
parties, and upon being satisfied that the making of the agreement or such failure to
comply therewith is not in issue, shall make an order directing the parties to proceed to
arbitration in accordance with the terms of the agreement. If the making of the agreement
or default be in issue the court shall proceed to summarily hear such issue. If the finding
be that no agreement in writing providing for arbitration was made, or that there is no
default in the proceeding thereunder, the proceeding shall be dismissed. If the finding be
that a written provision for arbitration was made and there is a default in proceeding
thereunder, an order shall be made summarily directing the parties to proceed with
arbitration in accordance with the terms thereof. “The court shall decide all motions,
petitions or applications filed under the provisions of this Act, within ten days after such
motions, petitions, or applications have been heard by it.
“SEC. 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 terms of the agreement: Provided, That
the applicant for the stay is not in default in proceeding with such arbitration.”
Within the meaning of section 6, the failure of Soledad F.Bengson to resort to arbitration
may be regarded as a refusal to comply with the stipulation for arbitration. And
defendants’ interposition of the defense that arbitration is a condition precedent to the
institution of a court action may be interpreted as a petition for an order that arbitration
should proceed as contemplated in section 15.Therefore, instead of dismissing the case,
the proceedings therein should be suspended and the parties should be directed to go
through the motions of arbitration at least within a sixty-day period. With the consent of
the parties, the trial court may appoint a third arbitrator to prevent a deadlock between the
two arbitrators. In the event that the disputes between the parties could not be settled
definitively by arbitration, then the hearing of the instant case should be resumed.
WHEREFORE, the trial court’s order of dismissal is reversed and set aside.
CASE NO. 25

GENERAL INSURANCE & SURETY CORPORATION Vs. UNION INSURANCE

SOCIETY OF CANTON, LTD., THE BRITISH OAK INSURANCE CO., LTD.,
BRITISH TRADERS’ INSURANCE CO., LTD., BEAVER INSURANCE CO., and
NORTH PACIFIC INSURANCE CO., LTD.,
G.R. Nos. 30475-76. November 22, 1989

FACTS:
The Union Insurance Society of Canton, Ltd. And the British Traders’ Insurance Co.,
Ltd. Are insurance corporations organized and existing under the laws of Great Britain
and licensed to do business in the Philippines with head offices in Hong Kong and branch
offices at Hong Kong Bank Building, No. 117 Juan Luna Street, Manila. The other
petitioners are also engaged in insurance business and are mere subsidiaries of the Union
Insurance Society of Canton, Ltd. Of Hong Kong.
In Civil Case No. 68558 Union Insurance Society (USS) and General Insurance & Surety
Corporation (GI) entered into a First Surplus Reinsurance Agreement which was
executed by USS in London on January 28, 1959, and by GI in Manila on June 3, 1959.
The parties agreed on reciprocal reinsurance expressed and payable in pounds sterling
between the petitioners and respondent commencing on January 1 st, 1959, and
terminating on December 31st, 1961. In the said reinsurance agreement, they expressly
agreed to settle by arbitration all their differences of whatever nature or controversy
arising out of the contract, which agreement is embodied in Article XII of the reinsurance
agreement.
The reinsurance agreement was terminated on December 31, 1961, on which date the
USS claim that there was due from GI under the treaties negotiated between the USS as
ceding companies and the GI as reinsurer the sum of pounds4,784.5.1 which GI should
pay to USS in pounds sterling. However, while USS requested GI to pay the aforesaid
sum in pounds sterling or in Philippine pesos at the exchange rate prevailing on the date
of payment so that the amount of Philippine pesos to be paid by the respondent will
purchase the amount of pounds 4,784.5.1 in which said obligation is payable, GI refused
to pay in pounds sterling and insisted that it should pay the said amount in Philippine
pesos at the old official exchange rate of P2.015 to $1.00. In view of GI’s refusal to pay
in the manner demanded by USS, the latter made a written formal demand upon GI to
proceed with the arbitration of their controversy in the manner provided for in the
reinsurance agreement, which demand was received by GI on August 18, 1966. In the
said communication, the USS informed the GI that they had appointed Mr. T.B. Turvey
of Victory Insurance Co., Ltd., 7316 King William St., London, E. C. 4, as arbitrator in
their behalf and requested GI to name its own arbitrator. GI, however, refused to proceed
with the arbitration, contending that there was no controversy or dispute existing between
the parties so that there was no need for arbitration. Hence, the filing of this case.
In Civil Case No. 68559 the USS and GI entered into a Retrocession Quota Share Fire
Pool Agreement executed by the USS in London on February 17, 1960, and by GI in
Manila on April 11, 1960. In said agreement the parties agreed on reciprocal reinsurance
arrangements expressed and payable in pounds sterling which would commence on
January 1st, 1960, and would terminate on December 31st, 1961.
The retrocession agreement was terminated on December 31 st, 1961, and on the said date
USS claim that there was due from GI under the treaties negotiated between the USS as
ceding companies and GI as reinsurer the sum of pounds1,035.2.7. However, while USS
requested GI to pay the aforesaid sum in pounds sterling or in Philippine pesos at the
exchange rate prevailing on the date of payment so that the amount of Philippine pesos to
be paid by GI will purchase the amount of poundsl,035.2.7 pounds sterling, GI refused to
pay in pounds and insisted to pay the said amount in Philippine pesos at the old official
exchange rate of P2.015 to $1.00. Because of GI’s refusal to pay in the manner demanded
by USS, the latter made a formal written demand to proceed with the arbitration of their
controversy in accordance with their retrocession agreement, which demand was received
by the GI on August 18, 1966. In the said demand USS likewise notified the GI that they
had appointed Mr. T.B. Turvey of Victory Insurance Co., Ltd. Of 7316 King William St.,
London. E.C. 4 as arbitrator in their behalf and requested GI to name its own arbitrator.
The said formal demand and a supplemental letter were received by GI. However, the GI
replied that there was no controversy or dispute existing between the parties so that there
was no need for arbitration.
After a joint trial, the Court ordered both parties to submit their respective memoranda. In
its memorandum, GI, for the first time, invoked RA 529 as its defense, however, was not
considered by the trial court in its decision.
Judgment was then rendered by the trial court on declaring that a valid controversy
existed and the herein petitioner was ordered to submit to arbitration.

ISSUE:
whether or not a controversy or dispute exists under the circumstances to warrant an
order compelling the parties to submit to arbitration.

HELD:
YES, as regards the dispute on the amount the parties owe each other, the same is a
proper subject of arbitration.
In an attempt to exclude this case from the coverage of their arbitration agreement, GI
belatedly invoked R.A. 529 as a defense. It contended that the agreement to pay in
pounds sterling cannot be legally enforced. Republic Act 529 declares as against public
policy, and null and void, provisions in agreements which “purport(s) to give the obligee
the right to require payment in gold or in a particular kind of coin or currency other than
Philippine Currency or in an amount of money in the Philippines measured thereby.”
Thus, GI continues that the agreement to pay in pounds sterling can be considered as not
in existence at all. There was then nothing to arbitrate. But, while GI seeks to evade its
obligation to pay in pounds sterling as being contrary to public policy, it manifested its
willingness to pay in another foreign currency, U.S. dollars.
As already stated, GI’s invocation of R.A. 529 as a defense was raised for the first time
only in its memorandum. It is a basic rule in procedure that defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived, the only
exceptions recognized under the rule being: 1) a failure to state a cause of action; and 2)
lack of jurisdiction (Sec. 2, Rule 9, Rules of Court).
As to what rate of exchange shall prevail has been settled in the case of Kalalo v. Luz,. It
was held thus:
…, if the obligation was incurred prior to the enactment of the Act (R.A. 529) and require
payment in a particular kind of coin or currency other than the Philippine currency the
same shall be discharged in Philippine currency measured at the prevailing rate of
exchange at the time the obligation was incurred. As We have adverted to, Republic Act
529 was enacted on June 16, 1950. In the case now before Us, the obligation of appellant
to pay appellee the 20% of $140,000.00, or the sum of $28,000.00, accrued on August 25,
1961, or after the enactment of Republic Act 529. It follows that the provision of
Republic Act which requires payment at the prevailing rate of exchange when the
obligation was incurred cannot be applied. Republic Act 529 does not provide for the rate
of exchange for the payment of obligation incurred after the enactment of the said Act.
The logical conclusion, therefore, is that the rate of exchange should be that prevailing at
the time of payment. upon the current rate of exchange, and not the par value of the
particular money involved.
In this case, the obligation was incurred between the years 1958-1961, or after the
enactment of R.A. 529 (June 16, 1950). Hence, the rate of exchange shall be that
prevailing at the time of payment.
Finally, petitioner, while admitting the existence of the provision to refer to arbitration
any dispute or controversy arising from the reinsurance and the retrocession agreements,
likewise contended that said provision can no longer be enforced five (5) years after the
termination of both contracts on December 31, 1961.
No restriction as to time was contemplated by the parties, Further, the provision on
arbitration is the remedy by which the parties may resort to for disputes arising from the
agreements. While the two agreements have been terminated, the provision requiting
arbitration remains as a remedy to settle any dispute/controversy arising from the
agreements.
WHEREFORE, the instant petition is denied. The questioned decision of the trial court is
AFFIRMED.
CASE NO. 26

TUNA PROCESSING, INC.,  Vs. PHILIPPINE KINGFORD, INC.,

G.R. No. 185582. February 29, 2012

FACTS:
On 14 January 2003, Kanemitsu Yamaoka (hereinafter referred to as the “licensor”), co-
patentee of U.S. Patent No. 5,484,619, Philippine Letters Patent No. 31138, and
Indonesian Patent No. ID0003911 (collectively referred to as the “Yamaoka
Patent”),6 and five (5) Philippine tuna processors, namely, Angel Seafood Corporation,
East Asia Fish Co., Inc., Mommy Gina Tuna Resources, Santa Cruz Seafoods, Inc., and
respondent Kingford (collectively referred to as the “sponsors”/”licensees”) entered into a
Memorandum of Agreement (MOA), pertinent provisions of which read:
1. Background and objectives. The Licensor, co-owner of U.S.Patent No. 5,484,619,
Philippine Patent No. 31138, and Indonesian Patent No. ID0003911 xxx wishes to
form an alliance with Sponsors for purposes of enforcing his three aforementioned
patents, granting licenses under those patents, and collecting royalties.
2.
The Sponsors wish to be licensed under the aforementioned patents in order to practice
the processes claimed in those patents in the United States, the Philippines, and
Indonesia, enforce those patents and collect royalties in conjunction with Licensor.
Xxx
3. Establishment of Tuna Processors, Inc. The parties hereto agree to the
establishment of Tuna Processors, Inc. (“TPI”), a corporation established in the
State of California, in order to implement the objectives of this Agreement.
4.
5. Bank account. TPI shall open and maintain bank accounts in the United States,
which will be used exclusively to deposit funds that it will collect and to disburse
cash it will be obligated to spend in connection with the implementation of this
Agreement.
6.
7. Ownership of TPI. TPI shall be owned by the Sponsors and Licensor. Licensor
shall be assigned one share of TPI for the purpose of being elected as member of
the board of directors. The remaining shares of TPI shall be held by the Sponsors
according to their respective equity shares. 9
8.
Xxx
Due to a series of events not mentioned in the petition, the licensees, including
respondent Kingford, withdrew from petitioner TPI and correspondingly reneged on their
obligations. Petitioner submitted the dispute for arbitration before the International
Centre for Dispute Resolution in the State of California, United States and won the case
against respondent
To enforce the award, petitioner TPI filed on 10 October 2007 a Petition for
Confirmation, Recognition, and Enforcement of Foreign Arbitral Award before the RTC
of Makati City. The petition was raffled to Branch 150 presided by Judge Elmo M.
Alameda.
At Branch 150, respondent Kingford filed a Motion to Dismiss. After the court denied the
motion for lack of merit, respondent sought for the inhibition of Judge Alameda and
moved for the reconsideration of the order denying the motion. Judge Alameda inhibited
himself notwithstanding “[t]he unfounded allegations and unsubstantiated assertions in
the motion.”Judge Cedrick O. Ruiz of Branch 61, to which the case was re-raffled, in
turn, granted respondent’s Motion for Reconsideration and dismissed the petition on the
ground that the petitioner lacked legal capacity to sue in the Philippines.

ISSUE:
Whether or not the court a quo was correct in so dismissing the petition on the ground of
petitioner’s lack of legal capacity to sue.

HELD:
NO.
The Corporation Code of the Philippines expressly provides:
Sec. 133. Doing business without a license. – No foreign corporation transacting business
in the Philippines without a license, or its successors or assigns, shall be permitted to
maintain or intervene in any action, suit or proceeding in any court or administrative
agency of the Philippines; but such corporation may be sued or proceeded against before
Philippine courts or administrative tribunals on any valid cause of action recognized
under Philippine laws.
It is pursuant to the aforequoted provision that the trial court dismissed the petition.c
TPI admits that it does not have a license to do business in the Philippines.
The petitioner counters, however, that it is entitled to seek for the recognition and
enforcement of the subject foreign arbitral award in accordance with Republic Act No.
9285 (Alternative Dispute Resolution Act of 2004),
In several cases, this Court had the occasion to discuss the nature and applicability of
the Corporation Code of the Philippines, a general law, viz-a-viz other special laws. As
between a general and special law, the latter shall prevail—generalia specialibus non
derogant.
Following the same principle, the Alternative Dispute Resolution Act of 2004 shall apply
in this case as the Act, as its title –
(a) Sec. 45 of the Alternative Dispute Resolution Act of 2004provides that the
opposing party in an application for recognition and enforcement of the
arbitral award may raise only those grounds that were enumerated under
Article V of the New York Convention,
Clearly, not one of those exclusive grounds touched on the capacity to sue of the party
seeking the recognition and enforcement of the award.
Pertinent provisions of the Special Rules of Court on Alternative Dispute
Resolution, which was promulgated by the Supreme Court, likewise support this position.
Rule 13.1 of the Special Rules provides that “[a]ny party to a foreign arbitration may
petition the court to recognize and enforce a foreign arbitral award.” The contents of such
petition are enumerated in Rule 13.5.32 Capacity to sue is not included.
Indeed, it is in the best interest of justice that in the enforecement of a foreign arbitral
award, we deny availment by the losing party of the rule that bars foreign corporations
not licensed to do business in the Philippines from maintaining a suit in our courts. When
a party enters into a contract containing a foreign arbitration clause and, as in this case, in
fact submits itself to arbitration, it becomes bound by the contract, by the arbitration and
by the result of arbitration, conceding thereby the capacity of the other party to enter into
the contract, participate in the arbitration and cause the implementation of the result.
Clearly, on the matter of capacity to sue, a foreign arbitral award should be respected not
because it is favored over domestic laws and procedures, but because Republic Act No.
9285 has certainly erased any conflict of law question.
All considered, petitioner TPI, although a foreign corporation not licensed to do business
in the Philippines, is not, for that reason alone, precluded from filing the Petition for
Confirmation, Recognition, and Enforcement of Foreign Arbitral Award before a
Philippine court.
CASE NO. 27

MABUHAY HOLDINGS CORPORATION, VS. SEMBCORP LOGISTICS

LIMITED
G.R. No. 212734

FACTS:
Petitioner Mabuhay Holdings Corporation (Mabuhay) and Infrastructure Development &
Holdings, Inc. (IDHI) are corporations duly organized and existing under the Philippine
Laws.
Respondent Sembcorp Logistics Limited (Sembcorp), formerly known as Sembawang
Maritime Limited, is a company incorporated in the Republic of Singapore.
On January 23, 1996, Mabuhay and IDHI incorporated Water Jet Shipping Corporation
(WJSC) in the Philippines to engage in the venture of carrying passengers on a common
carriage by inter-island fast ferry. On February 5, 1996, they also incorporated Water Jet
Netherlands Antilles, N.Y. (WJNA) in Curasao, Netherlands.
On September 16, 1996, Mabuhay, IDHI, and Sembcorp entered into a Shareholders’
Agreement (Agreement) setting out the terms and conditions governing their relationship
in connection with a planned business expansion of WJSC and WJNA. Sembcorp
decided to invest in the said corporations. As a result of Sembcorp’s acquisition of shares,
Mabuhay and IDHI’s shareholding percentage in the said corporations were reduced,
Pursuant to Article 13 of the Agreement, Mabuhay and IDHI voluntarily agreed to jointly
guarantee that Sembcorp would receive a minimum accounting return of US$929,875.50
(Guaranteed Return) at the end of the 24 th month following the full disbursement of the
Sembcorp’s equity investment in WJNA and WJSC. They further agreed that the
Guaranteed Return shall be paid three (3) months from the completion of the special
audits of WJSC and WJNA as per Article 13.3 of the Agreement.
The Agreement included an arbitration clause, 
On December 6, 1996, Sembcorp effected full payment of its equity investment. Special
audits of WJNA and WJSC were then carried out and completed on January 8, 1999. Said
audits revealed that WJSC and WJNA both incurred losses.
On November 26, 1999, Sembcorp requested for the payment of its Guaranteed Return
from Mabuhay and IDID. Mabuhay admitted its liability but asserted that since the
obligation is joint, it is only liable for fifty percent (50%) of the claim or US$464,937.75.
On February 24, 2000, Sembcorp sent a Final Demand to Mabuhay to pay the Guaranteed
Return. Mabuhay requested for three (3) months to raise the necessary funds but still
failed to pay any amount after the lapse of the said period.
(1) On December 4, 2000, Sembcorp filed a Request for Arbitration before the
International Court of Arbitration of the International Chamber of Commerce
(ICC) in accordance with the Agreement
On April 20, 2004, a Final Award was rendered by Dr. Anan Chantara-Opakom (Dr.
Chantara-Opakorn), the Sole Arbitrator appointed by the ICC.
The Sole Arbitrator hereby decides that the Sole Arbitrator has jurisdiction over the
parties’ dispute and directs [Mabuhay] to make the payments to [Sembcorp]
Consequently, on April 14, 2005, Sembcorp filed a Petition for Recognition and
Enforcement of a Foreign Arbitral Award before the RTC ofMakati City, Branch 149.
Mabuhay argued that the dispute is an intra-corporate controversy, hence, excluded from
the scope of the arbitration clause in the Agreement. It alleged that on March 13, 1997,
Sembcorp became the controlling stockholder of IDHI by acquiring substantial shares of
stocks through its nominee, Mr. Pablo N. Sare (Sare). Mabuhay thus claimed that it has
already been released from the joint obligation with IDHI as Sembcorp assumed the risk
of loss when it acquired absolute ownership over the aforesaid shares. Moreover,
Mabuhay argued that the appointment of Dr. Chantara-Opakorn was not in accordance
with the arbitral clause as he did not have the expertise in the matter at issue, which
involved application of Philippine law. Finally, Mabuhay argued that the imposition of
twelve percent (12%) interest from the date of the Final Award was contrary to the
Philippine law and jurisprudence.
Ruling of the RTC the RTC dismissed the petition and ruled that the Final Award could
not be enforced.
Ruling of the CA the CA promulgated its Decision reversing and setting aside the RTC
Decision.

ISSUE:
whether the RTC correctly refused to enforce the Final Award.

HELD:
No.
Our jurisdiction adopts a policy in favor of arbitration.The ADR Act and the Special
ADR Rules both declare as a policy that the State shall encourage and actively promote
the use of alternative dispute resolution, such as arbitration, as an important means to
achieve speedy and impartial justice and declog court dockets.This pro-arbitration policy
is further evidenced by the rule on presumption in favor of enforcement of a foreign
arbitral award under the Special ADR Rules, viz:
The court shall recognize and enforce a foreign arbitral award unless a ground to refuse
recognition or enforcement of the foreign arbitral award under this rule is fully
established.
The decision of the court recognizing and enforcing a foreign arbitral award is
immediately executory.
After a careful review of the case, We find that Mabuhay failed to establish any of the
grounds for refusing enforcement and recognition of a foreign arbitral award under
Article V of the New York Convention and Section 36 of the Model Law which are also
incorporated in Article 4.36 Rule 6 of the IRR and Rule 13.45 of the Special ADR Rules.
The CA correctly applied the Kompetenz-Kompetenz principle expressly recognized
under Rule 2.2 of the Special ADR Rules, viz:
The Special ADR Rules recognize the principle of competence competence, which means
that the arbitral tribunal may initially rule on its own jurisdiction, including any
objections with respect to the existence or validity of the arbitration agreement or any
condition precedent to the filing of a request for arbitration.
The Special ADR Rules expounded on the implementation of the said principle:
Rule 2.4. Policy implementing competence-competence principle. The arbitral tribunal
shall be accorded the first opportunity or competence to rule on the issue of whether or
not it has the competence or jurisdiction to decide a dispute submitted to it for decision,
including any objection with respect to the existence or validity of the arbitration
agreement. When a court is asked to rule upon issue/s affecting the competence or
jurisdiction of an arbitral tribunal in a dispute brought before it, either before or after the
arbitral tribunal is constituted, the court must exercise judicial restraint and defer to the
competence or jurisdiction of the arbitral tribunal by allowing the arbitral tribunal the
first opportunity to rule upon such issues.
To recall, the Agreement provides that “(a)ny dispute, controversy or claim arising out of
or relating to this Agreement, or breach thereof, other than intra-corporate controversies,
shall be finally settled by arbitration…”
Among the issues settled in the Final Award is whether the dispute is an intra-corporate
controversy. Dr. Chantara-Opakom ruled in the negative.
Again, the Special ADR Rules specifically provides that in resolving the petition for
recognition and enforcement of a foreign arbitral award, the court shall not disturb the
arbitral tribunal’s determination of facts and/or interpretation of law.
On a final note, the Court implores the lower courts to apply the ADR Act and the
Special ADR Rules accordingly. Arbitration, as a mode of alternative dispute resolution,
is undeniably one of the viable solutions to the longstanding problem of clogged court
dockets. International arbitration, as the preferred mode of dispute resolution for foreign
companies, would also attract foreign investors to do business in the country that would
ultimately boost Our economy. In this light, We uphold the policies of the State favoring
arbitration and enforcement of arbitral awards, and have due regard to the said policies in
the interpretation of Our arbitration laws.
Case No. 28

FEDERAL EXPRESS CORPORATION and RHICKE S. JENNINGS,

petitioners, vs. AIRFREIGHT 2100, INC. and ALBERTO D. LINA, respondents.

G.R. No. 216600. November 21, 2016

FACTS:

FedEx is a foreign corporation doing business in the Philippines primarily engaged in

international air carriage, logistics and freight forwarding, while Jennings serves as its
Managing Director for the Philippines and Indonesia.

Respondent Airfreight 2100 (Air21) is a domestic corporation likewise involved in the

freight forwarding business, while Alberto Lina (Lina) is the Chairman of its Board of
Directors.

FedEx, having lost its International Freight Forwarder’s (IFF) license to engage in
international freight forwarding in the Philippines, executed various Global Service
Program (GSP) contracts with Air21, an independent contractor, to primarily undertake
its delivery and pickup services within the country

In the implementation of these contracts, however, several issues relating to money

remittance, value-added taxes, dynamic fuel charge, trucking costs, interests, and
penalties ensued between the parties.

In an effort to settle their commercial dispute, FedEx and Air21 agreed to submit
themselves to arbitration before the Philippine Dispute Resolution Center (PDRC)

As part of the arbitration proceedings, Jennings, John Lumley Holmes (Holmes), the
Managing Director of SPAC Legal of FedEx; and David John Ross (Ross), Senior Vice
President of Operations, Middle East, India and Africa, executed their respective
statements5 as witnesses for FedEx. Ross and Holmes deposed that Federal Express
Pacific, Inc., a subsidiary of FedEx, used to have an IFF license to engage in the business
of freight forwarding in the Philippines.

Feeling aggrieved by those statements, Lina for himself and on behalf of Air21, filed a
complaint for grave slander against Jennings

FedEx and Jennings (petitioners) filed their Petition for Issuance of a

Confidentiality/Protective Order with Application for Temporary Order of Protection
and/or Preliminary Injunction before the RTC alleging that all information and
documents obtained in, or related to, the arbitration proceedings were confidential

RTC ruled in the negative

CA affirmed RTC ruling. In its assailed decision, the CA explained that the declarations
by Jennings were not confidential as they were not at all related to the subject of
mediation as the arbitration proceedings revolved around the parties’ claims for sum of
money.

ISSUE:

Whether the testimony of Jennings given during the arbitration proceedings falls within
the ambit of confidential information and, therefore, covered by the mantle of a
confidentiality/protection order

HELD:

Yes. Section 3(h) of Republic Act (R. A.) No. 9285 or the Alternative Dispute
Resolution of 2004 (ADR Act) defines confidential information as follows:

“Confidential information” means any information, relative to the subject of mediation or

arbitration, expressly intended by the source not to be disclosed, or obtained under
circumstances that would create a reasonable expectation on behalf of the source that the
information shall not be disclosed. It shall include (1) communication, oral or written,
made in a dispute resolution proceedings, including any memoranda, notes or work
product of the neutral party or nonparty participant, as defined in this Act; (2) an oral or
written statement made or which occurs during mediation or for purposes of considering,
conducting, participating, initiating, continuing of reconvening mediation or retaining a
mediator; and (3) pleadings, motions manifestations, witness statements, reports filed or
submitted in an arbitration or for expert evaluation.

The said list is not exclusive and may include other information as long as they satisfy the
requirements of express confidentiality or implied confidentiality.

Plainly, Rule 10.1 of A.M. No. 07-11-08-SC or the Special Rules of Court on Alternative
Dispute Resolution (Special ADR Rules) allows “[a] party, counsel or witness who
disclosed or who was compelled to disclose information relative to the subject of ADR
under circumstances that would create a reasonable expectation, on behalf of the source,
that the information shall be kept confidential x x x the right to prevent such information
from being further disclosed without the express written consent of the source or the
party who made the disclosure.” Thus, the rules on confidentiality and protective orders
apply when:

1. An ADR proceeding is pending;

2. A party, counsel or witness disclosed information or was otherwise compelled

to disclose information

3. The disclosure was made under circumstances that would create a reasonable
expectation, on behalf of the source, that the information shall be kept confidential;

4. The source of the information or the party who made the disclosure has the right
to prevent such information from being disclosed;

5. The source of the information or the party who made the disclosure has not
given his express consent to any disclosure; and
 6. The applicant would be materially prejudiced by an unauthorized disclosure of
the information obtained, or to be obtained, during the ADR proceeding.

The witness statement of witnesses Ross, Holmes and Jennings, as well as the
latter’s oral testimony in the April 25, 2013 arbitration hearing, both fall under Section
3(h)[1] and [3] of the ADR Act which states that “communication, oral or written, made
in a dispute resolution proceedings, including any memoranda, notes or work product of
the neutral party or nonparty participant, as defined in this Act; and (3) pleadings,
motions, manifestations, witness statements, reports filed or submitted in an arbitration or
for expert valuation,” constitutes confidential information. Notably, both the parties and
the Arbitral Tribunal had agreed to the Terms of Reference (TOR) that “the arbitration
proceedings should be kept strictly confidential as provided in Section 23 of the ADR Act
and Article 25-A19 of the PDRCI Arbitration Rules (Arbitration Rules) and that they
should all be bound by such confidentiality requirements.”

The provisions of the ADR Act and the Arbitration Rules repeatedly employ the word
“shall” which, in statutory construction, is one of mandatory character in common
parlance and in ordinary signification. Thus, the general rule is that information disclosed
by a party or witness in an ADR proceeding is considered privileged and confidential.

In evaluating the merits of the petition, Rule 10.8 of the Special ADR Rules mandates
that courts should be guided by the principle that confidential information shall not be
subject to discovery and shall be inadmissible in any adversarial proceeding.

Article 5.42 of the Implementing Rules and Regulations (IRR) of the ADR Act likewise
echoes that arbitration proceedings, records, evidence and the arbitral award and other
confidential information are privileged and confidential and shall not be published except
[i] with the consent of the parties; or [ii] for the limited purpose of disclosing to the court
relevant documents where resort to the court is allowed. Given that the witness
statements of Ross

Holmes and Jennings, and the latter’s arbitration testimony, fall within the ambit of
confidential information, they must, as a general rule, remain confidential.
CASE NO. 29

DALE STRICKLAND, PETITIONER, VS. PUNONGBAYAN & ARAULLO,

RESPONDENT.

G.R. No. 193782, August 01, 2018

FACTS:

On March 26, 2002, National Home Mortgage Finance Corporation (NHMFC) and PA
entered into a Financial Advisory Services Agreement (FASA) for the liquidation of the
NHMFC's Unified Home Lending Program (UHLP). At the time of the engagement, PA
was the Philippine member of respondent global company, EYLLP. In the March 26,
2002 letter[9] of PA to NHMFC confirming their engagement as exclusive Financial
Advisor for the UHLP Project, PA is designated as P&A/Ernst & Young.

During this period, Strickland was a partner of EYLLP seconded to respondent Ernst &
Young Asia Pacific Financial Solutions (EYAPFS), who was listed in the FASA as
member of the Engagement Team

By June 6, 2002, EYLLP wrote PA of the termination of its membership in EYLLP.

Despite the termination, the working relationship among the parties continued.

In an exchange of letters, notice was given to NHMFC of PA's intention to remove

Strickland from the NHMFC Engagement Team as a result of Strickland's resignation
from EYLLP and/or EYAPFS effective on July 2, 2004. Responding to NHMFC's
concerns on the removal of Strickland from the UHLP Project and his replacement by
Mark Grinis (Grinis), EYAPFS' Managing Director, EYLLP reiterated Grinis'
qualifications and affirmed its team of professionals' dedication of "all the time necessary
to close this transaction and to make NHMFC [their team's, headed by Grinis,] first
priority.

Conflict on Strickland's actual participation and concurrent designation on the project

arose among PA, NHMFC, and Strickland as reflected in the proposed revisions to the
"Draft Financial Advisory Services" initially prepared by PA. Counsel for Strickland
wrote PA asking for "equitable compensation for professional services" rendered to
NHMFC on the UHLP Project from the time of his separation from EYLLP and/or
EYAPFS in July 2004.

On June 2, 2005, counsel for PA responded, categorically denying any contractual

relationship with Strickland and his assertion that he effectively substituted EYLLP
and/or EYAPFS for the portion of the work he carried out in the UHLP Project
[Strickland] filed a Complaint, dated May 17, 2005, which included [EYAPFS], [PA] and
NHMFC among the defendants

The trial court admitted the Amended Complaint in its Order, dated December 6, 2006.
Subsequently, it also issued an Order, dated January 2, 2007, denying [EYAPFS'] Motion
To Refer to Arbitration EYLLP and/or EYAPFS] sought reconsideration of the
aforequoted Order, which was also denied by the trial court, prompting it to file a Petition
for Certiorari before this Court

PA filed a motion for reconsideration which the RTC denied in its May 19, 2011 Order.
Thus, PA filed a petition for certiorari before the CA docketed as CA-G.R. SP No.
120897, alleging grave abuse of discretion in the RTC's Orders denying its motion to
suspend proceedings. The CA annulled March 11 and 19, 2011 orders.

ISSUE:

1) In G.R. No. 193782, whether the CA erred in referring the dispute between
Strickland and EYLLP to arbitration and ordering that EYLLP be dropped as
defendant in Civil Case No. 05-692.
2) Whether or not the dispute between Strickland and EYLLP based on Strickland’s
complaint is arbitrable.
3) Whether or not Strickland's causes of action against all the defendants are
intricately intertwined such that the separate causes of action against PA and the
other impleaded defendants cannot independently proceed from the arbitration
between Strickland and EYLLP.

HELD:

1) We are not persuaded. We do not find reversible error in the Decision of the CA in
CA G.R. SP No. 102805.

Section 7, Rule 8 of the Rules of Court provides:

Sec. 7. Action or defense based on document. Whenever an action or defense is based

upon a written instrument or document, the substance of such instrument or document
shall be set forth in the pleading, and the original or a copy thereof shall be attached to
the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said
copy may with like effect be set forth in the pleading.

In this case, EYLLP initially only quoted the provisiOn of the Partnership Agreement on
Dispute Resolution, including a section on Arbitration, in its answer[37] dated February
15, 2006. Eventually, it submitted a copy of the Partnership Agreement in a manifestation
dated March 15, 2006. Thus, we agree with the holding of the CA that EYLLP
substantially, and ultimately, complied with the provision given that Strickland himself
did, and does not even deny, the Partnership Agreement nor the arbitration clause.
In so ruling that the validity of the contract containing the arbitration agreement does not
affect the applicability of the arbitration clause itself, we then applied the doctrine of
separability, thus:
"The doctrine of separability, or severability as other writers call it, enunciates that
an arbitration agreement is independent of the main contract. The arbitration
agreement is to be treated as a separate agreement and the arbitration agreement
does not automatically terminate when the contract of which it is a part comes to
an end.
 The separability of the arbitration agreement is especially significant to the
determination of whether the invalidity of the main contract also nullifies the
arbitration clause. Indeed, the doctrine denotes that the invalidity of the main
contract, also referred to as the "container" contract, does not affect the validity of
the arbitration agreement. Irrespective of the fact that the main contract is invalid,
the arbitration clause/agreement stillenforceable."
Plainly, considering that the arbitration clause is in itself a contract, the setting forth of
arbitration, its provisions in EYLLP's answer and in its motion to refer to coupled with
the actual submission by EYLLP of the Partnership Agreement, complies with the
requirements of Section 7, Rule 8 of the Rules of Court which Strickland should have
denied.

Thus, we agree with the CA's ruling on the nature of the contract between Strickland and
EYLLP, and its application of our commercial arbitration laws to this case:

"[T]he International Law doctrine of presumed identity approach or processual

presumption comes into play. Where a foreign law is not pleaded, or, even if pleaded, is
not proved, the presumption is that foreign law is the same as ours."

In this jurisdiction, one of the laws governing arbitration is the [Alternative

Dispute Resolution (ADR)] Act. Under this statute, international commercial
arbitration shall be governed by the Model Law on International Commercial
Arbitration ("Model Law") adopted by the United Nations Commission on
International Trade Law. Meanwhile, domestic arbitration is governed by the
Arbitration Law as amended by the ADR Act. To determine the applicable law
here, the nature of the arbitration sought to be undertaken must be looked at. The
ADR Act defines domestic arbitration negatively by stating that it is one that is not
international as defined in the Model Law[]. In turn, Article 1 (3) of the Model
Law provides that an arbitration is international if: (a) the parties to an arbitration
agreement have, at the time of the conclusion of that agreement, their places of
business in different States; or (b) one of the following places is situated outside
the State in which the parties have their places of business: (i) the place of
arbitration if determined in, or pursuant to, the arbitration agreement; (ii) any place
where a substantial part of the obligations of the commercial relationship is to be
performed or the place with which the subject-matter of the dispute is most closely
connected; or (c) the parties have expressly agreed that the subject-matter of the
arbitration agreement relates to more than one country." x x x

It is obvious then that the arbitration sought in the instant case is international for
falling under Article 1(3)(b)(ii) quoted above. The place of business of EYLLP is in the
United States of America. x x x It is here [the Philippines] that the services for which
[Strickland] seeks remuneration were rendered.

For the Model Law to apply, however, the arbitration should also be commercial.
The explanatory footnote to Article 1(l) of the Model Law explains that "[t]he term
'commercial' should be given a wide interpretation so as to cover matters arising from all
relationships of a commercial nature, whether contractual or not." It also states that
relationships of a commercial nature include the following transactions among others:

"any trade transaction for the supply or exchange of goods or services; distribution
agreement; commercial representation or agency; factoring; leasing; construction
 of works; consulting; engineering; licensing; investment; financing; banking;
insurance; exploitation agreement or concession; joint venture and other forms of
industrial or business co-operation; carriage of goods or passengers by air, sea, rail
or road."

The meaning attached to the term "commercial" by the Model Law is broad
enough to cover a partnership. The Civil Code x x x defines a partnership as a contract
where "two or more persons bind themselves to contribute money, property, or industry
to a common fund, with the intention of dividing the profits among themselves." Hence,
considering that EYLLP and Strickland had a partnership relationship, which was not
changed during his assignment [to] Manila for the Project, the request for arbitration here
has a commercial character. The dispute between the said parties relates to Strickland's
and EYLLP's association with each other.

2)

YES. Plainly, considering that the arbitration clause is in itself a contract, the setting forth
of arbitration, its provisions in EYLLP's answer and in its motion to refer to coupled with
the actual submission by EYLLP of the Partnership Agreement, complies with the
requirements of Section 7, Rule 8 of the Rules of Court which Strickland should have
denied.

We have consistently affirmed that commercial relationships covered by our arbitration

laws are purely private and contractual in nature. Article 1306 of the Civil Code provides
for autonomy of contracts where the parties are free to stipulate on such terms and
conditions except for those which go against law, morals, and public policy.

In our jurisdiction, commercial arbitration is a purely private system of adjudication

facilitated by private citizens which we have consistently recognized as valid, binding,
and enforceable.

"[T]he International Law doctrine of presumed-identity approach or processual

presumption comes into play. Where a foreign law is not pleaded, or, even if
pleaded, is not proved, the presumption is that foreign law is the same as ours."
To determine the applicable law here, the nature of the arbitration sought to be
undertaken must be looked at. The ADR Act defines domestic arbitration negatively by
stating that it is one that is not international as defined in the Model Law[]. In turn,
Article 1 (3) of the Model Law provides that an arbitration is international if:
“the parties to an arbitration agreement have, at the time of the
(a) conclusion of that agreement, their places of business in different States; or
b) one of the following places is situated outside the State in which the parties
have their places of business:
(i) the place of arbitration if determined in, or pursuant to, the arbitration
agreement;
(ii) any place where a substantial part of the obligations of the commercial
relationship is to be performed or the place with which the subject-matter
of the dispute is most closely connected; or
(c) the parties have expressly agreed that the subject-matter of the arbitration
agreement relates to more than one country." x x x (Emphasis in the original;
citations omitted.)
It is obvious then that the arbitration sought in the instant case is international for
falling under Article 1(3)(b)(ii) quoted above. The place of business of EYLLP is in
the United States of America. x x x It is here [the Philippines] that the services
for which [Strickland] seeks remuneration were rendered.
The following factors further militate against Strickland's insistence on Philippine courts
to primarily adjudicate his claims of tortious conduct, and not commercial arbitration, as
stipulated in the Partnership Agreement:
1. From his complaint and amended complaint, Strickland's causes of action
against EYLLP and PA hinge primarily on contract, i.e., the Partnership Agreement,
and the resulting transactions and working relationship among the parties, where
Strickland seeks to be paid.
2. The Partnership Agreement is bolstered by the assignment letter of
EYLLP to Strickland confirming his assignment to Manila as partner and which
assignment letter contains a choice of law provision
3. The allegations in Strickland's complaint, specifically his narration of facts,
admit that the entire controversy stems from his working relationship with EYLLP as a
partner
3)
Strickland's allegations in both the complaint and amended complaint are undoubtedly
hinged, and unavoidably linked, to his former contractual relationship with EYLLP to
which the present controversy among all the parties can be traced:
(28)(23) It is likely that one of the reasons that P&A refused to compensate him
was because of the influence of [EYLLP]. It is believed that [EYLLP] sought to
punish Mr. Strickland by trying to prevent him from receiving compensation
despite [EYLLP's] deliberate and reckless abandonment of its contractual
responsibilities. NHMFC appears to have refused to compensate [Strickland]
because it was not contractually bound by the Agreement to compensate him,
although NHMFC believed it could oblige [Strickland] to complete the work
because of [his] designation as Project Manager.
(29)(24) [Strickland] is entitled to be compensated for his work. x x x
The designation in Strickland's amended complaint of "Additional Cause of Action
Against [respondent EYLLP]"[62] further demonstrates that the totality of his causes of
action are actually anchored on the disintegration of his working relationship with
EYLLP whom he faults for his failure to receive compensation from the other defendants.
In a hodge podge of allegations, Strickland, without being a party to the FASA between
NHMFC and PA/EYLLP, insists on the continuation of his suit contending that
his designation as "Lead Due Diligence Partner," forming part of the Engagement Team,
entitles him to equitable compensation. Thus, Strickland maintains that the proceedings
in Civil Case No. 05-692 should not have been suspended, and should then proceed
independently of the arbitration between Strickland and EYLLP.
We do not agree. We do not find the designation of Strickland in the Engagement Team
of the FASA as a stipulation pour atrui.
The following circumstances underscore the high probability of an expeditious
resolution of the conflict with the referral to arbitration of the dispute between EYLLP
and Strickland and the succeeding suspension of the proceedings before the RTC in
Civil Case No. 05-692:
 1. As previously stated, these cases comprise of a foreign element, involving
foreign parties and international transactions. While the parties have not questioned the
jurisdiction of our courts, the RTC may still refuse to assume jurisdiction.
2. As previously discussed, the causes of action cited by Strickland in his
complaint (and amended complaint) all undoubtedly relate to his Partnership
Agreement with EYLLP which is subject to arbitration. This very same Partnership
Agreement is even reiterated in the November 15, 2002 Assignment Letter assigning
Strickland to Manila.
3. Strickland himself admits that as Partner of EYLLP, he was assigned to various
parts of Asia. He has also not denied that he was seconded to EYAPFS because of certain
tax consequences of his different assignments. In fact, in his additional cause of action
against EYLLP, Strickland alleged, among others, that EYLLP did not pay his correct
taxes making him liable for these. Evidently, the real dispute between Strickland and
EYLLP falls within its Partnership Agreement involving its own choice of law
provision
CASE NO. 30

CARGILL PHILIPPINES, INC., petitioner, vs. SAN FERNANDO REGALA

TRADING, INC., respondent.
G.R. No. 175404. January 31, 2011

FACTS:

San Fernando Regala Trading, Inc. filed with the Regional Trial Court (RTC) of Makati
City a Complaint for Rescission of Contract with Damages3 against petitioner Cargill
Philippines, Inc. In its Complaint, respondent alleged that it was engaged in buying and
selling of molasses and petitioner was one of its various sources from whom it purchased
molasses. Respondent alleged that it entered into a contract dated July 11, 1996 with
petitioner, wherein it was agreed upon that respondent would purchase from petitioner
12,000 metric tons of Thailand origin cane blackstrap molasses at the price of US$192
per metric ton; that the delivery of the molasses was to be made in January/February
1997 and payment was to be made by means of an Irrevocable Letter of Credit payable at
sight, to be opened by September 15, 1996; that sometime prior to September 15, 1996,
the parties agreed that instead of January/February 1997, the delivery would be made in
April/May 1997 and that payment would be by an Irrevocable Letter of Credit payable at
sight, to be opened upon petitioner’s advice. Petitioner, as seller, failed to comply with its
obligations under the contract, despite demands from respondent, thus, the latter prayed
for rescission of the contract and payment of damages.

Petitioner filed a Motion to Dismiss/Suspend Proceedings and To Refer Controversy to

Voluntary Arbitration, wherein it argued that the alleged contract between the parties.

The RTC found that the arbitration clause in question contravened these procedures, i.e.,
the arbitration clause contemplated an arbitration proceeding.

Petitioner filed its Motion for Reconsideration, which the RTC denied in an Order. CA
rendered its assailed Decision denying the petition and affirming the RTC Orders.

ISSUE:

Whether the CA erred in finding that this case cannot be brought under the arbitration
law for the purpose of suspending the proceedings in the RTC.

HELD:

There is merit in the petition. Arbitration, as an alternative mode of settling disputes, has
long been recognized and accepted in our jurisdiction. R.A. No. 876 authorizes
arbitration of domestic disputes. Foreign arbitration, as a system of settling commercial
disputes of an international character, is likewise recognized. The enactment of R.A.
No.9285 on April 2, 2004 further institutionalized the use of alternative dispute resolution
systems, including arbitration, in the settlement of disputes.
A contract is required for arbitration to take place and to be binding. Submission to
arbitration is a contract and a clause in a contract providing that all matters in dispute
between the parties shall be referred to arbitration is a contract. The provision to submit
to arbitration any dispute arising therefrom and the relationship of the parties is part of
the contract and is itself a contract.

The validity of the contract containing the agreement to submit to arbitration does not
affect the applicability of the arbitration clause itself. A contrary ruling would suggest
that a party's mere repudiation of the main contract is sufficient to avoid arbitration. That
is exactly the situation that the separability doctrine, as well as jurisprudence applying it,
seeks to avoid.
CASE NO. 31

ABOITIZ TRANSPORT SYSTEM CORPORATION and ABOITIZ SHIPPING

CORPORATION, petitioners, vs. CARLOS A. GOTHONG LINES, INC. and
VICTOR S.CHIONGBIAN, respondents.

G.R. No. 198226. July 18, 2014.

ABOITIZ TRANSPORT SYSTEM CORPORATION, petitioner, vs. CARLOS A.

GOTHONG LINES, INC. and VICTOR S. CHIONGBIAN, respondents.

G.R. No. 198228. July 18, 2014.*

FACTS:

ASC, CAGLI, and William Lines, Inc. (WLI), principally owned by the Aboitiz,
Gothong, and Chiongbian families, respectively, entered into an Agreement dated
January 8, 1996, which was signed by Jon Ramon Aboitiz for ASC, Benjamin D.
Gothong (Gothong) for CAGLI, and respondent Chiongbian for WLI. In the said
Agreement, ASC and CAGLI agreed to transfer their shipping assets to WLI in exchange
for the latter’s shares of capital stock. The parties likewise agreed that WLI would run the
merged shipping business and be renamed “WG&A, Inc.” Pertinently, Section 11.06 of
the Agreement provides that all disputes arising out of or in connection with the
Agreement shall be finally settled by arbitration in accordance with Republic Act No.
(RA) 876, otherwise known as “The Arbitration Law,” and that each of the parties shall
appoint one arbitrator, and the three arbitrators would then appoint the fourth arbitrator
who shall act as Chairman.

Among the attachments to the Agreement was a letter dated January 8, 1996 written by
respondent Chiongbian and addressed to Gothong, stating that WLI committed to acquire
from CAGLI's inventory certain spare parts and materials not exceeding P400 Million. In
this relation, a valuation of CAGLI's inventory was conducted wherein it was shown that
the same amounted to P514 Million. Thereafter, WLI received inventory valued at
P558.89 Million, but only paid CAGLI the amount of P400 Million as agreed upon in the
Agreement. Dissatisfied, CAGLI sent to WLI various letters in 2001, demanding that the
latter pay or return the inventory that it received in excess of P400 Million.

Sometime in 2002, the Chiongbian and Gothong families decided to sell their respective
interests in WLI/WG&A to the Aboitiz family. This resulted in the execution of a Share
Purchase Agreement whereby Aboitiz Equity Ventures (AEV) agreed to purchase and
acquire the WLI/WG&A shares of the Chiongbian and Gothong families. Thereafter, the
corporate name of WLI/WG&A was changed to ATSC.

Six (6) years later, or in 2008, CAGLI sent a letter dated February 14, 2008 to ATSC
demanding that the latter pay the excess inventory it delivered to WLI amounting to
P158,399,700.00. CAGLI likewise demanded AEV and respondent Chiongbian that they
refer their dispute to arbitration. In response, AEV countered that the excess inventory
had already been returned to CAGLI and that it should not be included in the dispute,
considering that it is an entity separate and distinct from ATSC. Thus, CAGLI was
constrained to file a complaint before the RTC against Chiongbian, ATSC, ASC, and
AEV to compel them to submit to arbitration.
The RTC issued an Order dated July 6, 2011, denying ATSC's Motion for
Reconsideration/To Exclude, holding that the issue raised in the said motion has been
rendered moot and academic in view of the confirmation of CAGLI's notice of dismissal.

ISSUE:

1. Whether or not the RTC was correct in confirming CAGLI’s notice of dismissal
and, consequently, dismissing the case without prejudice;
2. Whether or not respondent Chiongbian should be excluded from the arbitration
proceedings.

HELD:

1. It was an error on the part of the RTC to have confirmed the notice of dismissal and to
have dismissed the complaint without prejudice.

At the outset, the Court notes that the nature of the complaint filed by CAGLI before the
RTC is for the enforcement of an arbitration agreement, governed by Section 6 of RA
876, viz.:

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.

In the case of Gonzales v. Climax Mining, Ltd. (Gonzales), the Court had instructed that
the special proceeding under the above-quoted provision is the procedural mechanism for
the enforcement of the contract to arbitrate. RA 876 explicitly confines the court's
authority only to pass upon the issue of whether there is or there is no agreement in
writing providing for arbitration. If there is such agreement, the court shall issue an order
summarily directing the parties to proceed with the arbitration in accordance with the
terms thereof; otherwise, the proceeding shall be dismissed. To stress, such proceeding is
merely a summary remedy to enforce the agreement to arbitrate and the duty of the court
is not to resolve the merits of the parties' claims but only to determine if they should
proceed to arbitration or not.

In the present case, the records show that the primary relief sought for in CAGLI's
complaint, i.e., to compel the parties to submit to arbitration, had already been granted by
the RTC through its Order dated February 26, 2010. Undeniably, such Order partakes of a
judgment on the merits of the complaint for the enforcement of the arbitration agreement.

At this point, although no responsive pleading had been filed by ATSC, it is the rules on
appeal, or other proceedings after rendition of a judgment or final order no longer those
on notice of dismissal that come into play. Verily, upon the rendition of a judgment or
final order, the period "before service of the answer or of a motion for summary
judgment," mentioned in Section 1 of Rule 17 of the Rules of Court when a notice of
dismissal may be filed by the plaintiff, no longer applies. As a consequence, a notice of
dismissal filed by the plaintiff at such judgment stage should no longer be entertained or
confirmed.

2. Section 2 of RA 876 specifies who may be subjected to arbitration, to wit:

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

In Gonzales, the Court explained that "[d]isputes do not go to arbitration unless and until
the parties have agreed to abide by the arbitrator's decision. Necessarily, a contract is
required for arbitration to take place and to be binding.” Furthermore, in Del Monte
Corporation USA v. Court of Appeals, the Court stated that "[t]he provision to submit to
arbitration any dispute arising therefrom and the relationship of the parties is part of that
contract. As a rule, contracts are respected as the law between the contracting parties and
produce effect as between them, their assigns and heirs." Succinctly put, only those
parties who have agreed to submit a controversy to arbitration who, as against each other,
may be compelled to submit to arbitration.

The three parties to the Agreement and necessarily to the arbitration agreement embodied
therein are: (a) ASC, (b) CAGLI, and (c) WLI/WG&A/ATSC. Contracts, like the subject
arbitration agreement, take effect only between the parties, their assigns and
heirs. Respondent Chiongbian, having merely physically signed the Agreement as a
representative of WLI, is not a party thereto and to the arbitration agreement contained
therein. Neither is he an assignee or an heir of any of the parties to the arbitration
agreement. Hence, respondent Chiongbian cannot be included in the arbitration
proceedings.
CASE NO. 33

HOME BANKERS SAVINGS AND TRUST COMPANY vs. CA

GR No. 115412 November 19, 1999

FACTS:
Victor Tancuan, issued a Home Bankers Savings and Trust Company (HBSTC) check for
25.250 million pesos while Eugene Arriesgado issued three Far East Bank and Trust
Company (FEBTC) checks for 25.200 million pesos. Tancuan and Arriesgado exchanged
each other’s checks and deposited them with their respective banks for collection. When
FEBTC presented Tancuan’s HBSTC check for clearing, HBSTC dishonored it for being
drawn against insufficient funds. On October 15, 1991 HBSTC sent Arriesgado’s three
FEBTC checks through the Philippine Clearing House Corporation to FEBTC but was
returned on October 18, 1991 for being drawn against insufficient funds. HBSTC
received the notice of dishonor but refused to accept the checks so it returned them to
FEBTC for the reason of being beyond reglementary period implying that HBSTC
already treated the three checks as cleared and allowed the proceeds thereof to be
withdrawn. FEBTC demanded reimbursement for the returned checks and inquired from
HBTSC whether it had permitted any withdrawal of funds against the unfunded checks
and if so, on what day. HBSTC, however, refused to make any reimbursement and to
provide FEBTC with the needed information. Thus, on December 12, 1991 FEBTC
submitted the dispute for arbitration before the PCHC Arbitration Committee. While the
arbitration proceeding was still pending, FEBTC filed an action for sum of money and
damages. HBSTC interposed the dismissal of the case on the ground that the case states
no cause of action as it seeks to enforce an arbitral award which does not exist yet. RTC
denied the motion to dismiss. On December 16, 1992, HBSTC filed a petition for
certiorari with the Court of Appeals. The Court of Appeals dismissed the petition for lack
of merit. Hence, this petition.

ISSUE:
Whether or not FEBTC may subsequently file a separate case in court over the same
subject matter of arbitration despite the pendency of that arbitration

HELD:
NO. Section 14 of Republic Act 876, otherwise known as the Arbitration Law, allows
any party to the arbitration proceeding to petition the court to take measures to safeguard
and/or conserve any matter which is the subject of the dispute in arbitration, thus:

“Section 14. xxx The arbitrator shall have the power at any time, before rendering the
award, without prejudice to the rights of any party to petition the court to take
measures and/or conserve any matter which is the subject of the dispute in
arbitration.”
Section 14 simply grants an arbitrator the power to issue subpoena and subpoena duces
tecum at any time before rendering the award. The exercise of such power is without
prejudice to the right of a party to file a petition in court to safeguard any matter which is
the subject of the dispute in arbitration. In the case at bar, FEBTC filed an action for a
sum of money with prayer for a writ of preliminary attachment. Undoubtedly, such action
involved the same subject matter as that in arbitration. However, the civil action was not
a simple case of money claim since FEBTC has included a prayer for a writ of
preliminary attachment, which is sanctioned by Section 14 of the Arbitration Law.
Hence, participants in the regional clearing operations of the Philippine Clearing House
Corporation cannot bypass the arbitration process laid out by the body and seek relief
directly from the courts. In the case at bar, FEBTC has initiated arbitration proceedings as
required by the PCHC rules and regulation, and pending arbitration has sought relief from
the trial court for measures to safeguard and/or conserve the subject of the dispute under
arbitration, as sanctioned by Section 14 of the Arbitration Law, and otherwise not shown
to be contrary to the PCHC rules and regulations. It must be emphasized that arbitration,
as an alternative method of dispute resolution, is encouraged by the Supreme Court.
Aside from unclogging judicial dockets, it also hastens solutions especially of
commercial disputes. The Court looks with favor upon such amicable arrangement and
will only interfere with great reluctance to anticipate or nullify the action of the arbitrator.
CASE 34 A.

DFA vs. BCA International Corporation & Ad Hoc Arbitral Tribunal

GR No. 225051 July 19, 2017

FACTS:
In an Amended Built-Operate-Transfer Agreement dated April 5, 2002 DFA awarded the
Machine Readable Passport and Visa Project to BCA International Corporation. In the
course of implementing the MRP/V Project, conflict arose and DFA sought to terminate
the agreement. BCA International opposed the termination and filed a Request for
Arbitration on April 20, 2006. The Arbitral Tribunal was constituted on June 29, 2009. In
its Statement of Claims, BCA sought the following reliefs: (a) a judgment nullifying and
setting aside the Notice of Termination of the DFA; (b) a judgment confirming the Notice
of Default issued by BCA to the DFA and ordering DFA to perform its obligation under
the Amended BOT Agreement; (c) ordering DFA to pay damages to BCA estimated at
100 million pesos representing lost business opportunities and (d) other equitable relief.
On October 5, 2013 BCA manifested that it shall file an Amended Statement of Claims.
DFA opposed. However, the tribunal gave BCA a period of time within which to file. In
the Amended Statement of Claims, BCA interposed the alternative relief that, in the event
specific performance by DFA was no longer possible, BCA prayed that the Tribunal
order DFA to pay 1.6 billion pesos representing the net income BCA is expected and
other damages. DFA opposed alleging due process and that the Tribunal has no
jurisdiction over alternative reliefs sought by BCA.

On August 6, 2014 BCA filed a Motion to Withdraw Amended Statement of Claims.

However, on May 4, 2015, BCA filed anew a Motion to Admit Attached Statement of
Claims increasing the actual damages sought to 390 million pesos. DFA opposed. In
Procedural Order No. 11, the Arbitral Tribunal granted BCA’s Amended Statement of
Claims on the premise that it would no longer present any additional evidence-in-chief.
BCA filed a motion for partial reconsideration of Procedural Order No. 11 and prayed for
the admission of its Amended Statement of Claims without denying its right to present
evidence on the actual damages. Thereafter, the tribunal issued Procedural Order No. 12
resolving BCA’s motion disallowing it to prove the increase of its claim as a limitation to
the tribunal’s decision. The tribunal allowed the amendment of the Statement of Claims
conform to the evidence that has already been presented. DFA then filed this petition for
certiorari under Rule 65 of the Rules of Court with application for issuance of a
temporary restraining order and/or writ of preliminary injunction seeking to annul
Procedural Order nos. 11 and 12.

ISSUES:
1. Whether or not the UNCITRAL Arbitration Rules govern the arbitration
proceedings;
2. Whether or not the petition filed before the Court is proper

HELD:
1. No. Under Article 33 of the UNCITRAL Arbitration Rules governing the
parties, “the arbitral tribunal shall apply the law designated by the parties as
 applicable to the substance of the dispute.” “Failing such designation by the
parties, the arbitral tribunal shall apply the law determined by the conflict of
laws rules which it considers applicable.” Established in this jurisdiction is the
rule that the law of the place where the contract is made governs or lex loci
contractus. As the parties did not designate the applicable law and the Agreement
was perfected in the Philippines, our arbitration laws, particularly RA 876, RA
9285 and its IRR and the special ADR rules apply. The IRR of RA 9285 provides
that the arbitral tribunal shall decide the dispute in accordance with such law as is
chosen by the parties. In the absence of such agreement, Philippine law shall
apply. In DFA vs. BCA International Corporation, GR 210858, the Supreme Court
held that while enacted only in 2004, RA 9285 was made to apply in this case as it
applies to pending arbitration proceedings since it is a procedural law, which has
retroactive effect.
2. NO. Court intervention in the Special ADR Rules is allowed through these
remedies: (1) Specific Court Relief, which includes Judicial Relief involving the
issue of existence, validity and enforceability of the arbitral agreement, interim
measures of protection, challenge to the appointment of arbitrator, termination of
mandate of arbitrator, assistance in taking evidence, confidentiality/protective
orders, confirmation, correction or vacation award in domestic arbitration, all to be
filed with the RTC; (2) a motion for reconsideration may be filed by a party with
the RTC on the grounds specified in rules 19.1; (3) an appeal to the Court of
Appeals through a petition for review under Rule 19.26; and (4) a petition for
certiorari with the Supreme Court from a judgment or final order or resolution
of the court of appeals, raising only questions of law.

It is clear that an appeal by certiorari to the Supreme Court is from a judgment or

final order or resolution of the Court of Appeals and only questions of law may be
raised. There have been instances when the Supreme Court overlooked the rule on
hierarchy of courts and took cognizance of a petition for certiorari alleging abuse
of discretion by the RTC when it granted interim relief to a party and issued an
Order assailed by DFA, considering the transcendental importance of the issue
involved therein or to better serve the ends of justice when the case is determined
on the merits rather on technicality. However, in this case, the appeal by Certiorari
is not from a final order of the Court of Appeals or the RTC but from an
interlocutory order of the Arbitral Tribunal; hence the petition must be dismissed.
CASE NO 34B.

DFA vs. BCA INTERNATIONAL

GR NO. 210858 JUNE 29, 2016

FACTS:
This Petition for Review on Certiorari assails the Resolution dated September 2, 2013
and the Orders3 dated October 11, 2013 and January 8, 2014 of Branch 146 of the
Regional Trial Court of Makati City. The assailed judgments allowed the issuance of a
subpoena duces tecum and subpoena ad testificandum to compel the officers of the
Department of Foreign Affairs to testify and present documents to the Ad Hoc Arbitral
Tribunal, which was constituted to resolve the issues between the parties. On September
29, 2000, the Department of Foreign Affairs issued a Notice of Award to BCA
International Corporation to undertake its Machine Readable Passport and Visa Project
(Project). In compliance with the Notice of Award, BCA International Corporation
incorporated Philippine Passport Corporation to implement the Project. On February 8,
2001, the Department of Foreign Affairs and Philippine Passport Corporation entered into
a Build-Operate-Transfer Agreement. However, DOJ Opinion No. 10 dated March 4,
2002 stated that Philippine Passport Corporation had no personality to enter into the BOT
agreement hence, the DFA and BCA International entered into an amended BOT
agreement to replace BCA International Corporation as the party to the Agreement.
During the implementation of the Project, the DFA sought to terminate the agreement
prompting to request for arbitration before the Philippine Dispute Resolution Center
invoking Section 19.02 of the agreement, to wit:

Section 19.02. Failure to Settle Amicably.—If the Dispute cannot be settled amicably
within ninety (90) days by mutual discussion as contemplated under Section 19.01 herein,
the Dispute shall be settled with finality by an arbitrage tribunal operating under
International Law, hereinafter referred to as the “Tribunal,” under the UNCITRAL
Arbitration Rules contained in Resolution 31/98 adopted by the United Nations General
Assembly on December15, 1976, and entitled “Arbitration Rules on the United Nations
Commission on the International Trade Law.” The DFA and the BCA undertake to abide
by and implement the arbitration award. The place of arbitration shall be Pasay City,
Philippines, or such other place as may mutually be agreed upon by both parties. The
arbitration proceeding shall be conducted in the English language. One June 29, 2009, the
Ad Hoc Tribunal was constituted to resolve the dispute. On April 15, 2013, the ad hoc
tribunal granted BCA’s motion to apply for a subpoena to compel allegedly hostile
witnesses. On May 15, 2013, BCA International Corporation filed before Branch 146 of
the Regional Trial Court of Makati City a Petition18 under Article 5.27(a) of the
Implementing Rules and Regulations of Republic Act No. 9285. The Petition sought the
issuance of a subpoena ad testificandum and a subpoena duces tecum to certain officials
of the DFA. The RTC granted the petition pursuant to Rule 9.8 of the Special Rules of
Court on Alternative dispute. It ruled that the information sought to be produced was no
longer protected by the deliberative process privilege. Hence, this petition.

ISSUE:
(1) Whether or not the 1976 UNCITRAL Arbitration Rules and the Rules of Court
apply to the present arbitration proceedings.
 (2) Whether or not the witnesses presented during the hearing before the ad hoc
tribunal are prohibited from disclosing information on the basis of the deliberative
process privilege

HELD:

1. NO. Arbitration is deemed a special proceeding13 and governed by the special

provisions of RA 9285, its IRR, and the Special ADR Rules. RA 9285 is the
general law applicable to all matters and controversies to be resolved through
alternative dispute resolution methods. While enacted only in 2004, we held that
RA 9285 applies to pending arbitration proceedings since it is a procedural law,
which has retroactive effect. The IRR of RA 9285 reiterate that RA 9285 is
procedural in character and applicable to all pending arbitration proceedings.
Consistent with Article 2046 of the Civil Code, the Special ADR Rules were
formulated and were also applied to all pending arbitration proceedings covered by
RA 9285, provided no vested rights are impaired. Thus, contrary to DFA’s
contention, RA 9285, its IRR and the Special ADR Rules are applicable to the
present arbitration proceeding. The arbitration between the DFA and BCA is still
pending, since no arbitral award has yet been rendered. Moreover, DFA did not
allege any vested rights impaired by the application of those procedural rules. RA
9285, its IRR, and the Special ADR Rules provide that any party to an arbitration,
whether domestic or foreign, may request the court to provide assistance in taking
evidence such as the issuance of subpoena ad testificandum and subpoena duces
tecum. The Special ADR Rules specifically provide that they shall apply to
assistance in taking evidence, and the RTC order granting assistance in taking
evidence shall be immediately executory and not subject to reconsideration or
appeal. An appeal with the Court of Appeals (CA) is only possible where the RTC
denied a petition for assistance in taking evidence. An appeal to the Supreme
Court from the CA is allowed only under any of the grounds specified in the
Special ADR Rules. The Supreme Court therefore rules that the DFA failed to
follow the procedure and the hierarchy of courts provided in RA 9285, its IRR,
and the Special ADR Rules, when DRA directly appealed to the Supreme Court
the RCT Resolution and orders granting assistance in taking evidence.
2. NO. The deliberative process privilege can also be invoked in arbitration
proceedings under RA No. 9285. “Deliberative process privilege contains three (3)
policy bases: first, the privilege protects candid discussions within an agency;
second, it prevents public confusion from premature disclosure of agency opinions
before the agency establishes final policy; and third, it protects the integrity of an
agency’s decision; the public should not judge officials based on information they
considered prior to issuing their final decisions.” Stated differently, the privilege
serves “to assure that subordinates within an agency will feel free to provide the
decision[-]maker with their uninhibited opinions and recommendations without
fear of later being subject to public ridicule or criticism; to protect against
premature disclosure of proposed policies before they have been finally
formulated or adopted; and to protect against confusing the issues and misleading
the public by dissemination of documents suggesting reasons and rationales for a
course of action which were not in fact the ultimate reasons for the agency’s
action.” DFA did not waive the privilege in arbitration proceedings under the
Agreement. The agreement does not provide for the waiver of the deliberative
process privilege by DFA. Section 20.03 of the agreement merely allows a
party, if it chooses, without the consent of the other party, to disclose to the
tribunal privileged information in such disclosing party’s possession. In short,
a party can disclose privilege information in its possession, even without the
consent of the other party, if the disclosure is to a tribunal. However, a party
cannot be compelled by the other party to disclose privileged information to
the tribunal, where such privileged information is in its possession and not in
the possession of the party seeking the compulsory disclosure. Nothing in
Section 20.03 mandates compulsory disclosure of privileged information. Section
20.03 merely states that “the restrictions imposed in Section 20.02,”referring to the
“consent other party,” shall not apply to a disclosure of privilege information by a
party in possession of a privileged information. This is completely different from
compelling a party to disclose privileged information in its possession against its
own will. As a qualified privilege, the burden falls upon the government agency
asserting the deliberative process privilege to prove that the information in
question satisfies both requirements — predecisional and deliberative. “The
agency bears the burden of establishing the character of the decision, the
deliberative process involved, and the role played by the documents in the course
of that process.” It may be overcome upon a showing that the discoverant’s
interests in disclosure of the materials outweigh the government’s interests in their
confidentiality. “The determination of need must be made flexibly on a case-by-
case, ad hoc basis,” and the “factors relevant to this balancing include: the
relevance of the evidence, whether there is reason to believe the documents may
shed light on government misconduct, whether the information sought is available
from other sources and can be obtained without compromising the government’s
deliberative processes, and the importance of the material to the discoverant’s
case.”

In this case, the parties are directed to specify their claims before the RTC and
thereafter, the RTC shall determine which evidence is covered by the deliberative
process privilege, if there is any, based on the standards provided in this decision.
It is necessary to consider the circumstances surrounding the demand for the
evidence to determine whether or not its production is injurious to the consultative
functions of government that the privilege of nondisclosure protects.
CASE NO. 35.

TRANSFIELD PHILIPPINES vs. LUZON HYDRO CORPORATION

GR NO. 146717 November 22, 2004

FACTS:
On March 26, 1997, Transfield and Luzon Hydro entered into a Turnkey Contract
whereby Transfield as Turnkey contractor, undertook to construct, on a turnkey basis, a
seventy-megawatt hydro-electric power station at the Bakun River in Benguet and Ilocos
Sur. Transfield was given the sole responsibility for the design, construction,
commissioning, testing and completion of the project. To secure performance of
Transfield’s obligation on or before the target completion date (June 1, 2000), it opened
in favor of Luzon two standby letters of credit with the local branch of Australia and New
Zealand Banking Group Limited and with Security Bank. In the course of the
construction project, Transfield sought various extensions of time to complete the project
allegedly due to several factors. However, Luzon denied such requests. This gave rise to
actions for a request for arbitration before the Construction Industry Arbitration
Commission and International Chamber of Commerce. In both proceedings, the common
issues presented where: (1) whether typhoon Zeb and any of its associated events
constituted force majure to justify the extension of time sought by Transfield; and (2)
whether Luzon had the right to terminate the Turnkey Contract. Asserting that Luzon had
no right to call on the Security Banks, Transfield warned tem that any transfer, release or
disposition of the Securities in favor of Luzon would constrain it to hold the banks liable
for liquidated damages. As anticipated, Luzon sent notice to the banks pursuant to the
Turnkey Contract and declared Transfield in default in the performance of its obligation
prompting Luzon to demand payment for each day of delay and served notice on the
banks that it would call on the securities for the payment of liquidated damages for the
delay. Transfield filed a complaint for injunction with prayer for temporary restraining
order and writ of preliminary injunction. RTC denied the application for writ of
preliminary injunction as it had no legal right and suffered no irreparable injury
employing the principle of independent contract in letters of credit, the trial court ruled
that Luzon should be allowed to draw on the securities for liquidated damages. Court of
Appeals affirmed. Hence, this petition.

ISSUE:
Whether or not the dispute must be first resolved by the parties whether through
negotiations or arbitration before the beneficiary is entitled to call on the letter of
credit

HELD:
NO. Jurisprudence has laid down a clear distinction between a letter of credit and a
guarantee in that the settlement of a dispute between the parties is not a prerequisite for
the release of funds under the letter of credit. In other words, the argument of Transfield’s
argument that any dispute must first be resolved by the parties, whether through
negotiations or arbitration before the beneficiary is entitled to call on the letter of credit in
essence would convert the letter of credit into a mere guarantee is incompatible with the
very nature of a letter of credit. If a letter of credit is drawable only after settlement of the
dispute on the contract entered into by the applicant and the beneficiary, there would be
no practical and beneficial use for letters of credit in commercial transactions. While it is
the bank which is bound to honor the credit, it is the beneficiary who has the right to ask
the bank to honor the credit by allowing him to draw thereon. The situation itself
emasculates petitioner’s posture that LHC cannot invoke the independence principle and
highlights its puerility, more so in this case where the banks concerned were impleaded
as parties by petitioner itself. Respondent banks had squarely raised the independence
principle to justify their releases of the amounts due under the Securities. Owing to the
nature and purpose of the standby letters of credit, this Court rules that the Security banks
were left with little or no alternative but to honor the credit and both of them in fact
submitted that it was “ministerial” for them to honor the call for payment.
CASE NO. 36

DEPARTMENT OF FOREIGN AFFAIRS (DFA) VS. BCA INTERNATIONAL

CORPORATION & AD HOC ARBITRAL TRIBUNAL
G.R. No. 225051 July 19, 2017

FACTS:
Department of Foreign Affairs (DFA) awarded the Machine Readable Passport and Visa
Project (MRPV Project) to BCA International Corporation (BCA) thru an Amended
Build-Operate-Transfer Agreement which states that:
“Section 19.02. Failure to Settle Amicably – If the Dispute cannot be settled
amicably within ninety (90) days by mutual discussion as contemplated xxx
herein, the Dispute shall be settled with finality by an arbitrage tribunal operating
under International Law xxx under the UNCITRAL Arbitration Rules contained in
Resolution 31/98 adopted by the United Nations General Assembly on December
15, 1976 xxx. The DFA and the BCA undertake to abide by and implement the
arbitration award. The place of arbitration shall be Pasay City, Philippines, or such
other place as may be mutually agreed upon by both parties. The arbitration
proceeding shall be conducted in the English language”
However, during the implementation of the MRPV Project, DFA sought to
terminate the Agreement. This was opposed by BCA and filed a Request for Arbitration
according to the above provision. An ad hoc tribunal was constituted.
BCA filed with RTC a Petition for Assistance in Taking Evidence pursuant to the
Implementing Rules and Regulations (IRR) of “The Alternative Dispute Resolution Act
of 2004” or RA 9285, seeking the issuance of subpoena ad testificandum and subpoena
duces tecum against DFA. DFA filed its comment alleging that the subpoena ad
testificandum and subpoena duces tecum being sought by BCA is prohibited by law as it
runs afoul from the 1976 UNCITRAL Arbitration Rules that they have agreed in the
foregoing Agreement

ISSUE:
WON RA 9285 and the Special ADR Rules apply to the present arbitration proceedings

RULING:
YES. RA 9285, its IRR, and the Special ADR Rules provide that any party to an
arbitration, whether domestic of foreign, may request the court to provide assistance in
taking evidence such as the issuance of subpoena ad testificandum and subpoena duces
tecum. Arbitration is deemed a special proceeding and governed by the special provisions
of RA 9285, its IRR, and the Special ADR Rules. RA 9285 is the general law applicable
to all matters and controversies to be resolved through alternative dispute resolution
methods.
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. 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. Further, consistent with Article 2046 of the
Civil Code, the Special ADR Rules were formulated and were also applied to all pending
arbitration proceedings covered by RA 9285, provided no vested rights are impaired.
CASE NO. 37

POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT

CORPORATION, Petitioner,
vs. COMMISSIONER OF INTERNAL REVENUE, Respondent
G.R. No. 198146 August 8, 2017

FACTS:
Petitioner Power Sector Assets and Liabilities Management Corporation (PSALM) is a
government-owned and controlled corporation created under RA 9136, also known as the
Electric Power Industry Reform Act of 2001 (EPIRA). PSALM conducted public
biddings for the privatization of the Pantabangan-Masiway Hydroelectric Power Plant
and Magat Hydroelectric Power Plant wherein the winning bidders were First Gen
Hydropower Corporation and SN Aboitiz Power Corporation, respectively. NPC received
a letter from BIR demanding immediate payment of deficiency VAT for the sale of the
two hydroelectric plant. In compliance with the MOA executed among BIR, NPC, and
PSALM, PSALM remitted under protest to the BIR the total basic VAT due.
PSALM filed with the DOJ a petition for the adjudication of the dispute with the BIR to
resolve the issue of whether the sale of the power plants should be subject to VAT
wherein DOJ ruled in favor of PSALM. BIR filed with the CA a petition for certiorari,
seeking to set aside the DOJ's decision for lack of jurisdiction. Citing Section 4 of the
NIRC of 1997, as amended by Section 3 of RA 8424 and Section 7 of RA 9282, the CA
that the CIR is the proper body to resolve cases involving disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or
other matters arising under the NIRC or other laws administered by the BIR.

ISSUE:
WON the DOJ Secretary acted in according with the law in assuming jurisdiction and
settling the dispute by and between BIR and PSALM

RULING:
YES. This case involves a dispute between PSALM and NPC, which are both wholly
government owned corporations, and the BIR, a government office, over the imposition
of VAT on the sale of the two power plants. There is no question that original jurisdiction
is with the CIR, who issues the preliminary and the final tax assessments. However, if the
government entity disputes the tax assessment, the dispute is already between the BIR
(represented by the CIR) and another government entity, in this case, the petitioner
PSALM. Under PD 242, all disputes and claims solely between government agencies and
offices, including government-owned or controlled· corporations, shall be
administratively settled or adjudicated by the Secretary of Justice, the Solicitor General,
or the Government Corporate Counsel, depending on the issues and government agencies
involved.
It is only proper that intra-governmental disputes be settled administratively since
the opposing government offices, agencies and instrumentalities are all under the
President's executive control and supervision. Section 17, Article VII of the Constitution
states unequivocally that: "The President shall have control of all the executive
departments, bureaus and offices. He shall ensure that the laws be faithfully executed."
Furthermore, under the doctrine of exhaustion of administrative remedies, it is mandated
that where a remedy before an administrative body is provided by statute, relief must be
sought by exhausting this remedy prior to bringing an action in court in order to give the
administrative body every opportunity to decide a matter that comes within its
jurisdiction.
Since the amount involved in this case is more than one million pesos, the DOJ
Secretary's decision may be appealed to the Office of the President in accordance with
Section 70, Chapter 14, Book IV of EO 292 and Section 552 of PD 242. If the appeal to
the Office of the President is denied, the aggrieved party can still appeal to the Court of
Appeals under Section 1, Rule 43 of the 1997 Rules of Civil Procedure
WHEREFORE, PETITION IS GRANTED.
CASE NO. 38

PHILIPPINE VETERANS INVESTMENT DEVELOPMENT CORP. (PHIVIDEC)

& PHIVIDEC INDUSTRIAL AUTHORITY, petitioners, vs.HON. ALEJANDRO M.
VELEZ, as Judge, RTC of Cagayan de Oro City, Branch 20, and PHILIPPINE
VETERANS ASSISTANCE COMMISSION (PVAC), respondents.
G.R. No. 84295 July 18, 1991

FACTS:
Respondent, Philippine Veterans Assistance Commission (PVAC), filed in the RTC a
complaint for foreclosure of mortgage against the petitioners –– the Philippine Veterans
Investment Development Corporation (PHIVDEC) and PHIVIDEC Industrial Authority
(PIA). PHIVIDEC and PIA filed an answer with counterclaim. They alleged lack of
jurisdiction by the trial court over the case for it is allegedly covered by the arbitration
powers of the Government Corporate Counsel under PD 242 Sections 3-b and 6 of which
prescribe the procedure for the administrative settlement and adjudication of disputes,
claims, and controversies between or among government offices, agencies and
instrumentalities, including government-owned or controlled corporations.
Judge Velez denied the motion to dismiss on the ground that P.D. No. 242 is
"unconstitutional for being an act that amounts to an emasculation and impairment of the
judicial power of review of this court and of the Supreme Court under the 1987
Constitution. Petitioners filed a motion for reconsideration of that order which PVAC
opposed. In an order dated June 13, 1988, respondent Judge denied the motion for
reconsideration.
Petitioners filed in this Court a petition for certiorari and prohibition with a prayer for
preliminary injunction.

ISSUE:
WON PD 242 is unconstitutional

HELD:
NO. P.D. No. 242 does not diminish the jurisdiction of courts but only prescribes
an administrative procedure for the settlement of certain types of disputes between or
among departments, bureaus, offices, agencies, and instrumentalities of the National
Government, including government-owned or controlled corporations, so that they need
not always repair to the courts for the settlement of controversies arising from the
interpretation and application of statutes, contracts or agreements. The procedure is not
much different, and no less desirable, than the arbitration procedures provided in RA 876
(Arbitration Law) and in Section 26, R.A. 6715 (The Labor Code). It is an alternative to,
or a substitute for, traditional litigation in court with the added advantage of avoiding the
delays, vexations and expense of court proceedings. Or, as P.D. No. 242 itself explains,
its purpose is "the elimination of needless clogging of court dockets to prevent the waste
of time and energies not only of the government lawyers but also of the courts, and
eliminates expenses incurred in the filing and prosecution of judicial actions."
The notion that an administrative procedure such as is provided in P.D. No. 242, for the
settlement of quarrels between two administrative offices, departments, agencies, or
government corporations, would "emasculate" the jurisdiction of courts, is erroneous. In
fact, Section 1, subpar. (a), Rule 20 of the Rules of Court makes a pre-trial mandatory so
that the parties to a suit may meet in conference to consider, among other matters, "the
possibility of . . . a submission to arbitration."
P.D. No. 242 is a valid law prescribing an administrative arbitration procedure for certain
disputes among offices, agencies and instrumentalities under the executive control and
supervision of the President of the Philippines. Since PVAC filed Civil Case No. 11157
against PHIVIDEC and PIA without first passing through the administrative channel, the
judicial action was premature for non-exhaustion of administrative remedies, hence,
dismissible on that account (Chia vs. Acting Collector of Customs).
WHEREFORE, the petition for certiorari and prohibition is granted.
CASE No. 39

TEODORO I. CHAVEZ, Petitioners, vs. HON. COURT OF APPEALS and

JACINTO S. TRILLANA, Respondents
G.R. No. 159411. March 18, 2005

FACTS:
Petitioner Teodoro Chavez and respondent Jacinto Trillana entered into a contract of
lease whereby the former leased to the latter his fishpond at Sitio Pariahan, Taliptip,
Bulacan, Bulacan, for a term of 6 years. Paragraph 5 of the contract further provided that
respondent shall undertake all construction and preservation of improvements in the
fishpond that may be destroyed during the period of the lease, at his expense, without
reimbursement from petitioner.
A powerful typhoon hit the country which damaged the subject fishpond. Respondent
filed a complaint before the Office of the Barangay Captain of Taliptip, Bulacan,
Bulacan. He complained about the unauthorized repairs undertaken by petitioner, the
ouster of his personnel from the leased premises and its unlawful taking by petitioner
despite their valid and subsisting lease contract. After conciliation proceedings, an
agreement was reached.
Alleging non-compliance by petitioner with their lease contract and the "Kasunduan,"
respondent filed a complaint against petitioner before RTC wherein the latter ruled in
favor of respondent. CA modified the decision of the trial court by deleting the award of
₱500,000.00 for unrealized profits for lack of basis, and by reducing the award for
attorney’s fees to ₱50,000.00. Petitioner’s motion for reconsideration was denied.

ISSUE:
WON RTC had jurisdiction over the action filed by respondent considering that
the subject matter thereof, his alleged violation of the lease contract with respondent, was
already amicably settled before the Office of the Barangay Captain of Taliptip, Bulacan,
Bulacan

RULING:
YES. Indeed, the Revised Katarungang Pambarangay Law provides that an amicable
settlement reached after barangay conciliation proceedings has the force and effect of a
final judgment of a court if not repudiated or a petition to nullify the same is filed before
the proper city or municipal court within ten (10) days from its date. It further provides
that the settlement may be enforced by execution by the lupong tagapamayapa within six
(6) months from its date, or by action in the appropriate city or municipal court, if beyond
the six-month period. This special provision follows the general precept enunciated in
Article 2037 of the Civil Code. However, in Heirs of Zari, et al. v. Santos Art. 2037 is
qualified by Art. 2041 of the same Code: “If one of the parties fails or refuses to abide by
the compromise, the other party may either enforce the compromise or regard it as
rescinded and insist upon his original demand”.
Thus, although the "Kasunduan" executed by petitioner and respondent before the
Office of the Barangay Captain had the force and effect of a final judgment of a court,
petitioner’s non-compliance paved the way for the application of Art. 2041 under which
respondent may either enforce the compromise, following the procedure laid out in the
Revised Katarungang Pambarangay Law, or regard it as rescinded and insist upon his
original demand. Respondent chose the latter option when he instituted Civil Case for
recovery of unrealized profits and reimbursement of advance rentals, moral and
exemplary damages, and attorney’s fees. Respondent was not limited to claiming
₱150,000.00 because although he agreed to the amount in the "Kasunduan," it is
axiomatic that a compromise settlement is not an admission of liability but merely a
recognition that there is a dispute and an impending litigation which the parties hope to
prevent by making reciprocal concessions, adjusting their respective positions in the hope
of gaining balanced by the danger of losing. Under the "Kasunduan," respondent was
only required to execute a waiver of all possible claims arising from the lease contract if
petitioner fully complies with his obligations thereunder. It is undisputed that herein
petitioner did not.
IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The assailed
Decision of the Court of Appeals is modified by deleting the award of ₱300,000.00 as
reimbursement of advance rentals. The assailed Decision is AFFIRMED in all other
respects.
CASE NO. 40

CHINA CHANG JIANG ENERGY CORPORATION vs ROSAL

INFRASTRUCTURE BUILDERS
G.R. No. 125706, September 30, 1996

FACTS:
Petitioner China Chang engaged the services of Rosal Infrastructure Builders for the
construction of a Dam in Itogon, Benguet. In this contract, the parties agreed to submit
disputes arising therefrom to arbitration before the Arbitration of the International
Chamber of Commerce. When a dispute arose between the parties, Rosal filed a
complaint before the Construction Industry Arbitration Commission (CIAC) for
arbitration. China Chang filed its answer with CIAC for arbitration.
China Chang raised the issue of lack of jurisdiction with the CA which the CA dismissed.
China Chang filed a Motion for Reconsideration but was denied. China Chang now
questions the validity of CIAC Resolution 3- 93 amending Section 1, Article III of CIAC
Rules of Procedure Governing Construction Arbitration promulgated by the CIAC
pursuant to its rule-making power granted under Section 21 of Executive Order No. 1008,
which pertinently provides as follows:
Article III Effect of the Agreement to Arbitrate. Section 1. Submission to CIAC
Jurisdiction.
-An arbitration clause in a construction contract or a submission to arbitration of a
construction dispute shall be deemed an agreement to submit an existing or future
controversy to the CIAC jurisdiction, notwithstanding the reference to a different
arbitral institution or arbitral body in such contract or submission

ISSUES:
1. WON CIAC has jurisdiction over the dispute
2. WON the parties in the case at bar can agree to submit to arbitration their
construction dispute under the CIAC

RULING:
1. YES. The new rule, as amended merely implements the letter and the spirit of its
enabling law, E.O. No. 1008, which vests jurisdiction upon the CIAC:
Section 4: Jurisdiction - The CIAC shall have the original and exclusive
jurisdiction over disputes arising from, or connected with, contracts entered into
by the parties involved in the construction in the Philippines, whether the dispute
arises before or after the completion of the contracts, or after the abandonment or
breach thereof. These disputes may involve government or private contracts. For
the Board to acquire jurisdiction, the parties to a dispute must agree to submit the
same to voluntary arbitration. What the law merely requires for a particular
construction contract to fall within the jurisdiction of CIAC is for the parties to
agree to submit the same to voluntary arbitration.

2. YES. Parties may continue to stipulate as regards their preferred forum in case of
voluntary arbitration, but in so doing, they may not divest the CIAC of jurisdiction
as provided by law. Under the elementary principle on the law on contracts that
laws obtaining in a jurisdiction form part of all agreements, when the law provides
that the Board acquires jurisdiction when the parties to the contract agree to submit
the same to voluntary arbitration, the law in effect, automatically gives the parties
an alternative forum before whom they may submit their disputes. That alternative
forum is the CIAC.
CASE NO. 41

National Irrigation Administration vs. Court of Appeals

G.R. No. 129169. November 17, 1999.*

FACTS:
Records show that in a competitive bidding held by NIA in August 1978, Hydro
Resources Contractors Corporation (hereafter HYDRO) was awarded Contract MPI-C-2
for the construction of the main civil works of the Magat River MultiPurpose Project.
The contract provided that HYDRO would be paid partly in Philippine pesos and partly
in U.S. dollars. HYDRO substantially completed the works. HYDRO thereafter
determined that it still had an account receivable from NIA representing the dollar rate
differential of the price escalation for the contract.
After unsuccessfully pursuing its case with NIA, HYDRO, on 7 December 1994, filed
with the CIAC a Request for Adjudication of the aforesaid claim. HYDRO nominated six
arbitrators for the arbitration panel.
After reaching an accord on the issues to be considered by the arbitration panel, the
parties scheduled the dates of hearings and of submission of simultaneous memoranda.
On 13 March 1995, NIA filed a Motion to Dismiss7 alleging lack of jurisdiction over the
disputes. NIA contended that there was no agreement with HYDRO to submit the dispute
to CIAC for arbitration considering that the construction contract was executed in 1978
and the project completed in 1982, whereas the Construction
Industry Arbitration Law creating CIAC.
The arbitral body issued an order which deferred the determination of the motion to
dismiss and resolved to proceed with the hearing of the case on the merits as the grounds
cited by NIA did not seem to be “indubitable.” NIA filed a motion for reconsideration of
the aforesaid Order. CIAC in denying the motion for reconsideration ruled that it has
jurisdiction over the HYDRO’s claim over NIA pursuant to E.O. 1008 and that the
hearing should proceed as scheduled.
NIA filed with the Court of Appeals an original action of certiorari and prohibition with
prayer for restraining order and/or injunction, seeking to annul the Orders of the CIAC
for having been issued without or in excess of jurisdiction.
NIA filed before us an original action for certiorari and prohibition with urgent prayer
for temporary restraining order and writ of preliminary injunction, praying for the
annulment of the Resolutions of the Court of Appeals dated 28 June 1996 and 24
February 1997. In the said special civil action, NIA merely reiterates the issues it raised
before the Court of Appeals.

ISSUE:
Whether or not CIAC has jurisdiction to hear and try the dispute between the parties?

HELD:
The CIAC has jurisdiction over the controversy. Executive Order No. 1008, otherwise
known as the “Construction Industry Arbitration Law” which was promulgated on 4
February 1985, vests upon CIAC original and exclusive jurisdiction over disputes arising
from, or connected with contracts entered into by parties involved in construction in the
Philippines, whether the dispute arises before or after the completion of the contract, or
after the abandonment or breach thereof. The disputes may involve government or private
contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to
submit the same to voluntary arbitration.
The complaint of HYDRO against NIA on the basis of the contract executed between
them was filed on 7 December 1994, during the effectivity of E.O. No. 1008. Hence, it is
well within the jurisdiction of CIAC. The jurisdiction of a court is determined by the law
in force at the time of the commencement of the action.
Under the present Rules of Procedure, for a particular construction contract to fall within
the jurisdiction of CIAC, it is merely required that the parties agree to submit the same to
voluntary arbitration. Unlike in the original version of Section 1, as applied in the Tesco
case, the law as it now stands does not provide that the parties should agree to submit
disputes arising from their agreement specifically to the CIAC for the latter to acquire
jurisdiction over the same. Rather, it is plain and clear that as long as the parties agree to
submit to voluntary arbitration, regardless of what forum they may choose, their
agreement will fall within the jurisdiction of the CIAC, such that, even if they specifically
choose another forum, the parties will not be precluded from electing to submit their
dispute before the CIAC because this right has been vested upon each party by law, i.e.,
E.O. No. 1008.
CASE NO. 42

DENR v UPCI
G.R. No. 212081. February 23, 2015

FACTS:
Under the present Rules of Procedure, for a particular construction contract to fall within
the jurisdiction of CIAC, it is merely required that the parties agree to submit the same to
voluntary arbitration. Unlike in the original version of Section 1, as applied in the Tesco
case, the law as it now stands does not provide that the parties should agree to submit
disputes arising from their agreement specifically to the CIAC for the latter to acquire
jurisdiction over the same. Rather, it is plain and clear that as long as the parties agree to
submit to voluntary arbitration, regardless of what forum they may choose, their
agreement will fall within the jurisdiction of the CIAC, such that, even if they specifically
choose another forum, the parties will not be precluded from electing to submit their
dispute before the CIAC because this right has been vested upon each party by law, i.e.,
E.O. No. 1008.
The Commission on Audit (COA) released the Technical Services Office Report. (TSO)
finding the contract price of the Agreement to be 84.14% excessive. This
notwithstanding, petitioner, in a letter dated December 10, 1998, acknowledged its
liability to respondent in the amount of P2,239,479.60 and assured payment at the soonest
possible time.
For failure to pay its obligation under the Consultancy Agreement despite repeated
demands, respondent instituted a Complaint11 against petitioner before the Regional
Trial Court of Quezon City, Branch 222 (RTC), docketed as Case No. Q-07-60321.
Upon motion of respondent, the case was subsequently referred to arbitration pursuant to
the arbitration clause of the Consultancy Agreement, which petitioner did not oppose. As
a result, Atty. Alfredo F. Tadiar, Architect Armando N. Alli, and Construction Industry
Arbitration Commission (CIAC) Accredited Arbitrator Engr. Ricardo B.
San Juan were appointed as members of the Arbitral Tribunal. The court-referred
arbitration was then docketed as Arbitration Case No. A-001
The RTC merely noted petitioner’s aforesaid motions, finding that copies of the Arbitral
Award appear to have been sent to the parties by the Arbitral Tribunal, including the
OSG, contrary to petitioner’s claim. On the other hand, the RTC confirmed the Arbitral
Award pursuant to Rule 11.2(A) of the Special ADR Rules and ordered petitioner to pay
respondent the costs of confirming the award, as prayed for, in the total amount of
P50,000.00. From this order, petitioner did not file a motion for reconsideration.
respondent moved for the issuance of a writ of execution, to which no
comment/opposition was filed by petitioner despite the RTC’s directive therefor.
In an Order dated September 12, 2011, the RTC granted respondent’s motion.38
respondent moved for the issuance of a writ of execution, to which no
comment/opposition was filed by petitioner despite the RTC’s directive therefor. In an
Order37 dated September 12, 2011, the RTC granted respondent’s motion.
RTC denied petitioner’s motion to quash.
Dissatisfied, it filed on September 10, 2012 a petition for certiorari48 before the CA,
docketed as C.A.-G.R. S.P. No. 126458, averring in the main that the RTC acted with
grave abuse of discretion in confirming and ordering the execution of the Arbitral Award
The CA dismissed the certiorari petition on two (2) grounds, namely: (a) the petition
essentially assailed the merits of the Arbitral Award which is prohibited under Rule
19.750 of the Special ADR Rules; and (b) the petition was filed out of time, having been
filed way beyond 15 days from notice of the RTC’s July 9, 2012 Order, in violation of
Rule 19.28 in relation to Rule 19.853 of said Rules which provide that a special civil
action for certiorari must be filed before the CA within 15 days from notice of the
judgment, order, or resolution sought to be annulled or set aside (or until July 27,
2012).
Aggrieved, petitioner filed the instant petition.

ISSUE:
Whether or not the CA erred in applying the provisions of the Special ADR.

HELD:
Republic Act No. (RA) 9285, otherwise known as the “Alternative Dispute Resolution
Act of 2004,” institutionalized the use of an Alternative Dispute Resolution System
(ADR System) in the Philippines. The Act, however, was without prejudice to the
adoption by the Supreme Court of any ADR system as a means of achieving speedy and
efficient means of resolving cases pending before all courts in the Philippines
the Arbitral Tribunal rendered the Arbitral Award in favor of respondent. Under Section
17.2, Rule 17 of the CIAC Rules, no motion for reconsideration or new trial may be
sought, but any of the parties may file a motion for correction64 of the final award, which
shall interrupt the running of the period for appeal, based on any of the following
grounds, to wit:
a. an evident miscalculation of figures, a typographical or arithmetical error;
b. an evident mistake in the description of any party, person, date, amount, thing
or property referred to in the award;
c. where the arbitrators have awarded upon a matter not submitted to them, not
affecting the merits of the decision upon the matter submitted;
d. where the arbitrators have failed or omitted to resolve certain issue/s formulated
by the parties in the Terms of Reference (TOR) and submitted to them for resolution; and
e. where the award is imperfect in a matter of form not affecting the merits of the
controversy.
Moreover, the parties may appeal the final award to the CA through a petition for review
under Rule 43 of the Rules of Court.
CASE NO. 43 same as no. 9
CASE NO. 44

Gadrinab v Salmanca
G.R. No. 194560. June 11, 2014

FACTS:
Respondents, together with Adoracion Gadrinab and Arsenia Talao, are siblings and heirs
of the late Spouses Talao, Nicolas and Aurelia. The Spouses Talao died intestate, leaving
a parcel of land in Sta. Ana, Manila.The five Talao children divided the property among
themselves through an extrajudicial settlement.
Subsequently, Arsenia Talao waived her share over the property in favor of her siblings.
Respondent Salamanca filed a complaint for partition against her siblings.
All parties claimed their respective shares in the property. They also claimed shares in the
rentals collected from one of the units of a duplex apartment on the property. The total
amount of rental collection in the possession of Jose Lopez was P528,623.00. The
amount, according to Jose’s counsel, was ready for distribution.
Upon being referred to mediation, the parties entered into a compromise agreement the
Regional Trial Court approved the compromise agreement. Based on the entry of
judgment, the case became final and executory on April 10, 2003.
Pursuant to the compromise agreement, Cuervo Appraiser appraised the property.
Unsatisfied with the appraisal, Antonio Talao moved for the property’s reappraisal. This
was denied by the Regional Trial Court. The portion of the duplex that Nestor refused to
vacate, remained unsold. Because of the attitude of her co-heirs, respondent Salamanca
moved for the physical partition of the property before the Regional Trial Court of
Manila. She prayed for the physical partition of the property instead of having it sold.
Nestor and Francisco Gadrinab opposed the motion. They contended that the judgment
on the compromise agreement had already become final and executory and had the effect
of res judicata.
Regional Trial Court of Manila granted the motion for physical partition petitioner argued
that the Court of Appeals’ decision violated his right to due process. According to him,
had there been a full-blown trial on the action for partition, he would have been able to
present evidence of exclusive possession of half of the property.

ISSUE:
Whether the Court of Appeals erred in affirming the Regional Trial Court’s decision
allowing the physical partition of the property despite finality of a previous judgment on
compromise agreement involving the division of the same property.

HELD:
In a compromise agreement, the parties freely enter into stipulations. “[A] judgment
based on a compromise agreement is a judgment on the merits” of the case. It
has the effect of res judicata. These principles are impressed both in our law and
jurisprudence.
Thus, Article 2037 of the Civil Code provides:
Article 2037. A compromise has upon the parties the effect and authority of res judicata;
but there shall be no execution except in compliance with a judicial compromise.
In Spouses Romero v. Tan, this court said:
It is well-settled that a judicial compromise has the effect of res judicata and is
immediately executory and not appealable unless set aside [by mistake, fraud, violence,
intimidation, undue influence, or falsity of documents that vitiated the compromise
agreement
There is res judicata when the following concur:
1. Previous final judgment;
2. By a court having jurisdiction over the parties and
the subject matter;
3. On the merits of the case;
4. Between identical parties, on the same subject
matter, and cause of action.

Judicial compromise agreement is in the nature of both an agreement between the parties
and a judgment on the merits, it is covered by the Civil Code provisions on contracts. It
can be avoided on grounds that may avoid an ordinary contract, e.g., it is not in accord
with the law; lack of consent by a party; and existence of fraud or duress. Further, the
pertinent Civil Code provisions on compromise agreements provide:
Article 2038. A compromise in which there is mistake, fraud, violence, intimidation,
undue influence, or falsity of documents is subject to the provisions of Article 1330 of
this
Code.
Article 1330. A contract where consent is given through mistake, violence, intimidation,
undue influence, or fraud is voidable.
Therefore, courts cannot entertain actions involving the same cause of action, parties, and
subject matter without violating the doctrines on bar by prior judgment and immutability
of judgments, unless there is evidence that the agreement was void, obtained through
fraud, mistake or any vice of consent, or would disrupt substantial justice.
In this case, there was no issue as to the fact that the parties freely entered into the
compromise agreement. There was also no dispute about the clarity of its terms.
Some of the parties simply do not wish to abide by the compromise agreement’s terms.
This court does not see how substantial justice will be served by disturbing a previous
final judgment on compromise when failure of its execution was caused by the parties
themselves. Respondents’ argument that a supervening event, i.e., disagreement among
the parties, was present to justify disturbance of the final judgment on compromise fails
to persuade. A supervening event may justify the disturbance of a final judgment on
compromise if it “brought about a material change in [the] situation” between the parties.
The material change contemplated must render the execution of the final judgment unjust
and inequitable. Otherwise, a party to the compromise agreement has a “right to have the
compromise agreement executed, according to its terms.” The parties voluntarily agreed
to the compromise agreement, which was already stamped with judicial approval. The
agreement’s execution would bring about the effects desired by all parties and the most
just and equitable situation for all. On the other hand, the judgment granting the second
action for partition filed by respondent Salamanca was obtained with opposition.
Judges “have the ministerial and mandatory duty to implement and enforce [a
compromise agreement].” Absent appeal or motion to set aside the judgment, courts
cannot modify, impose terms different from the terms of a compromise agreement, or set
aside the compromises and reciprocal concessions made in good faith by the parties
without gravely abusing their discretion.
CASE NO. 45

Sonley v Anchor Savings Bank

G.R. No. 205623. August 10, 2016

FACTS:
Petitioner alleged that, on January 28, 2005, she agreed to purchase a real property from
[Anchor] for the sum of x x x Php2,200,000.00 x x x. The said real property pertained to
a parcel of land that had been foreclosed by [Anchor] with an area of x x x 126.50 square
meters x x x located at Fairview, Quezon City (“subject property”). Pursuant to the said
agreement, the parties entered into a Contract to Sell8 whereby the petitioner agreed to
pay the amount of x x x Php200,000.00 x x x as downpayment x x x with the balance of x
x x Php2,000,000.00 x x x payable in sixty (60) monthly instalments amounting to x x x
Php47,580.00
Petitioner, however, defaulted in paying her monthly obligations x x x which prompted
[Anchor] to rescind the contract to sell x x x. In filing the complaint x x x petitioner
averred that the rescission of the contract to sell was null and void because she had
already substantially paid her obligation to the bank.
In its Answer[,] [Anchor] denied the allegations that were made by the petitioner in her
complaint. On the contrary, it contended that the post-dated checks which were issued by
the petitioner in its favor covering the monthly installments for the purchase of the
subject property were all dishonored by the drawee bank when they were presented for
payment. Thus, [Anchor] averred that petitioner should not be allowed to benefit from
her own fault and prevent [Anchor] from exercising its right to rescind their contact to
sell.
Subsequently, after the issuance of a Pre-Trial Order by the trial court, the parties agreed
to an amicable settlement and entered into a Compromise Agreement However, [Anchor]
later on filed a Manifestation and Motion for Execution12 in the trial court claiming that
petitioner had not been paying the agreed monthly installments in accordance with the
compromise agreement. Moreover, it averred that all the checks which the petitioner
issued to pay her obligations were again dishonored. Thus, [Anchor] prayed that a writ of
execution be issued by the trial court in its favor ordering: (1) that the contract to sell that
was entered into between the parties be rescinded; (2) that [Anchor] be allowed to apply
all the payments that were made to it by the petitioner as rentals; and (3) that petitioner
immediately vacate the subject property.
Petitioner filed a Petition for Certiorari before the CA, CA ruled against the petitioner.
ISSUE:
Whether or not CA may issue writ of execution against the petitioner despite the fact that
the issuance thereof was not specifically provided in the judgment which it entered based
on compromise agreement.

HELD:
Under Article 2041 of the Civil Code, “(i)f one of the parties fails or refuses to abide by
the compromise, the other party may either enforce the compromise or regard it as
rescinded and insist upon his original demand.” “The language of this Article 2041 x x x
denotes that no action for rescission is required x x x, and that the party aggrieved by the
breach of a compromise agreement may, if he chooses, bring the suit contemplated or
involved in his original demand, as if there had never been any compromise agreement,
without bringing an action for rescission thereof. He need not seek a judicial declaration
of rescission, for he may ‘regard’ the compromise agreement already ‘rescinded.’
Certainly, a compromise agreement becomes the law between the parties and will not He
set aside other than [sic] the grounds mentioned above. In Ramnani v. Court of Appeals,
we held that the main purpose of a compromise agreement is to put an end to litigation
because of the uncertainty that may arise from it. Once the compromise is perfected, the
parties are bound to abide by it in good faith. Should a party fail or refuse to comply with
the terms of a compromise of amicable settlement, the other party could either enforce the
compromise by a writ of execution or regard it as rescinded and so insist upon his/her
original, demand