12. Korea Technologies Co., Ltd. V. Hon. Lerma, GR 143581, January 07, 2008, Velasco, Jr., J.

, Second Division.
FACTS:
Korea Technologies (KOGIES) is a Korean corporation engaged in the supply and installation of LPG cylinder manufacturing plants. Private respondent Pacific
General Steel Manufacturing Corp. (PGSMC) is a domestic corporation. PGSMC and KOGIES entered into a contract where KOGIES would set up an LPG Cylinder
manufacturing plant in Carmona Cavite. The contract was executed in PHL.

PGSMC leased the land of Worth Properties to house the manufacturing plant. It paid P322k monthly rental. PGSMC paid KOGIES $1,224,000. For the remaining
$306k for the installation of the plant, PGSMC issued two postdated BPI checks for P4.5M each. These checks were dishonored for “payment stopped”. PGSMC
informed KOGIES that it was cancelling the contract because KOGIES had altered the quantity and lowered the quality of machineries and equipment it delivered to
PGSMC and that PGSMC would dismantle and transfer the machineries.

KOGIES insisted that their dispute should be settled by arbitration as agreed upon in Art. 15, arbitration clause in their contract. KOGIES filed an application for
arbitration before the Korean Commercial Arbitration Board (KCAB). KOGIES also filed a complaint for specific performance against PGSMC in RTC. KOGIES
averred that PGSMC violated Art. 15 of their contract by unilaterally rescinding the contract without resorting to arbitration. KOGIES also asked that PGSMC be
restrained from dismantling and transferring the machinery in the plant.

PGSMC opposed the TRO and argued that the arbitration clause was void for being against public policy since it ousts local courts of jurisdiction over the
controversy. RTC held that Art. 15, arbitration clause, was void as it tended to oust the courts of jurisdiction. KOGIES’ prayer for injunctive writ was denied. CA
affirmed RTC and declared the arbitration clause against public policy. Hence this petition under Rule 45.

ISSUE:
Whether an arbitration clause for arbitration designating a foreign arbitral tribunal is void for being against public policy.
HELD: NO.
Art. 15 of the contract states:
Article 15. Arbitration.—All disputes, controversies, or differences which may arise between the parties, out of or in relation to or in connection with this
Contract or for the breach thereof, shall finally be settled by arbitration in Seoul, Korea in accordance with the Commercial Arbitration Rules of the
Korean Commercial Arbitration Board. The award rendered by the arbitration(s) shall be final and binding upon both parties concerned. 
1) Lex Loci contractus. The contract was perfected in PHL, so our laws govern. Art. 2044 provides “Any stipulation that the arbitrators’ award or decision shall be
final, is valid.”

2) The clause stipulates that the arbitration must be done in Seoul, Korea. This is not contrary to public policy. An arbitration clause to resolve differences of mutually
agreed contractual terms is valid.

3) 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
UNCITRAL Model Law on International Commercial Arbitration, PH bound itself to the Model Law. We incorporated the Model Law in RA 9285. S19 of RA 9285
states that an ICA shall be governed by the Model Law. Among the features of RA 9285 incorporating the UNCITRAL Model Law are:

a) RTC must refer to arbitration in proper cases:

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.

b) Foreign arbitral awards must be confirmed by RTC:

SEC. 42. Application of the New York Convention.––The New York Convention shall govern the recognition and enforcement of arbitral awards covered
by said Convention.
The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the rules of procedure to be
promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on the award or applying for its enforcement shall file with
the court the original or authenticated copy of the award and the arbitration agreement. If the award or agreement is not made in any of the official
languages, the party shall supply a duly certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign arbitration award was made in party to the New York Convention.
xxxx
SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York Convention.––The recognition and enforcement of
foreign arbitral awards not covered by the New York Convention shall be done in accordance with procedural rules to be promulgated by the Supreme
Court. The Court may, on grounds of comity and reciprocity, recognize and enforce a non-convention award as a convention award.
SEC. 44. Foreign Arbitral Award Not Foreign Judgment.––A foreign arbitral award when confirmed by a court of a foreign country, shall be recognized
and enforced as a foreign arbitral award and not as a judgment of a foreign court.
A foreign arbitral award, when confirmed by the Regional Trial Court, shall be enforced in the same manner as final and executory decisions of courts of
law of the Philippines
xxxx
SEC. 47. Venue and Jurisdiction.––Proceedings for recognition and enforcement of an arbitration agreement or for vacations, setting aside, correction or
modification of an arbitral award, and any application with a court for arbitration assistance and supervision shall be deemed as special proceedings and
shall be filed with the Regional Trial Court (i) where arbitration proceedings are conducted; (ii) where the asset to be attached or levied upon, or the act to
be enjoined is located; (iii) where any of the parties to the dispute resides or has his place of business; or (iv) in the National Judicial Capital Region, at
the option of the applicant.
SEC. 48. Notice of Proceeding to Parties.––In a special proceeding for recognition and enforcement of an arbitral award, the Court shall send notice to
the parties at their address of record in the arbitration, or if any part cannot be served notice at such address, at such party’s last known address. The
notice shall be sent al least fifteen (15) days before the date set for the initial hearing of the application.
The final foreign arbitral awards need first to be confirmed by RTC.

c) RTC has jurisdiction to review foreign arbitral awards. S42 in relation to S45 of RA 9285 vested RTC with authority and jurisdiction to set aside, reject, or vacate
a foreign arbitral award on grounds provided in Art. (2) of UNCITRAL Model Law. Thus, while RTC does not have jurisdiction over disputes governed by
arbitration mutually agreed upon by the parties, the foreign arbitral award is subject to judicial review by RTC. Thus, foreign arbitral awards, while final and binding,
do not oust courts of jurisdiction since these awards are not absolute and without exceptions as they are still judicially reviewable.

d) The grounds for judicial review in domestic arbitral awards are in S25, RA 876 while for foreign awards, the grounds for rejecting or vacating are in Art. 34(2) of
UNCITRAL Model Law.

4) S46 of RA 9285 provides for an appeal in CA as remedy of an aggrieved party in case RTC sets aside or modifies the arbitral award. The CA decision may further
be appealed to SC thru petition for review under Rule 45.

5) Thus, PGSMC must submit to the foreign arbitration as it bound itself thru the contract. While it may have misgivings on the foreign arbitration by KCAB, it has
available remedies under RA 9285. Its interests are duly protected by the law which requires the award to be confirmed by RTC. The arbitration clause thus does not
oust our courts of jurisdiction as the award is still judicially reviewable under certain conditions provided in the Model Law on ICA.

13. Gonzales v. Climax Mining, Ltd., GR 161957, February 28, 2005, Tinga, J., Second Division.
FACTS:
Petitioner Jorge Gonzales, as claimowner of mineral deposits in Dipidio, Nueva Vizcaya, entered into a joint venture agreement designated as the May 14, 1987 Letter
of Intent with GeoPhilippines, Inc. Gonzales granted GeoPH the exclusive right to explore the mining claims for 36months. A February 28, 1989 Agreement extended
the exploration by another 3 years.

Later, Gonzales, respondent Climax-Arimco Mining, GeoPH, and Aumex PH Inc. signed an Addendum to the May 14, 1987 LoI and February 28, 1989 Agreement.
Under the Addendum contract, Climax-Arimco Mining would apply to the PHL government for permission to mine the claims as the government’s contractor under a
Financial and Technical Assistance Agreement (FTAA). Arimco obtained the FTAA and carried out work thereunder.

Respondent Climax Mining Corporation and respondent Australasian PH Mining Inc. (APMI) entered into a MOA whereby Climax transferred its FTAA to the latter.

Gonzales filed before the panel of arbitrators, Mines and Geosciences Bureau of DENR against respondents Climax-Arimco, Climax, and APMI a complaint seeking
to nullify the addendum contract, FTAA, MOA, and other agreements. Gonzales seeks reliefs on the ground of "FRAUD, OPPRESSION and/or VIOLATION of
Section 2, Article XII of the CONSTITUTION perpetrated by these foreign RESPONDENTS, conspiring and confederating with one another and with each other.”

The panel dismissed the complaint for lack of jurisdiction. Upon MR, it reconsidered. CA declared that the panel did not have jurisdiction as what is involved is not a
mining dispute. Hence this petition for review on certiorari under Rule 45.

ISSUE:
Whether the DENR-MGB panel of arbitrators has jurisdiction over a dispute involving validity of contracts where there is allegation of violation of the constitution
and fraud.
HELD: NO.
1) A judicial question is raised when the question involves determination of what the law is and what the legal rights of the parties are with respect to the matter in
controversy. A mining dispute is a dispute involving (a) rights to mining areas, (b) mineral agreements, FTAAs, or permits, and (c) surface owners, occupants and
claimholders/concessionaires. Under RA 7942, PH Mining Act of 1995, the panel of arbitrators has exclusive original jurisdiction to hear and decide these mining
disputes. Its jurisdiction is limited only to those mining disputes which raise questions of fact or matters which requires application of technological knowledge.

2) In its complaint, petitioner alleges that respondents, conspiring and confederating with one another, misrepresented under the  Addendum Contract and FTAA that
respondent Climax-Arimco possessed financial and technical capacity to put the project into commercial production, when in truth it had no such qualification
whatsoever to do so.

3) The panel of arbitrators has no jurisdiction over the complaint. The basic issue in the complaint is the presence of fraud or misrepresentation allegedly
attendant to the execution of the addendum contract and other contracts, rendering them invalid. This constitutes fraud which vitiated petitioner’s consent, and in
Art. 1390 of NCC, is one of the grounds to annul a voidable contract.

4) Petitioner claims that his complaint is one for declaration of nullity of void contracts (Art. 1409), arguing that respondents do not qualify to enter into joint venture
agreement with the government in violation of S2, Art. XII of the constitution. But whether the case involves void or voidable contracts is still a judicial question.
The resolution of validity of the contracts remains a judicial question as it requires exercise of a judicial function. Clearly, the dispute is NOT a mining conflict. The
complaint was not for determination of rights under the mining contracts since the very validity of those contracts is put in issue.

The main question is the validity of the Addendum contract, FTAA, and subsequent contracts.

5) The complaint raised the issue of constitutionality of FTAA which is a judicial question. The Panel of Arbitrators does not have jurisdiction over such an issue
since it does not involve the application of technical knowledge and expertise relating to mining.

6) 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. 

7) Gonzales argues that CA erred in ruling that the case should be brought for arbitration under RA 876 pursuant to the arbitration clause in the Addendum Contract.
But we agree that the dispute should not be brought under the ambit of the arbitration law since 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. The complaint should be filed in the regular courts.

13.1 Gonzales v. Climax Mining Ltd., GR 161957, January 22, 2007, Tinga, J., Second Division.
FACTS:
Respondents Climax et al. filed a partial MR, seeking reconsideration of that part of the decision holding that the case should not be brought for arbitration under RA
876. They claim that the arbitration clause in the Addendum Contract should be treated as an agreement independent of the other terms of the contract and that a
claimed rescission of the main contract does not avoid the duty to arbitrate.

HELD:
1) Disputes 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. R.A. No. 876 recognizes the contractual nature of the arbitration agreement, thus:
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.
The special proceeding under Sec. 6 of R.A. No. 876 recognizes the contractual nature of arbitration clauses or agreements. It provides: 
Sec. 6. Hearing by court.—A party aggrieved by the failure, neglect or refusal of another to perform under an agreement in writing providing for
arbitration may petition the court for an order directing that such arbitration proceed in the manner provided for in such agreement. Five days notice in
writing of the hearing of such application shall be served either personally or by registered mail upon the party in default. The court shall hear the parties,
and upon being satisfied that the making of the agreement or such failure to comply therewith is not in issue, shall make an order directing the parties to
proceed to arbitration in accordance with the terms of the agreement. If the making of the agreement or default be in issue the court shall proceed to
summarily hear such issue. If the finding be that no agreement in writing providing for arbitration was made, or that there is no default in the proceeding
thereunder, the proceeding shall be dismissed. If the finding be that a written provision for arbitration was made and there is a default in proceeding
thereunder, an order shall be made summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.
2) This special proceeding is the procedural mechanism for enforcement of the contract to arbitrate. RA 876 confines the court’s authority only to the determination of
whether there is an agreement in writing providing for arbitration. If there is, the court shall issue an order directing the parties to proceed with arbitration. If there is
no agreement, the proceeding shall be dismissed. The proceedings are summary in nature. This proceeding is only a summary remedy to enforce the agreement to
arbitrate.

3) Implicit in the summary nature of this proceeding is the separable or independent character of the arbitration agreement. The doctrine of separability
enunciates that an arbitration agreement is independent of the main contract. It shall 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 invalidity of the main contract (container contract) does NOT AFFECT
the validity of the arbitration agreement. This doctrine is confirmed in Art. 16(1) of UNCITRAL Model Law.
4) Thus, Gonzales’ argument that the addendum contract is void, and thus the arbitration clause therein is void also, is untenable. First, the proceeding in a petition for
arbitration in RA 876 is limited only to resolve the question of whether the arbitration agreement exists. Second, the separability of the arbitration clause from the
addendum contract means that validity or invalidity thereof will not affect the enforceability of the agreement to arbitrate.

4.1) Hence, we now hold that 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. 

When it was declared in the Feb. 28, 2005 decision that the case should not be brought for arbitration, it must be clarified that the case referred to is the one filed by
Gonzales in DENR Panel of arbitrators, as the case should have been filed in the regular courts involving as it did judicial issues.

14. Del Monte Corporation-USA v. CA, GR 136154, February 07, 2001, Bellosillo, J., Second Division.
FACTS:
Del Monte Corporation-USA (DMC-USA) appointed private respondent Montebueno Marketing, Inc. (MMI) as exclusive distributor of DMC products in PHL for 5
years renewable for 2 consecutive 5 year perios with consent of the parties. The agreement had an arbitration clause this appointment as exclusive distributor was
published in newspapers. Respondent Sabrosa Foods Inc. (SFI) was made the marketing arm of MMI.

Later, MMI, SFI, and MMI’s managing director Lily Sy filed a complaint against DMC-USA, Paul Derby (managing director for export sales), Daniel Collins, and
Luis Hidalgo, and Dewey Ltd. in RTC Malabon. They contend that petitioners violated Arts. 20, 21, and 23 of NCC since DMC-USA products continued to be
brought into PH by parallel importers despite appointment of MMI as exclusive distributor, causing MMI embarrassment and damage. They claim that DMC-USA ‘s
bad faith was motivated by their determination to squeeze MMI out of the distributorship agreement in favor of another party.

Petitioners filed a motion to suspend proceedings, invoking the arbitration clause in their agreement. RTC denied, ruling that the suspension will only delay
determination of the issues. CA affirmed, holding that the interpretation of Art. 21 of NCC requires full blown trial. Hence this petition for review.

ISSUE:
Whether the dispute should be referred to arbitration.
HELD: NO.
1) The arbitration clause in the distributorship agreement between DMC-USA and MMI is valid and the dispute arbitrable. But the petition is denied. The agreement is
a contract. The arbitration clause is part of that contract and is itself a contract. Contracts are binding between the contracting parties, their assigns, and heirs. Clearly,
only parties to the agreement, DMC-USA and its managing director for export sales Paul Derby and MMI and its managing director Lily Sy are bound by
the agreement and its arbitration clause since they are the only signatories thereto. Petitioners Daniel Collins and Luis Hidalgo, and private respondent SFI are
not parties to the agreement and not assigns and heirs of the parties. They are NOT BOUND by the agreement and arbitration clause. Thus, referral to arbitration
in California and suspension of the proceedings in the civil case 2637 pending return of the arbitral award could be called for but ONLY as to DMC-USA and MMI
and their managing directors.

1.1) In Toyota Motor PH v. CA, the contention that the arbitration clause is dysfunctional because of the presence of third parties was held untenable since "[c]ontracts
are respected as the law between the contracting parties" and that "[a]s such, the parties are thereby expected to abide with good faith in their contractual
commitments." But in Salas Jr. v. Laperal Realty, we held that the splitting of proceedings to arbitration as to some parties on one hand and trial for the others, or
suspension of trial pending arbitration between some of the parties should not be allowed as it would result in multiplicity of suits.

Thus, the issue in this case could not be speedily and efficiently resolved if we allow simultaneous arbitration proceedings and trial , or suspension of trial
pending arbitration. The interest of justice would be served if the trial court hears and adjudicates the case in a single and complete proceeding.

15. Sea-Land Service, Inc. v. CA, GR 126212, March 02, 2000, Ynares-Santiago, J., First Division.
FACTS:
Sea Land (SLS) and private respondent AP Moller/Maersk Line (AMML), both cargo carriers, entered into a contract “Cooperation in the pacific”, a vessel-sharing
agreement whereby they mutually agreed to purchase, share, and exchange cargo space in their containerships. Under the agreement, either party could be a principal
carrier or containership operator (operator of containership on which the cargo is carried).

Florex International, Inc. delivered to AMML cargo for delivery to San Francisco. The bill of lading was issued to Florex by AMML. AMML, pursuant to the
agreement, loaded the cargo on MS Sealand Pacer, a vessel owned by SLS. Under this arrangement, AMML is the principal carrier while SLS was the containership
operator.

The consignee refused to pay for the cargo, alleging that delivery was delayed. Florex thus filed a complaint against Maersk-Tabacalera Shipping Agency for
reimbursement. AMML filed a third-party complaint against SLS, claiming that whatever damage Flores sustained were caused by SLS which actually transported
Florex’s cargo,.

SLS moved to dismiss on the ground that there is an arbitration agreement between SLS and AMML. RTC denied the motion to dismiss. CA affirmed. Hence this
petition.

ISSUE:
Whether the third-party complaint filed by AMML against SLS may be allowed under their agreement.
HELD: NO.
1) The “Cooperation in the Pacific Contract provides:
16.2 For the purposes of this agreement the Containership Operator shall be deemed to have issued to the Principal Carrier for good consideration and for
both loaded and empty containers its non-negotiable memo bills of lading xxx.
16.3 The Principal Carrier shall use all reasonable endeavours to defend all in personam and in rem suits for loss of or damage to cargo carried pursuant
to bills of lading issued by it, or to settle such suits for as low a figure as reasonably possible. The Principal Carrier shall have the right to seek damages
and/or an indemnity from the Containership Operator by arbitration pursuant to Clause 32 hereof. Notwithstanding the provisions of the Lines' memo
bills of lading or any statutory rules incorporated therein or applicable thereto, the Principal Carrier 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, such award or judgment not being the
subject of appeal, provided that the Containership Operator has been given notice of the said claim in writing by the Principal Carrier within three months
of the Principal Carrier receiving notice in writing of the claim. 

From clauses 16 and 32, it is clear that: First, disputes between the Principal Carrier and the Containership Operator arising from contracts of carriage shall be
governed by the provisions of the bills of lading issued to the Principal Carrier by the Containership Operator.  Second, the Principal Carrier shall use its best efforts to
defend or settle all suits against it for loss of or damage to cargo pursuant to bills of lading issued by it.  Third, the Principal Carrier shall have the right to seek
damages and/or indemnity from the Containership Operator by arbitration, pursuant to Clause 32 of the agreement. Fourth, the Principal Carrier shall have the right to
commence such arbitration any time until one year after its liability has been finally determined by agreement, arbitration award or judgment, provided that the
Containership Operator was given notice in writing by the Principal Carrier within three months of the Principal Carrier receiving notice in writing of said claim.

2) Allowing AMML’s third party complaint against SLS would violate clause 16.2. This provides that the bills of lading issued to the principal carrier (AMML) by the
containership operator (SLS) shall govern in disputes between the parties. The third party complaint would allow AMML to hold SLS liable under the bill of lading
issued by the principal carrier to Florex, under which Florex is suing.
3) CA ruled that the terms of the agreement required the principal carrier’s claim against the containership operator to first be determined by, among others, a court
judgment before the right to arbitration accrues. But precisely arbitration is the mode by which liability of the containership operator may be determined . This is clear
from Clause 16.3.

It is wrong to say that the contract does not require arbitration as condition precedent to judicial action. It is clear that arbitration is the mode provided in the
agreement for AMML, principal carrier, to seek damages from SLS, as containership operator. AMML is barred from taking judicial action against SLS by the clear
terms of their agreement.

4) As principal carrier with which Florex directly dealt with, AMML can be held liable by Florex if it has a valid claim against AMML. Pursuant to Clause 16.3 of the
Agreement, respondent AMML, when faced with such a suit "shall use all reasonable endeavours to defend" itself or "settle such suits for as low a figure as
reasonably possible". In turn, respondent AMML can seek damages and/or indemnity from petitioner as Containership Operator for whatever final judgment may be
adjudged against it under the Complaint of Florex. The crucial point is that collection of said damages and/or indemnity from petitioner should be by
arbitration.

When the contract is explicit and leaves no doubt as to its intention, the court may not read into it any other intention contradicting its plain import. The third-party
complaint should thus be dismissed.

16. Magellan Capital Management Corporation v. Zosa, GR 129916, March 26, 2001, Buena, J., Second Division.
FACTS:
Magellan Capital Holdings Corporation (MCHC) appointed Magellan Capital Management Corporation (MCMC) as manager for its business affairs. MCMC, MCHC,
and Rolando Zosa entered into an employment agreement designating Zosa as CEO of MCHC. The term of Zosa’s employment is coterminous with the management
agreement until March 1996. But on May 10, 1995, the MCHC board of directors decided not to re-elect Zosa as CEO due to loss of trust and confidence.
Nonetheless, Zosa was elected to a new position as MCHC’s vice chairman for new ventures development.

On September 26, 1995, Zosa communicated his resignation as vice chairman on the ground that the position had less responsibility than CEO. He demanded that he
be given termination benefits under the employment agreement. MCHC communited its non-acceptance of Zosa’s resignation, informed him that the employment
agreement is terminated on account of breach of S12 thereof.

Zosa thus invoked the arbitration clause in the agreement:

xxx. Arbitration shall be effected by a panel of three arbitrators. The Manager, Employee and Corporation shall designate one (1) arbitrator who shall, in
turn, nominate and elect who among them shall be the chairman of the committee. xxx
Zosa designated his brother Atty. Zosa as representative in the arbitration panel. MCHC designated Atty. Fojas. MCMC nominated Atty. Quiason.

But instead of submitting the dispute to arbitration, Zosa filed an action for damages in RTC to enforce his benefits under the employment agreement. Petitioners
MCMC and MCHC moved to dismiss. RTC denied the motion to dismiss, ruling that the validity of the arbitration clause can only be determined after trial.

Petitioners filed a motion ad cautelam for the parties to file memoranda to support their stands on the issue of validity of the arbitration clause. RTC denied. CA
ordered RTC to resolve the issue of validity of arbitration clause. Thus, RTC ruled that the arbitration clause is partially void insofar as it concerns the composition of
the panel of arbitrators, since MCHC and MCMC represent the same interest and they each have 1 arbitrator. Hence this petition.

ISSUE:
Whether the arbitration clause as to the composition of the panel of arbitrators granting 1 arbitrator each to MCMC and MCHC, and one arbitrator to Zosa, is valid.
HELD: NO.
1) MCMC claims that the case falls under the jurisdiction of SEC. But the dispute does not involve election/appointment of officers of MCHC. Zosa’s complaint
focuses on the illegality of the arbitration clause initially invoked by him. Under RA 876, Arbitration Law. It is RTC which exercises jurisdiction over questions
relating to arbitration. Although the controversy which spawned the action concerns the validity of the termination of the service of a corporate officer, the issue on
the validity and effectivity of the arbitration clause is determinable by the regular courts.

2) RTC found that the composition of the panel of arbitrators would in all probability work injustice to respondent Zosa. While SC does not review factual findings in
Rule 45, even if we do so, RTC’s observations on why the composition of the panel should be voided is correct. MCMC and MCHC represent the same interest. From
the arbitration clause, MCMC and MCHC have 1 arbitrator each to compose the panel of 3 arbitrators. As MCMC is the manager of MCHC, its vote in the arbitration
proceeding would naturally be in favor of its employer MCHC and MCHC would protect its own interest. Thus, 2 votes, of MCHC and MCMC, would certainly be
against the lone arbitrator for Zosa. Thus, Zosa would never get justice or fairness in the arbitration proceedings. Thus, the arbitration clause, insofar as the
composition of the panel, is void because Art. 2045 of NCC provides: "Any clause giving one of the parties power to choose more arbitrators than the other is
void and of no effect"

The panel should be composed of 1 arbitrator for Zosa, one for both MCMC and MCHC, and the third arbitrator to be chosen by petitioners and respondent.

17. Cargill PHL, Inc. v. San Fernando Regala Trading, Inc., GR 175404, January 31, 2011, Peralta, J., Second Division.
FACTS:
Respondent San Fernando (SFRT) filed in RTC Makati a complaint for rescission of contract with damages against Cargill, alleging that it was engaged in buying and
selling molasses and Cargill was one of its sources from whom it purchased molasses. SFRT alleged that it entered into a contract with Cargill where SFRT would
purchase 12,000 metric tons of blackstrap molasses at $192 per metric ton. Payment was by irrevocable letter of credit payable at sight. Cargill failed to comply with
its obligations despite demands from SFRT.

Cargill moved to dismiss/suspend proceedings and refer controversy to arbitration, alleging that the contract was never consummated since SFRT did not return the
proposed agreement bearing its written acceptance nor did SFRT open the letter of credit. It claimed that the contract had an arbitration clause and that SFRT must
first comply with this before resorting to court. Thus, RTC must either dismiss or suspend and direct the parties to proceed to arbitration under S6 and 7 of RA 876.

RTC denied the motion to dismiss/suspend. CA affirmed. Hence this petition.

ISSUE:
Whether RTC acted correctly in denying the motion to dismiss.
HELD: NO.
1) SFRT claims that Cargill’s Rule 65 petition in the CA against an RTC order denying a motion to dismiss/suspend proceedings and refer controversy to voluntary
arbitration was a wrong remedy under S29, RA 876:
Section 29.
xxx An appeal may be taken from an order made in a proceeding under this Act, or from a judgment entered upon an award
through certiorari proceedings, but such appeals shall be limited to question of law. xxx
SFRT cites Gonzales v. Climax Mining where SC ruled the impropriety of Rule 65 as a mode of appeal from an RTC order directing the parties to arbitration. But this
case is not in point.

1.1) In Gonzales, the certiorari petition raises a question of law, but not a question of jurisdiction. The judge therein acted in accord with RA 876 when he ordered
Gonzales to proceed with arbitration after determining that there was an arbitration agreement. As long as courts act within its jurisdiction and do not gravely abuse its
discretion, any error it commits will be merely an error of judgment reviewable by appeal and not thru special civil action of certiorari.
1.2) Here, RTC found the existence of the arbitration clause. However, notwithstanding the finding that an arbitration agreement existed, RTC denied the motion of
Cargill to suspend proceedings and ordered Cargill to file answer. RA 876 confines the court’s authority only to the determination of whether there is an
agreement in writing providing for arbitration. In the affirmative, the statute ordains that the court issue an order summarily directing the parties to proceed
with arbitration. If none, the proceedings shall be dismissed.

In denying the motion to suspend proceedings and refer to arbitration, RTC went beyond its authority of determining only the issue of whether there is an arbitration
agreement by directing Cargill to file answer, instead of ordering the parties to proceed to arbitration. In so doing it acted in excess of jurisdiction. Rule 65 is the
proper remedy since there is no plain, speedy, and adequate remedy in the ordinary course of law.

2) CA ruled that arbitration cannot be ordered in this case since Cargill alleged that the contract between the parties did not exist or was invalid and arbitration is not
proper where one party repudiates the existence/validity of the contract. CA cites Gonzales v. Climax Mining.

2.1) But the Gonzales case relied upon by CA had been modified upon MR: Hence, we now hold that 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. In so ruling, we applied the doctrine of separability.

3) SFRT argues that the separability doctrine is not applicable in Cargill’s case since in this case, Cargill, who is insistent on arbitration, claims that the contract
sought by SFRT to be rescinded did not exist or was not consummated. Thus, the separability doctrine is inapplicable as there is no container contract or arbitration
clause to speak of.

Applying Gonzales, an arbitration clause shall not be regarded non-existent just because the main contract is invalid since it shall be treated as a separate agreement
independent of the main contract. Thus, even a party who has repudiated the main contract is not prevented from enforcing its arbitration clause.

4) SFRT claims that even if the existence of arbitration clause is conceded, CA’s declining to refer to arbitration is correct since in its complaint in RTC, it presents
the issue of whether it is entitled to rescind the contract with damages, which is a judicial question. SFRT cites Gonzales.

In Gonzales, we found that since the complaint filed with DENR Panel of Arbitrators charged respondents with disregarding the addendum contract and acting in a
fraudulent manner against petitioner Gonzales, the complaint filed in the panel was not a dispute involving rights to mining areas, but essentially judicial issues. We
then said that the panel did not have jurisdiction over such issue since it did not involve application of technical knowledge and expertise relating to mining. It is in
this context that we said that arbitration before the panel is not proper when:

“one of the parties repudiates the existence or validity of such contract on the ground of fraud or oppression. 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.”

4.1) In fact, We even clarified in our 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."
We made such clarification in our resolution of the motion for reconsideration after ruling that the parties in that case can proceed to arbitration under the Arbitration
Law, as provided under the Arbitration Clause in their Addendum Contract.

18. RCBC Capital Corporation v. BDO Unibank Inc., GR 196171, December 10, 2012, Villara, Jr., J., First Division.
FACTS:
RCBC entered into a Share Purchase Agreement (SPA) with Equitable PCI Bank (EPCIB), George Go., and shareholders of Bankard Inc. for the sale to RCBC of
226,460,000 shares of Bankard, 67% of Bankard’s capital stock. After payment of P1.7B, the deeds of sale over the shares were executed. The dispute between the
parties arose when in May 2003, RCBC informed EPCIB and other selling shareholders of an overpayment of the shares, claiming there was overstatement of
valuation of P478M and that the sellers violated their warranty under S5(g) of the SPA.

RCBC commenced arbitration with the International Chamber of Commerce-International Court of Arbitration (ICC-ICA) in accordance with S10 of the SPA. In its
request for arbitration, RCBC charged Bankard with contravening generally accepted accounting principles due to which the financial statements of Bankard before
the stock purchase were inaccurate and resulted in P556M overpayment. Thus, RCBC sought rescission of the SPA and damages of P573M. EPCIB, Go, and other
selling shareholders, respondents, claim that RCBC’s claim is one for overpayment or price reduction and is already time-barred in S5(h) of the SPA.

The arbitration tribunal was constituted. Mr. Neil Kaplan was nominated by RCBC; Justice Kapunan by respondents; and Sir Ian Barker was appointed by ICC-ICA
as chairman.

1) ICC-ICA informed the parties that they are required to pay $350k as advance on costs under Art. 30(3) of ICC Rules. RCBC paid its share. Respondents did not,
claiming that to make them share equally with RCBC when RCBC’s claim is 40 times that of their counterclaims would be unfair. ICC-ICA thus instructed the
tribunal to suspend its work. RCBC objected to cancellation of the hearings, arguing that respondents have been given ample time to submit their brief. It argues that
respondents should be declared in default. Costs advances were increased to $450k. Respondents refused to pay still. RCBC reiterated its request to declare
respondents in default and their counterclaims be dismissed. Chairman Barker, in a letter, said that the tribunal has no power to give RCBC any relief against
respondents’ refusal to pay. Thus, RCBC paid the whole amount of cost advances to prevent suspension of hearings.

The tribunal rendered its first partial award. RCBC filed a motion to confirm the award and respondents a motion to vacate in RTC Makati. RTC confirmed the award
in SP Proc. Case 6046.

The cost advances were increased to $580k RCBC paid the whole increment. It reiterated its plea that respondents be held in default. In a December 18, 2007 letter,
Chairman Barker said that “the tribunal interprets claimant (RCBC)’s letter as an application for partial award against respondents.”

2) In a letter dated March 13, 2008, Chairman Barker advised the parties:
2. The Tribunal notes that neither party has referred to an article by Mat[t]hew Secomb on this very subject which appears in the ICC Bulletin
Vol. 14 No.1 (Spring 2003). To assist both sides and to ensure that the Tribunal does not consider material on which the parties have not been given an
opportunity to address, I attach a copy of this article, which also contains reference to other scholarly works on the subject.

The arbitration tribunal then rendered its second partial award the bases of which were in the article by Secomb. The award ordered respondents to refund the costs
that were paid by RCBC for them of $290k. This was confirmed by RTC Branch 148. EPCIB filed in CA a petition for review with application for TRO. (CA Case
113525) CA reversed the second partial award. RCBC filed a petition for review with SC (GR 196171).

The tribunal issued the final award, ruling in favor of RCBC. BDO (EPCIB merged with BDO).Branch 148 in Case 6046 confirmed the final award. George Go, for
respondents, filed a petition in CA seeking to set aside the confirmation. Branch 148 then issued an order granting RCBC’s motion to execute against respondents. To
avert the sale of BDO properties and prevent disruption of BDO operations, respondents paid under protest by tendering a manager’s check of P637M which was
accepted by RCBC as full payment of the writ of execution. CA also denied BDO’s application for TRO for non-compliance with Rule 19.25 of Special ADR Rules .
Hence, BDO filed a petition for certiorari with application for WPMI (GR 199238).

ISSUE:
Whether the second award’s reversal by the CA was proper.
HELD: YES.
1) In their Terms of Reference (TOR), the parties agreed on the governing law and rules: Governing law: Republic of the PHL.
Procedure: ICC Rules of Arbitration (January 1, 1998) and the law currently applicable to arbitration in PHL.

2) Although the parties provided in S10 of SPA that the arbitration shall be conducted under ICC Rules, it was nonetheless arbitration under PHL Law since both
parties are residents of this country. RA 876 as amended by RA 9285 principally applied in the arbitration between the parties.

3) In RA 9285:
SEC. 40. Confirmation of Award. – The confirmation of a domestic arbitral award shall be governed by Section 23 of R.A. 876.
A domestic arbitral award when confirmed shall be enforced in the same manner as final and executory decisions of the Regional Trial Court. Xxx
SEC. 41. Vacation Award. – A party to a domestic arbitration may question the arbitral award with the appropriate regional trial court in accordance with
the rules of procedure to be promulgated by the Supreme Court only on those grounds enumerated in Section 25 of Republic Act No. 876. Any other
ground raised against a domestic arbitral award shall be disregarded by the regional trial court.

Rule 11.4 of Special ADR Rules sets forth the grounds for vacating an arbitral award:
Rule 11.4. Grounds.—(A) To vacate an arbitral award. – The arbitral award may be vacated on the following grounds:
a. The arbitral award was procured through corruption, fraud or other undue means;
b. There was evident partiality or corruption in the arbitral tribunal or any of its members;
c. The arbitral tribunal was guilty of misconduct or any form of misbehavior that has materially prejudiced the rights of any party such as refusing to
postpone a hearing upon sufficient cause shown or to hear evidence pertinent and material to the controversy;
d. One or more of the arbitrators was disqualified to act as such under the law and willfully refrained from disclosing such disqualification; or
e. The arbitral tribunal exceeded its powers, or so imperfectly executed them, such that a complete, final and definite award upon the subject matter
submitted to them was not made.
The award may also be vacated on any or all of the following grounds:
a. The arbitration agreement did not exist, or is invalid for any ground for the revocation of a contract or is otherwise unenforceable; or
b. A party to arbitration is a minor or a person judicially declared to be incompetent.
xxxx
In deciding the petition to vacate the arbitral award, the court shall disregard any other ground than those enumerated above.
4) Review brought to SC under Special ADR Rules is not a matter of right. Rule 19,36 states:
Rule 19.36.Review discretionary.—A review by the Supreme Court is not a matter of right, but of sound judicial discretion, which will be granted only
for serious and compelling reasons resulting in grave prejudice to the aggrieved party. The following, while neither controlling nor fully measuring
the court’s discretion, indicate the serious and compelling, and necessarily, restrictive nature of the grounds that will warrant the exercise of the Supreme
Court’s discretionary powers, when the Court of Appeals:
a. Failed to apply the applicable standard or test for judicial review prescribed in these Special ADR Rules in arriving at its decision resulting in
substantial prejudice to the aggrieved party;
b. Erred in upholding a final order or decision despite the lack of jurisdiction of the court that rendered such final order or decision;
c. Failed to apply any provision, principle, policy or rule contained in these Special ADR Rules resulting in substantial prejudice to the aggrieved party;
and
d. Committed an error so egregious and harmful to a party as to amount to an undeniable excess of jurisdiction.
The mere fact that the petitioner disagrees with the Court of Appeals’ determination of questions of fact, of law or both questions of fact and law, shall
not warrant the exercise of the Supreme Court’s discretionary power. The error imputed to the Court of Appeals must be grounded upon any of the
above prescribed grounds for review or be closely analogous thereto. xxx

5) In Rule 19,10, the court can only vacate the decision of an arbitral tribunal upon clear showing of the grounds in S24 of RA 876 or under Rule 34 of the Model
Law in a domestic arbitration . The court “shall not set aside or vacate the award xxx merely on the ground that the arbitral tribunal committed errors of fact, or of
law” or both as the court cannot substitute its judgment for that of the arbitral tribunal.

Thus, awards cannot be set aside for mere errors of judgment. Courts will not review findings of law and fact in the award.

6) The ground raised to vacate the second partial award is evident partiality under S24(b) of RA 876 and Rule 11.4 (b) of Special ADR Rules.

The common meaning of “partiality” is inclination to favor one side.” “Inclination” means “a disposition of mind or character; propensity.” “Evident” means “capable
of being perceived especially by sight; discernable; obvious; manifest; apparent.” Evident partiality in its common definition thus implies the “existence of signs and
indications that must lead to an identification or inference of partiality.”

6.1) In Morelite Construction Corp. v. NY District Council Carpenters Benefit Funds, the second circuit held that:
Bias is always difficult and often impossible to “prove”. If the standard of "appearance of bias" is too low for the invocation of  Section 10, and "proof of
actual bias" too high, with what are we left? Thus, “evident partiality” will be found where a reasonable person would have to conclude that an
arbitrator was partial to one party to the arbitration.
The myriad of judicial interpretations and approaches to evident partiality resulted in a lack of uniform standard, leaving courts to examine evident partiality on a
case-by-case basis.

6.2) Chairman Barker’s partiality is indicative of bias. Although RCBC repeatedly asked for reimbursement and withdrawal of BDO’s counterclaims, it is baffling
why only in the December 18, 2007 letter of Barker that RCBC’s prayer was given a complexion of being an application for partial award. To this Court, the letter
signaled a preconceived course of action that the relief prayed for by RCBC will be granted.

6.3) Barker furnished the parties with a copy of the Secomb Article. This article ultimately favored RCBC by advancing its cause. Barker makes it appear that he
intended good to be done in doing so but due process dictates the cold neutrality of impartiality. This act established that he had pre-formed opinions. That he
provided copies of the article is interpretable that he had prejudged the matter before him. The Secomb article tackled the bases upon which the Second Partial Award
was founded. Thus, the article reflected in advance the disposition of the ICC arbitral tribunal.

6.4) 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. Moreover, such bias must be “direct, definite, capable of demonstration rather than remote, uncertain, or
speculative.” We agree with CA that Barker’s furnishing of the Secomb article is indicative of partiality such that a reasonable man would conclude that he was
favoring RCBC. That Barker was predisposed to grant relief to RCBC was shown by his act of interpreting RCBC’s letter as an application, which merely reiterated
its plea to declare BDO in default, to issue partial award.

6.5) The Court clarifies that the merits in the issuance of the second partial award are not in issue. Courts will not review findings of law and fact of an award. It is the
finding of evident partiality which constitutes legal ground to vacate the second partial award.

7) As to injunction in execution of arbitral award, before injunctive writ can be issued, these requisites must be present: 1) right to be protected; 2) an act in violation
of such right. Special ADR Rules states:
Rule 19.22. Effect of appeal.—The appeal shall not stay the award, judgment, final order or resolution sought to be reviewed unless the Court of Appeals
directs otherwise upon such terms as it may deem just.
CA did not abuse its discretion in denying the application for TRO upon its finding that BDO failed to establish a clear legal right to enjoin execution of the final
award. But since BDO already paid P637M under protest to RCBC, which RCBC accepted, there is no more act to be enjoined.