1. BF Corporation v.
Court of Appeals, 288 SCRA 267 the Conditions of Contract was not duly executed or signed by the
Facts:
Petitioner and respondent Shangri-la Properties, Inc. entered
into an agreement whereby the latter engaged the former to
construct the main structure of the "EDSA Plaza Project," a shopping
mall complex in Mandaluyong. Petitioner incurred delay in the
construction work that SPI considered as "serious and substantial." On
the other hand, according to petitioner, the construction works
"progressed in faithful compliance with the First Agreement until a
fire broke out damaging Phase I" of the Project. Hence, SPI proposed
the re-negotiation of the agreement between them.
Petitioner and SPI entered into a written agreement denominated as
"Agreement for the Execution of Builder's Work for the EDSA Plaza
Project." Said agreement would cover the construction work on said
project as of May 1, 1991 until its eventual completion. According to
SPI, petitioner "failed to complete the construction works and
abandoned the project." This resulted in disagreements between the
parties as regards their respective liabilities under the contract.
Petitioner filed with the RTC of Pasig a complaint 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. The motion was anchored on defendants'
allegation that the formal trade contract for the construction of the
project provided for a clause requiring prior resort to arbitration
before judicial intervention could be invoked in any dispute arising
from the contract. Petitioner opposed said motion claiming that
there was no formal contract between the parties although they
entered into an agreement defining their rights and obligations in
undertaking the project.
Thereafter, upon a finding that an arbitration clause indeed
exists, the lower court denied the motion to suspend proceedings as
parties, and the failure of the defendants to submit any signed copy of
the said document,.
The lower court then ruled that, assuming that the
arbitration clause was valid and binding, still, it was "too late in the
day for defendants to invoke arbitration. Considering the fact that
under the supposed Arbitration Clause invoked by defendants, it is
required that "Notice of the demand for arbitration of a dispute shall
be filed in writing with the other party . . . . in no case . . . . later than
the time of final payment . . . "which apparently, had elapsed because
defendants have failed to file any written notice of any demand for
arbitration during the said long period of one year and eight months.
The CA annulled the orders of the RTC.
Issue: WON a petition for certiorari is proper
Held:
Yes. The rule that the special civil action of certiorari may not
be invoked as a substitute for the remedy of appeal. The Court has
likewise ruled that "certiorari will not be issued to cure errors in
proceedings or correct erroneous conclusions of law or fact. As long
as a court acts within its jurisdiction, any alleged errors committed in
the exercise of its jurisdiction will amount to nothing more than errors
of judgment which are reviewable by timely appeal and not by a
special civil action of certiorari."
The question of jurisdiction, which is a question of law
depends on the determination of the existence of the arbitration
clause, which is a question of fact. In the instant case, the lower court
found that there exists an arbitration clause. However, it ruled that in
contemplation of law, said arbitration clause does not exist. It is that
mode of appeal taken by private respondents before the CA that is
being questioned by the petitioners before this Court. But at the heart
of said issue is the question of whether there exists an Arbitration
Clause because if an Arbitration Clause does not exist, then private
respondents took the wrong mode of appeal before the CA.
For this Court to be able to resolve the question of whether
private respondents took the proper mode of appeal, which,
incidentally, is a question of law, then it has to answer the core issue
of whether there exists an Arbitration Clause which, admittedly, is a
question of fact.
Moreover, where a rigid application of the rule that
certiorari cannot be a substitute for appeal will result in a manifest
failure or miscarriage of justice, the provisions of the Rules of Court
which are technical rules may be relaxed. As we shall show
hereunder, had the CA dismissed the petition for certiorari, the issue
of whether or not an arbitration clause exists in the contract would
not have been resolved in accordance with evidence extant in the
record of the case. Consequently, this would have resulted in a
judicial rejection of a contractual provision agreed by the parties to
the contract.
In the same vein, this Court holds that the question of the
existence of the arbitration clause in the contract between petitioner
and private respondents is a legal issue that must be determined in
this petition for review on certiorari.
This Court may as well proceed to determine whether the arbitration
clause does exist in the parties' contract. Republic Act No. 876
provides for the formal requisites of an arbitration agreement as
follows:
Sec. 4. Form of arbitration agreement. - A contract to arbitrate a
controversy thereafter arising between the parties, as well as a
submission to arbitrate an existing controversy, shall be in writing and
subscribed by the party sought to be charged, or by his lawful agent.
The making of a contract or submission for arbitration described in
section two hereof, providing for arbitration of any controversy, shall
be deemed a consent of the parties of the province or city where any
of the parties resides, to enforce such contract of submission.
(Emphasis supplied.).
The formal requirements of an agreement to arbitrate are therefore
the following:
(a) it must be in writing and
(b) it must be subscribed by the parties or their representatives.
There is no denying that 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; to sign at the end of a
document. 11 That word may sometimes be construed to mean to give
consent to or to attest. 12
The Court finds that, upon a scrutiny of the records of this case, 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 private
respondent's representative to initial the "Conditions of Contract"
would therefore 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.
Petitioner's contention that there was no arbitration clause because
the contract incorporating said provision is part of a "hodge-podge"
document, is therefore untenable. 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. 13 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. 14
This Court likewise does not find that the Court of Appeals erred in
ruling that private respondents were not in default in invoking the
provisions of the arbitration clause which states that "(t)he demand
for arbitration shall be made within a reasonable time after the
dispute has arisen and attempts to settle amicably had failed."
Under the factual milieu, private respondent SPI should have paid its
liabilities tinder 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 private respondent 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, petitioner posthaste filed the complaint before
the lower court. Thus, while private respondent SPI's request for
arbitration on August 13, 1993 might appear an afterthought as it was
made after it had filed the motion to suspend proceedings, it was
because petitioner 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. "Reasonableness"
is a relative term and the question of whether the time within which
an act has to be done is reasonable depends on attendant
circumstances. 15 This Court finds that under the circumstances
obtaining in this case, a one-month period from the time the parties
held a conference on July 12, 1993 until private respondent SPI
notified petitioner that it was invoking the arbitration clause, is a
reasonable time. Indeed, petitioner may not be faulted for resorting
to the court to claim what was due it under the contract. However,
we find its denial of the existence of the arbitration clause as an
attempt to cover up its misstep in hurriedly filing the complaint before
the lower court.
In this connection, it bears stressing that the lower court has not lost
its jurisdiction over the case. Section 7 of Republic Act No. 876
provides that proceedings therein have only been stayed. After the
special proceeding of arbitration 16 has been pursued and completed,
then the lower court may confirm the award 17 made by the
arbitrator.
It should be noted that in this jurisdiction, arbitration has been held
valid and constitutional. Even before the approval on June 19, 1953 of
Republic Act No. 876, this Court has countenanced the settlement of
disputes through arbitration. 18 Republic Act No. 876 was adopted to
supplement the New Civil Code's provisions on arbitration. 19 Its
potentials as one of the alternative dispute resolution methods that
are now rightfully vaunted as "the wave of the future" in international
relations, is recognized worldwide. To brush aside a contractual
agreement calling for arbitration in case of disagreement between the
parties would therefore be a step backward.
2. Sea-Land Service, Inc. v. Court of Appeals, 327 SCRA 135
FACTS: Petitioner Sea-Land Services, Inc. and private respondent A.P.
Moller/Maersk Line (hereinafter referred to as "AMML"), both carriers
of cargo in containerships as well as common carriers, entered into a
contract entitled, "Co-operation in the Pacific" (hereinafter referred to
as the "Agreement"), a vessel sharing agreement whereby they
mutually agreed to purchase, share and exchange needed space for
cargo in their respective containerships. Under the Agreement, they
could be, depending on the occasion, either a principal carrier (with a
negotiable bill of lading or other contract of carriage with respect to
cargo) or a containership operator (owner, operator or charterer of
containership on which the cargo is carried).
During the lifetime of the said Agreement, Florex International, Inc.
(hereinafter referred to as "Florex") delivered to private respondent
AMML cargo of various foodstuffs, with Oakland, California as port of
discharge and San Francisco as place of delivery. Pursuant to the
Agreement, respondent AMML loaded the subject cargo on MS
Sealand Pacer, a vessel owned by petitioner. Under this arrangement,
therefore, respondent AMML was the principal carrier while
petitioner was the containership operator. The consignee refused to
pay for the cargo, alleging that delivery thereof was delayed.
Thus, Florex filed a complaint against respondent Maersk-Tabacalera
Shipping Agency (Filipinas), Inc. for reimbursement of the value of the
cargo and other charges. Respondent AMML filed its Answer alleging
that even on the assumption that Florex was entitled to
reimbursement; it was petitioner who should be liable. Accordingly,
respondent AMML filed a Third Party Complaint against petitioner
averring that whatever damages sustained by Florex were caused by
petitioner, which actually received and transported Florexs cargo on
its vessels and unloaded them.
Petitioner filed a Motion to Dismiss the Third Party Complaint on the
ground of failure to state a cause of action and lack of jurisdiction.
Petitioner also prayed either for dismissal or suspension of the Third
Party Complaint on the ground that there exists an arbitration
agreement between it and respondent AMML. The lower court issued
an Order denying petitioners Motion to Dismiss. Petitioners Motion
for Reconsideration was likewise denied so they subsequently filed a
petition for certiorari with the Court of Appeals. Meanwhile,
petitioner also filed its Answer to the Third Party Complaint in the trial
court. Respondent CA rendered the assailed Decision dismissing the
petition for certiorari. With the denial of its Motion for
Reconsideration, petitioner filed the instant petition for review.
ISSUES:
(1) Whether CA erred in holding that arbitration is a condition precedent
to suit where such an agreement to arbitrate exists.
(2) Whether CA erred in refusing to have the third-party complaint
dismissed for failure to state a cause of action and for ruling that the
failure to state a cause of action may be remedied by reference to its
attachments.
RULING:
(1) YES, the terms of the contract requires arbitration as a condition
precedent to judicial action is erroneous. It is clear that arbitration is
the mode provided by which respondent AMML as Principal Carrier
can seek damages and/or indemnity from petitioner, as Containership
Operator. Stated differently, respondent AMML is barred from taking
judicial action against petitioner by the clear terms of their
Agreement.
All told, when the text of a contract is explicit and leaves no doubt as
to its intention, the court may not read into it any other intention that
would contradict its plain import. Arbitration being the mode of
settlement between the parties expressly provided for by their
Agreement, the Third Party Complaint should have been dismissed.
This Court has previously held that arbitration is one of the alternative
methods of dispute resolution that is now rightfully vaunted as "the
wave of the future" in international relations, and is recognized
worldwide. To brush aside a contractual agreement calling for
arbitration in case of disagreement between the parties would
therefore be a step backward.
(2) NO, the pertinent clauses of the "Co-operation in the Pacific" contract
entered into by the parties provide that 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.
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 the foregoing, it is clear: 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.
Based from the foregoing matters, we find that both the trial court
and the Court of Appeals erred in denying petitioners prayer for
arbitration. To begin with, allowing respondent AMMLs Third Party
Claim against petitioner to proceed would be in violation of Clause
16.2 of the Agreement. The Court of Appeals ruled that the terms of
the Agreement "explicitly required that the principal carriers claim
against the containership operator first be finally determined by,
among others, a court judgment, before the right to arbitration
accrues." However, the Court of Appeals failed to consider that,
precisely, arbitration is the mode by which the liability of the
Containership Operator may be finally determined. This is clear from
the mandate of Clause 16.3 that "(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".
3. Manila Electric Company v. Pasay Transportation Company, 57 Phil.
600
Fast facts
The case at bar relates with a petition of the Manila Electric
Company (MEC, pet), requesting the members of the SC, sitting as a
board of arbitrators, to fix the terms upon which certain
transportation companies shall be permitted to use the Pasig bridge
of the MEC and the compensation to be paid to the MEC by such
transportation companies.
Act NO. 1446, Section 11
Relates with the legal act of the members of the SC, sitting as a
board of arbitrators, to act on the petition.
Issue
Concerns the legal right of the members of the SC, sitting as a board
of arbitrators the decision of a majority of whom shall be final, to
act in that capacity.
Held & Ratio
Act 1446, Section 11 contravenes the maxims which guide the
operation of a democratic government constitutionally established,
and that it would be improper and illegal for the members of the SC,
sitting as a board or arbitrators, the decision of a majority of whom
shall be final, to act on the petition of the MEC.
The decisions of the Board of Arbitration shall go through the regular
court system (Trial Courts – Court of Appeals – SC). They will be
reviewed by the lower courts and will ultimately be reviewed by
themselves. The SC cannot sit as members of the Board of
Arbitration because it is not within their jurisdiction to decide on
cases on purely contractual situations.
 Sec. 11 of Act 1446 provides:
“Whenever any franchise or right of way is granted
to any other person or corporation, now or
hereafter in existence, over portions of the lines
and tracks of the grantee herein, the terms on
which said other person or corporation shall use
such right of way, and the compensation to be paid
to the grantee herein by such other person or
corporation for said use, shall be fixed by the
members of the Supreme Court sitting as a board
of arbitrators, the decision of a majority of whom
shall be final.”
 Said Act provides that for every franchise
granted, terms as to the usage and
compensation to be paid to the grantee shall
be fixed by the members of the Supreme Court
sitting as board of arbitrators, a majority vote
is required and this is final
 Pursuant to said Act, MERALCO filed a petition before the
court requesting the members of the Supreme Court sitting
as board of arbitrators to fix the terms upon which certain
transportation companies shall be permitted to use the Pasig
bridge of the MERALC
 Copies were sent to affected transpo company (one of which
is the Pasay Transpo) and to Atty-Gen which disclaimed any
interest.
ISSUES: Whether or not the members of the Supreme Court can sit
as arbitrators and fix the terms and compensation as is
asked of them in this case
HELD: No
 The Supreme Court represents one of the three divisions of
power in our government. It is judicial power and judicial
power only which is exercised by the Supreme Court. Just as
the Supreme Court, as the guardian of constitutional rights,
should not sanction usurpations by any other department of
the government, so should it as strictly confine its own sphere
of influence to the powers expressly or by implication
conferred on it by the Organic Act.
 The Supreme Court and its members should not and cannot
be required to exercise any power or to perform any trust or
to assume any duty not pertaining to or connected with the
administering of judicial functions
 The Organic Act provides that the Supreme Court of the
Philippine Islands shall possess and exercise jurisdiction as
heretofore provided and such additional jurisdiction as shall
hereafter be prescribed by law (sec. 26).
  When the Organic Act speaks of the
exercise of "jurisdiction" by the Supreme
Court, it could not only mean the exercise
of "jurisdiction" by the Supreme Court
acting as a court, and could hardly mean
the exercise of "jurisdiction" by the
members of the Supreme Court, sitting as a
board of arbitrators
 A board of arbitrators is not a "court" in any proper sense of
the term, and possesses none of the jurisdiction which the
Organic Act contemplates shall be exercised by the Supreme
Court.
 The power conferred on this court is exclusively judicial, and it
cannot be required or authorized to exercise any other. . . . Its
jurisdiction and powers and duties being defined in the
organic law of the government, and being all strictly judicial,
Congress cannot require or authorize the court to exercise any
other jurisdiction or power, or perform any other duty.
 section 11 of Act No. 1446 contravenes the maxims which
guide the operation of a democratic government
constitutionally established, and that it would be improper
and illegal for the members of the Supreme Court, sitting as a
board of arbitrators, the decision of a majority of whom shall
be final, to act on the petition of the Manila Electric Company
4. Puromines v. Court of Appeals, 220 SCRA 281
Facts:
Puromines, Inc. and Makati Agro Trading, Inc. entered into a contract
with private respondents Philipp Brothers Oceanic, Inc. for the sale of
prilled Urea in bulk. The Sales Contract provided, among others an
arbitration clause which states, thus:
"9. Arbitration - Any disputes arising under this contract
shall be settled by arbitration in London in accordance with
the Arbitration Act 1950 and any statutory amendment or
modification thereof. XXXX" 
The shipment covered by 3 bills of lading was loaded on MV Liliana
Dimitrova with Philipp Brothers as charterer of said vessel. When the
shipment covered by Bill of Lading 1 and 3 were discharged in Manila,
it was found to be in bad order and condition, caked, hardened and
lumpy, discoloured and contaminated with rust and dirt.
Puromines filed a complaint with the Trial Court for breach of contract
of carriage against Maritime, as ship-agent and Philipp Brothers, as
charterer. Philipp filed a motion to dismiss on the ground that
Petitioner should comply with the arbitration clause in the sales
contract. Puromines opposed contending that the sales contract does
not include contract of carriage, therefore, the latter is not covered by
the agreement on arbitration.
Issue: Whether or not the arbitration clause in the sales contract
covers claims for violations of contract of carriage.
Held:
Yes. The sales contract is comprehensive enough to include claims for
damages arising from carriage and delivery of the goods. Puromines
derives its right to the cargo from the bill of lading which is the
contract of affreightment together with the sales contract.
Consequently, it is bound by the provisions and terms of the said bill
of lading and of the arbitration clause incorporated in the sales
contract.
Responsibility to third persons for goods shipped on board a vessel
follows the vessel's possession and employment. Assuming the cause
of action is based on contract of carriage, it must be first determined
what kind of charter party had with the ship owner to determine
liability. If it is a contract of affreightment, the charterer is not liable
as possession is still with owner. If it is a charter of demise or
bareboat, then the charterer is liable as it is considered the owner and
therefore would be liable for damage or loss.
In any case, whether the liability of respondent should be based on
the same contract or that of the bill of lading, the parties are
nevertheless obligated to respect the arbitration provisions on the
sales contract and/or the bill of lading. Petitioner being a signatory
and party to the sales contract cannot escape from his obligation
under the arbitration clause as stated therein.
Arbitration has been held valid and constitutional. The rule now is
that unless the agreement is such as absolutely to close the doors of
the courts against the parties, which agreement would be void, the
courts will look with favor upon such amicable arrangements and will
only interfere with great reluctance to anticipate or nullify the action
of the arbitrator.
WHEREFORE, petition is hereby DISMISSED and decision of the court a
quo is AFFIRMED.
5. Labayen v. Hernaez, 1 Phil. 587
From the record of this case it appears (1) That the complaint was
filed in accordance with the former law of Civil Procedure, and that by
it a declarative action of greater import was brought, and that the
answer setting up a counterclaim was also filed in accordance with
the said law. (2) From this stage on the trial was conducted in
accordance with the provisions of the new Code of Civil Procedure,
and was set for hearing on the 16th of April, 1902. (3) On the same
date, the parties having suggested the appointment of experts for the
examination of the accounts, the judge made an order for their
appointment. The parties, however, subsequently agreed to
substitute one of the experts by another, who was accepted by the
court by an order of the 7th of June following. (4) On the 14th of the
same month the parties presented a petition in which they proposed
another person in substitution of the expert last named, who had
resigned, and in this petition they expressed the duties of these two
persons in the following terms : "The said referees should
report solely upon the facts appearing from the record, in accordance
with the provisions of article 134 of the Code Civil Procedure, and the
documents presented to the court." The court immediately thereafter
entered the following order: "Upon the filing of the preceding
stipulation of the parties, and in accordance therewith, the court will
issue a commission in favor of the gentlemen selected as referees in
this case." (5) The clerk entered the following note: "On this date, and
in compliance with the preceding order, I have issued, under the seal
of this court, the proper commission to the referees in favor of
Messrs. William F. Nicholls and Felix Atienza, in accordance with the
provisions of article 136 of the Code of Civil Procedure." (6) On the
same date, the 14th of June, the record shows that the papers were
delivered to the referees appointed, and on the 30th of June the
papers were returned by the latter, together with a document called
an account-current, prepared by the referees, and based, according to
their statements, solely upon the documents and accounts-current,
appearing in the record. With this they presented their report. (7) The
record discloses that the next step taken was to inform the judge of
the filing of this statement and report, and that the judge took time to
examine the account and report of the referees. Without further
proceedings than those above related the court below ordered
judgment against the plaintiff and in favor of the defendant in the
sum of 13,498 pesos and 80 cents, concurring entirely in the report of
the referees.
The termination of this trial has been in a high degree irregular. The
judge had no authority, either by the consent of the parties or the
provisions of the law, to enter judgment as he did. The will of the
parties was that the experts called referees were to report solely upon
the facts appearing from the record and papers presented to the
judge, and in accordance with the provisions of article 134 of the Code
of Civil Procedure. Nevertheless, in their report they passed upon
three questions of law, upon which they expressed their opinion, the
fact being that the parties, in accordance with the provisions of article
134 of the Code, sought nothing more than and agreement as to the
facts, and if these referees understood that they were to act a such in
accordance with the indication of the acting clerk in his note with
respect to article 136 of the Code of Civil Procedure, in this case they
should have complied with the provisions of the said article and those
of the following articles, Nos. 138, 139, and 140. None of this, with
the exception of the issuance of the commissions and the collections
of fees, has been done. The result was a trial by referees, in violation
of the provisions of law, this being a substantial defect which vitiates
the judgment itself.
We therefore declare the judgment entered below to be null and
void, without special condemnation as to costs. It is directed that the
record be returned to the court below. So ordered.
6. Wahl v. Donaldson, 2 Phil. 301
Brief facts: A contract was entered into between Wahl and Donaldson
for the purpose of lease of a ship and a stipulation in said contract
provides that conflicts shall be submitted before arbitrators in HK. A
complaint for sum of money was filed before the CFI. CFI first decided
in favor of Wahl, but upon application, the judgment by default was
set aside. The CFI in granting such motion to set aside judgment,
upheld the validity of the arbitration clause. The SC however reversed
the CFI and declared the clause contrary to public policy.
Doctrine: A condition in a contract that disputes arising out of it shall
be referred to arbitration is good where the amount of damages
sustained by a breach of the contract is to be ascertained by specified
arbitration before any right of action arises, but that it is illegal where
all the matters in dispute of whatever sort may be referred to
arbitrators and to them alone. In the first case a condition precedent
to the accrual of a right of action is imposed, while in the second it is
attempted to prevent any right of action accruing at all, and this can
not be permitted.
Facts:
 Wahl and Donaldson entered into a contract by which Wahl
leased to the defendants a certain ship called Ptrarch for the
term of 6 months
 Wahl then claimed that Donaldosn is still indebted to them
(Wahl) a balance of $ 25, 484.38 with interest. Wahl then
insituted a suit.
 Donaldson failed to answer the complaint. Consequently, a
judgment by default was rendered in favor of Wahl wherein
Donaldson was asked to pay Wahl the sum of $17, 892.81
 After almost 2 months, Donaldson made an application to
the CFI for a new trial which was granted and eventually set
aside the judgment by default.
 After the grant of motion for new trial, a demurrer was made
by Donaldson to the complaint which presented the question
of the competency of the CFI to try the case basing this
argument on a provision in the subject contract
o Contract provides that in case of conflict, the
difference shall be referred for arbitration to 2
competent persons in HK
Issue: WON the provision is invalid as being against public policy (Yes)
Ratio:
 A condition in a contract that disputes arising out of it shall
be referred to arbitration is
o Valid – where the amount of damages sustained by
a breach of the contract is to be ascertained by
specified arbitration before any right of action arises
 Ratio for validity – it is a condition
precedent to the accrual of a right of action
o Illegal – where all the matters in dispute of
whatever sort may be referred to arbitratiors and to
them alone
 Ratio for invalidity – it is attempted to
prvent any right of action accruing at all,
and this cannot be permitted
 Rule proviided above is the rule in the US which shall also be
applicable in our jurisdiction because our Code of Civil
Procedure, which is the law applicable in the case at bar, is
copied from the Civil Code of Procedure of California
 Moreover, the CFI erred in granting the motion for new
trial.
o The general rule for grant of the said motion is that
the application should show merits, and that this
should be done with some degree of certainty and
not left to surmise.
o In the case at bar, the affidavit submitted by
Donaldson merely states that they have a
counterclaim against Wahl based upon the failure
on the part of the plaintiffs (Wahl) to perform the
contract with regard to the Petrarch. The SC finds
such statement too vague and uncertain to show
merits in the defense.
o Also, after the application to set aside the judgment
had been granted, a demurrer was submitted based
upon a purely technical ground that under the
contract the parties had agreed to settle the matters
in dispute by arbitration at HK. Such is not
meritorious.
Disposition: CFI decision set aside. Order for new trial issued.
7. Chang v. Royal Exchange, 8 Phil. 399
Facts:
The arbitration clause in the fire policy includes that.ph "If a
disagreement should at any time arise between the corporation and
the assured respect of any loss or damage alleged to have been
caused by fire, every such disagreement, when it may occur, shall be
referred to the arbitration of some person to be selected by
agreement of both parties . . . And by virtue of these presents it is
hereby expressly declared to be a condition of this policy, and an
essential element of the contract between the corporation and the
insured that unless the corporation shall demand exemption from
liability by reason of fraud, breach of conditions, or waiver, as
stated..." lib
The company may, however, by its conduct, waived the provisions of
this clause relating to arbitration. 
The property insured was entirely destroyed by a fire. Plaintiffs
notified the agent of the defendant of the loss. Plaintiffs were notified
by the company that this proof was insufficient and that they must
obtain the sworn certificates of two merchants to the truth of their
statement.
Various interviews were had between the agent of the defendant and
the plaintiff Chang and the plaintiffs’ lawyer.
This action was commenced in June, 1905. The plaintiffs at no time
requested the appointment of arbitrators. The defendant requested
in writing that arbitrators be appointed in accordance with the terms
of the policy.
The statement made by the company’s agent on the amounted to a
denial of liability on the ground that proper proofs of loss had not
been presented therefore, there had been a failure of the assured to
comply with one of the terms of the policy.
The delay of the company in taking any affirmative action, its
repeated statements that the proofs were insufficient, and its final
statement that it could go no further with the case, were sufficient
evidence to show that it did not intend to pay.
ISSUE:
Whether there has been a waiver?
HELD:
NO.
The mere silence of the company would not amount to a waiver of its
right to insist upon the condition as to arbitration, but when it placed
its determination upon the grounds stated in the correspondence, it
must be held to have waived the condition requiring arbitration.
Here, the counsel for the plaintiffs sought the interview for the
express purpose of finding out what the decision of the company was.
The plaintiffs were fully justified in bringing the action at once,
without seeking any arbitration.
A great many witnesses were presented by each side, but the only
persons who had any real knowledge as to the amount of stock in the
store at the time of the fire, and as to its value, were the plaintiff
Chang and his clerk. The arbitrators appointed by the defendant
found that the value was 2,106 pesos.
policy of fire insurance contained a clause providing that in the event
of a loss under the policy, unless the company should deny all liability,
as a condition precedent to the bringing of any suit by the insured
upon the policy the latter should first submit the question of liability
and indemnity to arbitration. Such a condition is a valid one in law,
and unless it be first complied with no action can be brought.
If in the course of the settlement of a loss. however, the action of the
company or its agents amounts to a refusal to pay, the company will
be deemed to have waived the condition precedent with reference to
arbitration and a suit upon the policy will lie.
8. Lopez v. Fajardo, 101 Phil. 1104
FACTS
Children of the late Jacobo Puno, filed a petition in the CFI Manila,
alleging that, pursuant to an agreement entered into by and between
the widow and heirs of the deceased, they agreed to subdivide into
several lots the parcel of land in the province of Cotabato, and
adjudicate the lots thus subdivided to the groups of heirs.
In order to arrive at a fair distribution of the estate, a committee to
appraise the value of the share adjudicated to each group of heirs was
formed. The parties agreed further that in case of conflict in the
reports, Edgardo Villavicencio shall submit a report on the value of
the lots as appraised by him and his report shall be final and binding
upon the parties.
Upon the foregoing allegations, the petitioners prayed that the
probate court direct the Registrar of Deeds in and for the province of
Cotabato to annotate on the transfer certificate of title to be issued to
Antonia J. Vda. de Fajardo for the lots adjudicated to her her
obligation to pay the sum of P44,539.68 due and owing to the
petitioners.
Administratrix objected to the motion to annotate the lien on the
ground that the sum of P44,539.68 awarded to the petitioners has not
yet been approved by the Court.
Petitioners filed a reply to the opposition alleging that the report of
Edgardo Villavicencio was submitted in compliance with the
agreement entered into by the heirs duly approved by the and that in
accordance with article 2044 of the new Civil Code, the report need
not be approved by the Court to bind the parties therein.
Court finds that the report of Edgardo Villavicencio in question does
not require judicial approval in view of the terms of the agreement
above quoted, and that the unreasonableness of the amount awarded
is not one of the grounds provided for by law to contest the award or
decision of an arbitrator.
Administratix appealed.
ISSUE:
Whether Edgardo’s report is final and binding?
HELD:
NO.
Nowhere in the agreement, is the arbitrator empowered to award to
any heir the sum of money he did award to the petitioners. The
purpose in forming the committee of two was to appraise the value of
the estate as a step leading to its just and fair partition among the
heirs.
At most that part of the report of the arbitrator awarding to the
herein petitioners the sum due from the administratrix, would merely
be recommendatory but could not be deemed final and binding upon
the administratrix. What is final and binding upon the parties is that
part of the report appraising the subdivided parcels of land and
improvements thereon.
Section 24(d), Republic Act No. 876, known as the Arbitration Law,
may be retroactively applied to the case at bar because it is
procedural in character. It provides that the court may vacate an
award of an arbitrator when he has exceeded his powers.
The probate court in effect awards to the petitioners the sum of
P44,539.68 as due from the administratrix upon the ground "that the
report of Edgardo Villavicencio in question does not require judicial
approval in view of the terms of the agreement above quoted, and
that the unreasonableness of the amount awarded is not one of the
grounds provided for by law to contest the award or decision of an
arbitrator."
9. Chung Fu v. Court of Appeals, 206 SCRA 545
FACTS:
Petitioner Chung Fu Industries and private respondent Roblecor
Philippines, Inc. entered into a construction contract whereby private
respondent contractor committed to construct petitioner
corporation's industrial/factory complex in Tanawan, Tanza, Cavite. In
the event of disputes arising from the performance of subject
contract, it was stipulated therein that the issue(s) shall be submitted
for resolution before a single arbitrator chosen by both parties.
Respondent Roblecor failed to complete the work despite the
extension of time allowed it by Chung Fu. Subsequently, the latter had
to take over the construction when it had become evident that
Roblecor was not in a position to fulfill its obligation.
Claiming an unsatisfied account and unpaid progress billings, Roblecor
filed a petition for Compulsory Arbitration with prayer for Temporary
Restraining Order before respondent Regional Trial Court, pursuant to
the arbitration clause in the construction agreement.
Respondent Regional Trial Court approved the arbitration agreement
which provides among others that the decision of the arbitrator shall
be final and unappealable. Therefore, there shall be no further judicial
recourse if either party disagrees with the whole or any part of the
arbitrator's award. Thereafter, Engr. Willardo Asuncion was appointed
as the sole arbitrator.
Arbitrator Asuncion ordered petitioners to immediately pay
respondent contractor and further declared the award as final and
unappealable, pursuant to the Arbitration Agreement precluding
judicial review of the award. Consequently, Roblecor moved for the
confirmation of said award. On the other hand, Chung Fu moved to
remand the case for further hearing and asked for a reconsideration
of the judgment.
ISSUE:
Whether or not the parties who agree to submit their disputes to
arbitration further provide that the arbitrators' award shall be final,
unappealable and executory
HELD: No.
It is stated explicitly under Art. 2044 of the Civil Code that the finality
of the arbitrators' award is not absolute and without exceptions.
Where the conditions described in Articles 2038, 2039 and 2040
applicable to both compromises and arbitrations are obtaining, the
arbitrators' award may be annulled or rescinded. Additionally, under
Sections 24 and 25 of the Arbitration Law, there are grounds for
vacating, modifying or rescinding an arbitrator's award. Thus, if and
when the factual circumstances referred to in the above-cited
provisions are present, judicial review of the award is properly
warranted.
The proper remedy is certiorari under Rule 65 of the Revised Rules of
Court. It is to be borne in mind, however, that this action will lie only
where a grave abuse of discretion or an act without or in excess of
jurisdiction on the part of the voluntary arbitrator is clearly shown.
For "the writ of certiorari is an extra-ordinary remedy and that
certiorari jurisdiction is not to be equated with appellate jurisdiction.
In a special civil action of certiorari, the Court will not engage in a
review of the facts found nor even of the law as interpreted or
applied by the arbitrator unless the supposed errors of fact or of law
are so patent and gross and prejudicial as to amount to a grave abuse
of discretion or an exces de pouvoir on the part of the arbitrator."
10. Allen v. Province of Tayabas, 38 Phil. 356
FACTS:
Province of Tayabas and Arthur F, Allen (Allen) entered into a
contract whereby the contractor agreed to construct five reinforced
concrete bridges. One provision of the contract was that the bridges
were to be constructed "in accordance with the said advertisements,
instructions to bidders, general conditions, plans, specifications,
proposal, and this agreement”.
Four of the bridges were accepted by the Government and
paid for. The dispute between the parties arose as to the fifth bridge.
As to this bridge, the Province of Tayabas partially paid but refused to
pay the balance because Allen had deviated from the specifications
and because the work was defective.
Allen filed an action to recover the balance refused to be
paid by Province of Tayabas. While the latter, on its defense, alleged
defective work on the part of the Allen, and that the contract was not
approved by the Governor-General under Act No. 1600.
The trial court ruled in favor of Allen holding that the law
which makes the approval of the Governor-General a prerequisite
only to the purchase or conveyance of real property by a province.
Since the Province of Tayabas’ Motion for New trial was
denied, it elevated the case to the Supreme Court contending that the
certificate by the district engineer and the Director of Public Works
must be obtained before suit can be brought on a contract; that the
findings of these officials are conclusive; and that the complaint must
contain an averment to this effect. On the other hand, Allen contends
that neither the law nor the contract requires the submission to
arbitration of disputes between the Government and the contractor.
ISSUE:
Whether or not, the certification of the district engineer and
the Director of Public Works which must be obtained first before a
suit can be brought on a contract constitutes an arbitration
agreement
HELD:
Judgment AFFIRMED with modification as to amount.
The Certification of the district engineer and the Director of
Public Works is not an arbitration agreement but a condition
precedent before a contractor can recover from a contract,
nevertheless, Allen is entitled to recover even without such Certificate
on the ground of substantial performance.
Act No. 1401, as amended by Act No. 1752, was in force
when this action was instituted. The same provisions are now found in
slightly altered phraseology in section 1917-1923 of the
Administrative Code of 1917. The law gives the district engineer
supervision over all contacts connected with public works, which
exceed the estimated cost of P500.
Allen speaks of the provisions of the law and the portions of
the contract in questions as possibly constituting an arbitration
agreement. We deem these provisions to be more correctly labelled a
condition precedent to the contractor's right to obtain payment; the
condition is for the satisfaction of the Government.
Both the law and the contract provide in mandatory
language for a certificate of acceptance by the Director of Public
Works or his representative before any payment shall be made on any
public work for the Government.
The rule is well-settled that in the absence of fraud or of such
gross mistake as would necessarily imply bad faith; contractors with
public corporations are concluded by the decisions of engineers or
like officers where the contract contains such a stipulation. The public
corporation can rely on the provision in a contract that performance
by the other party shall be approved by or satisfactory to it, or a
particular officer, board or committee.
 However, it has been held that the provision of a contract to
perform work for the city requiring the contractor to obtain the
certificate of the city engineer that the work has been done in
accordance with the contract and the approval of such work by
certain boards or committees, before he is entitled to payment
therefor, does not deprive him of the right to recover for the work, if
it has been done in substantial conformity to the contract, because
the city's officers arbitrarily or unreasonably refuse the certificate and
approval called for.
Substantial performance and the unfounded refusal of the
certificate of approval can be proved in various ways. Thus,
acceptance and occupancy of the building by the owner amounts to
an acknowledgment that the work has been performed substantially
as required by the contract. Other circumstances, as partial payment,
also show acquiescence on the part of purchaser.
Moreover, it has been held that, if the plaintiff's right of
action depends upon a condition precedent he must allege and prove
the fulfilment of the condition or a legal excuse for its non-fulfilment.
And if he omits such allegation, his declaration, complaint, or petition,
will be bad on demurrer." Undoubtedly, the complaint should have
alleged either the performance of the condition precedent, approval
by the Director of Public Works or the District Engineer, or a good and
sufficient excuse for not obtaining it. However, the complaint contains
the general averment that the Allen fully and faithfully complied with
all the terms and conditions of the said contract, while some months
subsequent to the filing of the complaint but previous to the trial, the
Province of Tayabas accepted the bridge. A failure to allege a
condition precedent or a legal reason for dispensing with it may be
cured by the issues tendered by the answer and the proof.
Accordingly, the Province of Tayabas having accepted bridge
should, of course, pay the balance due.
11. Chan Linte v. Law Union, 42 Phil. 548
FACTS
 Plaintiff alleges that he was the owner of 30,992.50 kilos of
hemp stored in the warehouse in Calbayog, and requested
the defendant Law Union and Rock Insurance Co., Ltd., to
insure against loss by fire in the sum of P5,000. Insurance
company issued and delivered that policy in consideration of
which he paid the company a premium of P87.50. This was
renewed from time to time. During the life of the policy
insured, a value of P21,296.27 was lost and he at once
notified the defendant of the loss complied with the terms
and conditions of the policy, and made a demand for the
payment of the full amount of the insurance.
 Defendant refused and still refuses to pay the same. Plaintiff
prays for judgment for P5,000, with interest and costs.
 Defendant requested to submit the matter to arbitration.
Plaintiff acceded to the requirement. Frank B. Ingersoll was
named sole arbitrator, and both parties informally presented
evidence before him and he made return of arbitration to
the effect that said plaintiff had only seven bales of hemp
destroyed in the fire abovementioned. Plaintiff is dissatisfied,
so he comes to this court for proper action under an
amended complaint.
 Defendant alleges that, the plaintiff made a claim against the
defendant for P5,000. The difference between them as to the
amount of the alleged loss, was supposedly settled by an
arbitrator, who was agreed upon and selected by the mutual
consent of both parties. The arbitrator found that only seven
bales of hemp of the grade "ovillo" were destroyed.
  Both parties agreed-upon Frank B. Ingersoll as arbitrator, and
submitted to him the evidence pro and con. He filed a
supplemental report in which he found the value of the
property destroyed to be P608.34.
 Any liability arising out of the fire should be borne by the
defendants in equal parts and each of the three insurance
company has offered in writing to pay the plaintiff its 1/3 of
the amount of the plaintiff's loss, as ascertained by the
arbitrator.
 Plaintiff claimed that trial court erred in holding that the
decision of the arbitrator is conclusive and binding. Plaintiff
likewise said that TC erred in not awarding judgment for the
plaintiff, as prayed for in his complaint.
ISSUE
Whether plaintiff can question arbitration after it has commenced and
in the absence of fraud or mistake.
HELD
 NO. The plaintiff, having agreed to arbitration after his
action was commenced, and having submitted his proofs to
the arbitrator, in the absence of fraud or mistake, is
estopped and bound by the award.
 Sometime after the action was commenced and upon the
request of the defendants, the plaintiff agreed to arbitrate
under the terms and provisions of the policies. The parties
mutually agreed upon an arbitrator, each appearing before
him and offered his or its evidence upon the questions in
dispute. There is no claim or pretense that the proceedings
were not honestly and fairly conducted.
 Where a plaintiff commenced an action to recover upon an
insurance policy and then voluntarily submits the amount
of his loss to arbitration, under the terms and provisions of
the policy, he cannot ignore or nullify the award, and treat
it as void upon the ground that he is not satisfied with the
decision.
 Here, there was no dispute about the policy of insurance of
the fire. The only real difference was the amount of the loss
which plaintiff sustained, and that was the only question
submitted to arbitration. In December, the arbitrator found
the amount of plaintiff's hemp which was destroyed, but did
not find its value.
 Hence the award on the question submitted was not
complete or final. In the finding of the actual value of the
hemp, there was no change or revision of any previous
finding.
12. Vega v. San Carlos Mining, 51 Phil. 908
FACTS
 This is for the recovery of 32,959 kilos of centrifugal sugar, or
its value, P6,252, plus the payment of P500 damages and the
costs.
 CFI Negros Occidental rendered judgment giving plaintiff a
better right to the possession of the 32,959 kilos of
centrifugal sugar manufactured in the defendant's central
and the latter is sentenced to deliver them to the plaintiff.
 Defendant company appealed and alleged that the lower
court erred in having held itself with jurisdiction to take
cognizance of and render judgment.
ISSUE:
Whether arbitration covenant deprives the courts of jurisdiction to
take cognizance of a cause arising therefrom.
HELD:
 NO. The defendant is right in contending that such
covenants on arbitration are valid, but they are not for that
reason a bar to judicial action, in view of the way they are
expressed:
"An agreement to submit to arbitration, not consummated
by an award, is no bar to a suit at law or in equity
 concerning the subject matter submitted. And the rule
applies both in respect of agreements to submit existing
differences and agreements to submit differences which
may arise in the future."
 Based on the above cited clause, arbitration is not a
condition precedent to judicial action because these clauses
quoted do not create such a condition either expressly or by
necessary inference.
 Clauses in insurance and other contracts providing for
arbitration in case of disagreement are very dissimilar, and
the question whether submission to arbitration is a
condition precedent to a suit upon the contract depends
upon the language employed in each particular stipulation.
Where by the same agreement which creates the liability,
the ascertainment of certain facts by arbitrators is expressly
made a condition precedent to a right of action thereon,
suit cannot be brought until the award is made.
 The courts generally will not construe an arbitration clause
as ousting them of their jurisdiction unless such
construction is inevitable, and consequently when the
arbitration clause is not made a condition precedent by
express words or necessary implication, it will be construed
as merely collateral to the liability clause, and so no bar to
an action in the courts without an award.
W Defendant is estopped from denying plaintiff’s right to use the
cars gratuitously.
 Yes. Defendant, being the owner of a railway and the cars
used thereon, suggests to plaintiff that he install a portable
switch from the main line for the purpose of transporting the
cars to the sugar-cane fields and loading them.
 Plaintiff purchases and lays the portable switch and uses the
cars for the transportation of sugar, without the defendant
demanding any payment for the use of said cars.
 Defendantis now estopped and cannot deny plaintiff's right
to use the cars gratuitously, because it deliberately and
intentionally induced plaintiff to believe that by laying the
switch, the latter should have the right to use the cars
gratuitously.
13. Puentebella v. Negros Coal Co., 50 Phil. 69
FACTS
 These are appeals by both parties. Due to the close
connection between these two cases, they were tried jointly
by agreement of the parties. They are actions for the
recovery of damages for the sum of P50,000 and P40,000,
respectively.
 Plaintiffs, having bound themselves to plant sugar cane
which the defendants, in turn, promised to mill in a sugar
central which they were to erect, complied with their
contract, but the latter did not erect the central in due time.
This delay caused the former to lose all of the said crop.
 Defendant alleged that due to force majeure, fortuitous
events, and other circumstances independent of their will,
they were unable to complete the construction of the sugar
central within due time. Defendants likewise alleged that
plaintiffs, after the construction of the central, refused to mill
their cane and did nothing to lessen their losses.
 In the first case it is alleged as a special defense, that a
contract was agreed upon where it stated that before
commencing any litigation, they would submit their
differences to arbitrators. Defendant alleged that the
plaintiffs have done nothing to comply with this stipulation.
 At the trial of these cases the parties submitted a stipulation
of facts, paragraph S of which, literally, reads that the
partnership denominated "Hijos de I. de la Rama" was
organized in the year 1907 for a period of ten years and
expired in 1917. Esteban de la Rama was appointed
liquidator of the property of the partnership by agreement
between the members.
  After the liquidation had commenced, and before the year
1920, Esteban bought all the rights of his copartners in the
property of the said firm in liquidation, to be paid in
installments, with the right to use the firm name, but with
the obligation not to dispose of the property of the firm in
liquidation while the price stipulated in the contract of sale
of rights remained unpaid. Esteban de la Rama being the sole
owner of the firm of Hijos de I. de la Rama, and having taken
over the rights, actions and obligations of the Negros Coal
Co., Ltd., as alleged in the first paragraph of the answer, it
appears that he is at present in possession of all the rights,
actions and obligations which originated from the
contractual relations entered into in both cases by the
plaintiffs on the one side and the, then, corporation, known
as the Negros Coal Co., Ltd. and the Hijos de I. de la Rama on
the other, by virtue of the documents, Exhibits A, B, 19, 20
and 21.
 Exhibit A is a contract executed in Iloilo by Esteban de la
Rama, in his capacity as President of the Negros Coal Co., Ltd,
the contract contains, among other things, a stipulation that
the party of the first part shall erect a sugar central with a
railway across the land of the party.
 Exhibits 19, 20 and 21, as has already been stated, are
contracts of mortgage loan executed separately.
 By virtue of said contracts A, B, 19, 20 and 21, all of the
plaintiffs in both cases tilled the mortgaged land and planted
sugar cane during the months of September, October,
November and December of 1920 and January of 1921 and,
at about the time the cane was ripe. De la Rama, by letter,
demanded the erection of a mill for muscovado sugar in
accordance with the agreement.
ISSUE
W Arbitration clause is valid.
HELD
 NO. The arbitration clause in paragraph 17 of the Ferrer
contract, Exhibit A, expressly provides that the parties shall
"abide by the decision of said arbitrators or any three of
them, as the case may be."
 The clause does not merely provide for arbitration as a
condition precedent to recourse to the courts; it provides
for a final determination of legal rights by arbitration. In
other words, an attempt was made to take the disputes
between the parties out of the jurisdiction of the courts. An
agreement to that effect is contrary to public policy and is
not binding upon the parties.
 PARTIES CANNOT DIVEST COURTS OF THEIR JURISDICTION
THROUGH ANY STIPULATION
14. Umbao v. Yap, 100 Phil. 1008
FACTS
 This is an appeal from the judgment of the Manila CFI
ordering the defendant to pay to the plaintiff the sum of
P2,298.97, representing plaintiff's unpaid overtime pay while
in defendant's employ.
 complaint sought enforcement of an arbitration award
rendered by the Wage Administration Service in pursuance
of the arbitration agreement signed by Silverio Umbao and
Santiago Yap to settle their dispute regarding unpaid wages
claimed by the Umabo as employee of Yap.
 Both agreed in writing to "submit their case to the Wage
Administration Service for investigation" and "to abide by
whatever decision (said) office may render on the case"
which "they recognized . . . to be final and conclusive."
 Based from the agreement, proper investigation had been
conducted by Severo Puncan. He declared respondent Yap to
be liable for unpaid wages. Yap refused to abide and
 questioned the enforceability, contending mainly that the
Service had no legal authority to act as arbitrator.
 At first Court ruled in favor of defendant but after
reconsideration, TC ruled to uphold the arbitration.
 Appellant argues that the award should not be executed
because the arbitrator had not been appointed in
accordance with rules promulgated by the Supreme Court,
pursuant to article 2046 of the New Civil Code.
ISSUE
Whether arbitration by the Service conformed with the Act
HELD
 The Act was adopted to supplement-not to supplant-the
New Civil Code on arbitration. It expressly declares that "the
provisions of chapters one and two, Title XIV, Book IV of the
Civil Code shall remain in force." Under the New Civil Code
the parties may select the arbitrator without court
intervention. And section 8 of the Act impliedly permits them
to do so. There is nothing in Republic Act 876 that requires
court permission or knowledge or intervention before the
arbitrator selected by the parties may perform his assigned
work.
 Section 5 of the Act states that Court action is needed
when: (1) the parties, after entering into the contract to
arbitrate, neglects, fails or refuses to arbitrate or (2) where
the arbitrator has not been selected by the parties who
have agreed to arbitrate. Nowhere in Section 5 means that
there can be no arbitration without a previous court
actuation.
 Here, court intervention was not required from the
beginning, because they named the arbitrator: Severo
Puncan. Defendant cannot question the authority of said
officer now, because he voluntarily submitted; and only
turned around to deny such authority after the verdict. He
even appealed to the Secretary of Labor, without questioning
the arbitrator’s authority.
 The judicial action only became necessary after confirmation
of such Award.
15. De Lopez v. Vda. de Fajardo, 101 Phil. 1104 (check above)
16. Mindanao Portland Cement v. McDonough , 19 SCRA 808
FACTS
 Petitioner Mindanao Portland Cement Corporation and
respondent McDonough Construction Company of Florida,
U.S.A., executed a contract for the construction of a dry
portland cement plant in Iligan City. In a separate contract,
Turnbull, Inc. — the "engineer" referred to in the
construction contract — was engaged to design and manage
the construction of the plant, as well, as check and certify all
contractors' progress and fiscal requests for payment.
 Alterations in the plans and specifications caused extensions
of time for the termination of the project.
 Respondent finally completed the project, except the
delivery of spare parts and finally complied with a month
after.
 Differences later arose. Petitioner claimed from respondent
damages for the delay and alleged losses due to cost of extra
work.
 A conference was held between petitioner and Turnbull, Inc.,
on one hand, and respondent to settle the differences but no
satisfactory results were reached.
 Petitioner sent respondent, written invitations to arbitrate,
invoking a provision in their contract.
 Instead of answering said invitations, respondent submitted
to petitioner for payment its final statement of work
accomplished, asking P403.700 as unpaid balance of the
consideration of the contract.
  Petitioner filed the present action in CFI Manila to compel
respondent to arbitrate.
 Respondent denied the existence of disagreement between
the parties. As special defense, it alleged that its claim for
P403,700 was not disputed and that the respective claims for
damages should be resolved by Turnbull, Inc., pursuant to
the exception in the arbitration clause of the construction
contract.
 Court found that dispute or disagreement obtained between
the parties with respect to their rights and obligations under
their contract and the existence of an arbitration clause.
 respondent appealed raising the purely legal question of
whether under these facts respondent is duty-bound to
submit to arbitration.
ISSUE
(1) Whether there is showing of disagreement; Y (2) if there is,
whether the same falls under the exception, to be resolved
by the engineer; N
HELD
 The fact of disagreement has been determined by the court
below upon the stipulation of facts and documentary
evidence submitted. This should not be disturbed. The
existence of disagreement is plainly shown in the record.
Respondent admits the existence of petitioner's claim but
denies its merit.
 Regarding the second point, the parties agreed by way of
exception that disagreements with respect to the following
matters shall be resolved by the engineer, instead of being
submitted to arbitration: (1) The interpretation of plans and
specifications; (2) sufficiency of materials; and (3) the time,
sequence and method of performing the work.
 The disputes involved here, on the other hand, are on (1) the
proper computation of the total contract price, and (2) the
liability for alleged delay in completing the project and for
alleged losses due to change in the plans and specifications.
 Thus, the engineer is empowered to correct all discrepancies,
errors or omissions in the plans and specifications; to explain
all doubts that may arise thereon; and to furnish further
plans and specifications as may be required. There is no
mention as to the cost of the project.
 The disagreements in question do not belong to the
exceptions. Thus, the rule of arbitration applies. The parties
in fact also stipulated in their contract, under "EXTRA
WORK", the cost of extra work to be paid shall be subject to
negotiation. This negates the proposition that Turnbull, Inc.'s
cost estimates are final and conclusive.
 The reason for the exceptions is the need to decide these
matters immediately. The same is not true as to matters
relating to the liability for delay in the project's completion.
The engineer does not have to resolve before the project can
go on.
 Since respondent failed to comply with the arbitration
clause, the court can order the parties to proceed to
arbitration in accordance with the terms of their agreement.
 The proceeding in court is merely a summary remedy to
enforce the agreement to arbitrate. The duty of the court in
this case is not to resolve the merits of the parties' claims but
only to determine if they should proceed to arbitration or
not. Mere fact that a defense exists against a claim does not
make it frivolous or baseless.
17. Bengzon v. Chan, 78 SCRA 113
FACTS:
 Bengson and Chan entered into a contract for the
construction of a 6-story building on Bengson’s lot. In that
contract, Bengson found herself to pay Chan, the contractor,
P352k for the materials labor and construction expenses.
Construction should be finished within 12 calendar months
 The arbitration clause provides that any disputes arising
between the parties relative to the construction of the
building shall be determined by arbitration of 2 persons,
each chosen by the parties themselves. The determination of
the arbitration shall be final, conclusive and binding upon the
parties UNLESS they choose to go to court, in which case the
determination by arbitration is a condition precedent for
taking any court action.
 Bengson filed an action for damages against Chan alleging
that Chan violated the contract when it failed to finish the
1st and 2nd stories within the 5 month period. Chan and his
sureties alleged that as an affirmative defense that complaint
states no cause of action since Bengson did not submit the
controversy for arbitration as stipulated in their contract.
 RTC ruled that the COAs were embraced under the contract
hence they should’ve brought it up to the arbitration first. TC
dimissed! So P Bengson appealed.
ISSUE:
Whether or not the failure to resort to arbitration warrants the
dismissal of a complaint.
HELD:
 NO. Bengson’s distinction between the contract for the
construction of the building and the construction of the
building is not convincing. It is still covered. Although the
causes of action in the complaint are covered by the
clause, her failure to resort to arbitration does not
warrant the dismissal of her complaint.
 Arbitration may be resorted to during the pendency of
the case. Arbitration Law Sec 6 provides that an
aggrieved party 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 the such arbitration proceed in the
manner agreed upon. Sec 7 provides that in any suit
brought upon an issue arising out of an agreement
providing for the arbitration, the court in which such suit
is pending, upon being satisfied that the issue involved in
such suit is referable to arbitration, shall stay the action
or proceeding until an arbitrary has been had. Provided,
that the applicant for the stay is not in default in
proceeding with such arbitration.
 In this case, the failure of Bengson to resort to
arbitration may be regarded as a refusal to comply with
the stipulation for arbitration. Defendants defense that
arbitration is a condition precedent of a court action
may be interpreted as a petition for an order that
arbitration should proceed. Instead of dismissing the
case, the proceedings should be suspended and parties
should be directed to go through the motions of
arbitration at least within 60 days. With the consent of
the parties, TC may appoint a 3rd arbitrator to prevent
a deadlock between the 2 arbitrators. If the dispute
could not be settled by such, then the hearing of the
instant case should be resumed.
 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.xxxx
 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 quit 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.
18. Western Minolco v. Court of Appeals, 167 SCRA 592
FACTS
 A series of contracts was entered into between Western
Minolco Corporation and Gregorian Mining Company, for the
operation of mining claims. One of the stipulations in the
contracts (a) declared certain particular disputes to be
subject to arbitration and (b) specified the manner of
enforcement by court action of the resulting arbitration
awards. They likewise stipulated the venue to be in Manila.
 It is clear that there are two classes of disputes to be
"referred to a board of arbitration."
 1) those "regarding the meaning, application or effect
of the agreement(s) or any clause thereof," and
 2) those "in regard to the amount and computation of
the royalties, deductions, or other item of expense" provided
in the agreement.
 Also, no action concerning them may be instituted in any
court by either party (1) unless the controversy be " first
submitted to and received by said board of arbitrators," and
(2) only if the action "be based upon the award as obtained."
In the event of such an action, the venue thereof "shall be in
the City of Manila."
 Western Minolco Corporation subsequently executed
another agreement with another firm, the Dreamers Mining
Association, for the validation of 36 mineral lode claims. The
36 claims were believed by Gregorian Mining Company to be
in conflict with its own claims.
 Gregorian Mining Company brought suit against Western
Minolco Corporation for the rescission of their agreements
and damages in CFI Baguio.
 Western Minolco moved to dismiss the complaint, theorizing
that (a) venue had been improperly laid, and (b) the
complaint stated no cause of action. The Trial Court denied
Western Minolco's motion to dismiss and reconsideration.
 Western Minolco filed a petition with the CFI Manilato
compel arbitration, in line with its agreement with Gregorian.
Petition was granted.
 CA dismissed Western Minolco’s petition
ISSUE
Whether the issue falls under the disputes in the arbitration Clause.
NO.
HELD
 The terms of the applicable provision of the parties'
agreements are indeed "clear, unambiguous, and
unequivocal." Only 2 kinds of "disputes, differences or
disagreements" have been made subject of arbitration:
o those "regarding the meaning, application or effect
of the agreement(s) or any clause thereof;" and
o those "in regard to the amount and computation of
the royalties, deduction, or other item of expense"
provided in the agreement.
  The controversy involved was the alleged violation by the
latter of its agreements with the former, consisting of its
entering into a contract with a third party for the validation
of mining claims which it knew had already been located by
Gregorian. It was the breach of faith, or the double dealing of
Western Minolco. Clearly, such a controversy does not fall
within either of the two categories of disputes which must
first be submitted for arbitration.
 Even assuming that this should first be submitted to and
resolved by a board of arbitrators, the worst that could then
be said of the orders of the Trial Court, affirmed by the Court
of Appeals, is that they are attended by an error in the
analysis and interpretation of the language and import of the
stipulation in question, but certainly not by that whimsical,
capricious, or totally groundless exercise of adjudgment or
discretion as would justify the issuance of the extraordinary
writ of certiorari or prohibition. The lower Courts did not act
in arbitrary or despotic manner.
 Since the stipulation as to venue becomes relevant only
when an action has to be instituted "based upon the award
as obtained" from the board of arbitrators and since there is
here no such award because no controversy subject to
arbitration existed and was ever submitted to arbitration, no
error can possibly be imputed to the Trial Court in not
applying the stipulation to the action. Thus, stipulation of
venue should be construed merely as an agreement on an
additional forum, not as limiting venue to the specified place.
19. General Insurance v. Union Insurance, 179 SCRA 530
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 in Manila.
 Private respondents and petitioner General Insurance &
Surety Corporation entered into a First Surplus Reinsurance
Agreement which was executed by petitioners in London and
by the respondent in Manila. The parties agreed on
reciprocal reinsurance expressed and payable in pounds
sterling. In the said reinsurance agreement, the petitioners
and respondent expressly agreed to settle by arbitration all
their differences of whatever nature or controversy arising
out of the contract,
 In another civil case, the petitioners and the respondent
entered into a Retrocession Quota Share Fire Pool
Agreement executed by the petitioners in London and by the
respondent in Manila. The parties agreed on reciprocal
reinsurance arrangements expressed and payable in pounds
sterling.
 After a joint trial, the Court ordered both parties to submit
their respective memoranda. Judgment was then rendered
declaring that a valid controversy existed and the petitioner
was ordered to submit to arbitration.
 MR was denied
ISSUE
Whether a controversy or dispute exists under the circumstances to
warrant an order compelling the parties to submit to arbitration
HELD
 A valid controversy existed between the parties, which is a
proper subject for arbitration. The 2 civil cases brought by
respondents alleged that there was still some amount
payable in pounds sterling due to it from the herein
petitioner.
 Since it was not disputed that in both the First Surplus
Reinsurance Agreement and the Retrocession Quota Share
Fire Pool Agreement the parties had agreed that any dispute
arising from these agreements shall be referred to a set of
 arbitrators, the trial court correctly ordered the parties to
submit to arbitration.
 As regards the dispute on the amount the parties owe each
other, the same is a proper subject of arbitration.
 Petitioner'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.
 Assuming petitioner’s invocation of R.A. 529 is valid, it would
not in any way help petitioner's effort to success fully evade
its duty, under their agreement, to submit to arbitration.
Whether petitioner agreed to pay its obligation in pounds
sterling or in US dollars, "it is settled that, ". . . if there is any
agreement to pay the (instant) obligation in a currency other
than the Philippine currency, the same is null and void as
contrary to public policy (Republic Act No. 529)
 What RA 529 declares as null and void is the provision to
such effect. Consequently, the transaction or contract
subsists. The most that could be demanded is to pay said
obligation in Philippine currency.
 Here, the obligation was incurred between the years 1958-
1961, or after the enactment of R.A. 529. 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 5 years after the termination of both
contracts.
 The language of the reinsurance contract on arbitration of
any dispute between them which may arise before or after
the termination of the agreement is clear.
 Where there is an agreement to arbitrate and one party puts
up a claim which the other disputes, the need to arbitrate is
imperative.
20. Philippine Airlines v. National Labor Relations Commission ,
180 SCRA 555
FACTS:
 Petitioner PAL admitted respondent DOLINA at their Aviation
School for training as pilot with an agreement to provide
regular and permanent employment to DOLINA upon
completion of the 6-month training.
 DOLINA logged only 84H 55M flying time, much lower than
the required 500H flying time for regularization. He was
extended to complete this requirement but still failed to
reach the 500H minimum. He was extended for the second
time where he finished the minimum requirement and
applied for regularization. He was extended for the third
time.
 On the psychological exam, he was found unacceptable in his
“Adaptability Rating” and rendered him disqualified for
regular employment. PAL placed DOLINA on preventive
suspension pending their application for clearance for the
latter’s termination. DOLINA filed a complaint for illegal
dismissal to which the OIC of DOLE Regional Office IV lifted
the suspension with full backwages but referred the
termination and damages to the Labor Arbiter.
 PAL appealed the OIC’s order to Sec of Labor. Pending
resolution, the parties agreed before the Undersec. Of Labor
to consider DOLINA in the payroll pending the case’s final
resolution by arbitration. The Labor Arbiter granted PAL’s
termination clearance and denied claim for damages.
 DOLINA appealed to NLRC, contending that LA’s decision is
not final due to timely appeal. PAL opposed the motion.
NLRC rendered decision that the termination sufficiently
passed test of validity, but DOLINA should be returned to the
 payroll pending the case’s final resolution. Hence, this
petition.
ISSUE:
Whether or not the NLRC committed grave abuse of discretion in
holding that DOLINA is entitled to his salaries “until the case’s
final resolution.
HELD:
 YES. The stipulation in the agreement that Dolina shall
be included in the payroll of PAL until final resolution of
the case by arbitration was intended to supersede the
order of the Regional Director which, by stipulation of
the parties, was rendered moot and academic.
 In lieu of reinstatement and the payment of his
backwages, private respondent was included in
petitioner's payroll, effective from the time he was
preventively suspended until final resolution of the case
by arbitration, without having to perform any work for
the petitioner.
 In entering into the agreement, the parties could not
have intended to include in the clause "final resolution
of the case by arbitration" the whole adjudicatory
process, including appeal. For if it were so, even
proceedings on certiorari before this Court would be
embraced by the term "arbitration" and Dolina will
continue to receive monthly salary without rendering
any service to PAL regardless of the outcome of the
proceedings before the Labor Arbiter, for as long as one
of the parties appeal to the NLRC and until the case is
finally resolved by this Court.
 This is clearly an absurdity which could not have been
contemplated by the parties. Neither can proceedings
on appeal before the NLRC en banc be considered as
part of the arbitration proceeding.
 In its broad sense, arbitration is the reference of a
dispute to an impartial third person, chosen by the
parties or appointed by statutory authority to hear and
decide the case in controversy. When the consent of
one of the parties is enforced by statutory provisions,
the proceeding is referred to as compulsory arbitration.
 In labor cases, compulsory arbitration is 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 Under the
Labor Code, it is the Labor Arbiter who is clothed with
the authority to conduct compulsory arbitration on
cases involving termination disputes [Article 217, Pres.
Decree No. 442, as amended].
 When the Labor Arbiter renders his decision, compulsory
arbitration is deemed terminated because by then the
hearing and determination of the controversy has
ended. Any appeal raised by an aggrieved party from
the Labor Arbiter's decision is already beyond the
scope of arbitration since in the appeal stage, the NLRC
en banc merely reviews the Labor Arbiter's decision for
errors of fact or law and no longer duplicates the
proceedings before the Labor Arbiter. Thus, the clause
"pending final resolution of the case by arbitration"
should be understood to be limited only to the
proceedings before the Labor Arbiter, such that when
the latter rendered his decision, the case was finally
resolved by arbitration.
21. PHIVIDEC v. Velez, 199 SCRA 405
FACTS
 Respondent Philippine Veterans Assistance Commission
(PVAC), filed a complaint in RTC for foreclosure of mortgage
against the petitioners — the Philippine Veterans Investment
Development Corporation (PHIVIDEC) and PHIVIDEC
Industrial Authority (PIA).
 On November 20, 1987, PHIVIDEC and PIA 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 Sec 1, 3-b and 6 of PD. 242
government-owned or controlled corporations, Sections 1, 3-
b and 6 of P.D. 242, which provide that such cases shall be
administratively settled.
 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 in this Court a petition for certiorari and
prohibition with a prayer for preliminary injunction.
 SC referred the case to the CA and CA eventually returned
the case for resolution of MR
ISSUE
Whether PD 242 applies to the case. Y
HELD
 PHIVIDEC and PIA manifested that they are government-
owned and controlled corporations created under P.D. No.
243 and P.D. No. 538, respectively.
 Respondent PVAC similarly manifested that pursuant to P.D.
No. 244, it is a government office or agency.
 Since the foreclosure proceeding filed by PVAC against
PHIVIDEC and PIA arose from the interpretation and
application of the mortgage contract between them, P.D. No.
242 applies to the case.
 P.D. No. 242 is not unconstitutional. It 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 Republic Act No.
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
 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
22. Tesco v. Vera, 209 SCRA 440
FACTS
 Petitioner TESCO and private respondent LAROSA
entered into a subcontract agreement with the former
as contractor and the latter as the sub-contractor, for
the execution of the Civil Works under the PLDT's 5th
Expansion Program.
 TESCO alleged that LAROSA failed to perform the work
required of the latter within the time frame set out in
the Subcontract agreement.
 TESCO sent LAROSA a 30-day notice of termination of
the Sub-contract agreement pursuant to Article 25 of the
said contract stating as ground therefor non-compliance
with the project schedule.
  TESCO again sent a letter-request for the early
termination of contract.
 LAROSA filed a Petition for Injunction with Prayer for
Issuance of a Writ of Preliminary Injunction and a TRO
with RTC. TRO was granted.
 TESCO filed Certiorari and Prohibition with Prayer for a
TRO questioning the jurisdiction of the court
ISSUE:
whether CIAC has jurisdiction over the subject matter of this case
FACTS
HELD:
 NO. Article 26 of the Sub-contract agreement provides
the procedure to be followed by the parties in the event
of any dispute. Nowhere in said article does it mention
the Construction Industry Arbitration Commission
(CIAC), much less vest jurisdiction with the CIAC.
 It is true that under EO 1008 (Construction Industry
Arbitration Law), the CIAC shall have original and
exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties
involved in the construction industry in the Philippines,
whether the dispute arises before or after the
completion of the contract or after the abandonment or
breach thereof. However, for the Board to acquire
jurisdiction, the parties to a dispute must first agree to
submit the same to voluntary arbitration.
 Under the Rules governing Construction Arbitration, a
party to a construction contract wishing to have
recourse to arbitration by CIAC shall submit its Request
for Arbitration in sufficient copies to the Secretariat of
the CIAC
 The records do not show that the parties agreed to
submit the disputes to arbitration by the CIAC. Neither
was there a Request for Arbitration filed with the
Secretariat of the CIAC. Hence, CIAC did not acquire
jurisdiction over the disputes arising from the Sub-
contract agreement between petitioner TESCO and
private respondent LAROSA. While both parties in the
Sub-contract had agreed to submit the matter to
arbitration, this was only between themselves, no
request having been made by both with the CIAC.
Hence, the CIAC has no jurisdiction over the dispute.
23. Toyota v. Court of Appeals, 216 SCRA 236
 SC ruled that employees of the respondent Toyota Motor
Philippines Corporation (TMPC) belonging to the Level 5
positions under its Single Salary Structure set up were
supervisory employees. (Final and Executory) Respondent
put up and implemented its Three-Function Salary Structure
for its personnel/employees.
 Petitioner Toyota Motor Philippines Corporation Workers'
Association (TMPCWA) filed a petition for certification
election in an unorganized establishment, particularly for the
rank-and-file employees at the Sta. Rosa and Bicutan Plants
before the Med-Arbitration Unit of the DOLE-NCR. TMPC
opposed the petition on the ground that a case was pending
in SC between it and another union, the TMPCLU, whose
registration certificate has been cancelled. It asserted that
the petitioner's membership is the same as that of the
TMPCLU, which sought to represent the same bargaining
unit.
 Med-Arbiter Lameyra dismissed the petition. DOLE reversed
and ordered the conduct of a certification election. The DOLE
denied the MR.
 TMPC filed a petition for certiorari. CA Denied. Thus, the
Decision of the SOLE became final. The certification election
was set on March 8, 2000.
 During the inclusion and exclusion proceedings before the
Med-Arbiter, the respondent submitted a list of 1,110
 employees at its Bicutan and Sta. Rosa Plants included in the
payroll list. The petitioner, however, questioned the
eligibility of the 120 employees in the list, contending that
they were not rank-and-file employees but supervisory. The
respondent asserted that the establishment of its Three-
Function Salary Structure had already superseded the SC
decision where the real supervisors or managers are
distinguished from the rank-and-file employees in terms of
the duties/functions of the employees.
 Petitioner sought to be declared as the certified bargaining
agent of the respondent at its Sta. Rosa and Bicutan Plants
after getting affirmative votes, with 105 challenged votes.
Respondent prayed with the Med-Arbiter for the opening of
the challenged votes.
 After the submission position papers, Med-Arbiter Lameyra
certified the petitioner as the exclusive bargaining agent of
the rank-and-file employees. She held that the challenged
voters were supervisory employees under the Three-
Function Salary Structure.
 Respondent appealed before DOLE. 105 challenged voters
filed motion to remand the case to he Med-Arbiter. DOLE
reaffirmed Med-Arbiter’s decision.
 CA grant respondent’s writ of preliminary injunction.
Petitioner filed instant petition.
ISSUE
W CA committed grave abuse of discretion in granting respondent’s
plea.
HELD
 YES.
 First. The issue of whether or not the respondent is entitled
to injunctive relief is interwoven with the principal issue on
the merits of the petition, whether or not the respondent is
the real party-in-interest to assail the resolution of the SOLE
and the resolution of the Med-Arbiter. Petitioner cited a
plethora of decisions of this Court that in certification
elections, the employer is a bystander; it has no right or
material interest to assail the certification election.
 Second. The CA took into account the pleadings of the
parties and their admissions during the hearing of
respondent's plea for injunctive relief.
 The issue of whether or not the respondent is entitled to
injunctive relief is interwoven with the principal issue on the
merits of the petition, whether or not the respondent is the
real party-in-interest to assail the resolution of the SOLE and
the resolution of the Med-Arbiter. By granting the
respondent's plea for a writ of preliminary injunction, the CA,
in effect, ruled that the respondent is the real party-in-
interest, and not merely a bystander in the certification
election; hence, has a material and substantial right sought
to be protected. Thus, through the issuance of the writ, the
CA may be perceived as having prejudged the principal issue
before it.
 In light of the express manifestations and guarantee made by
the petitioner, through counsel, which were unrebutted by
the respondent, there was no longer any emergency,
urgency or a pressing necessity for the CA to still issue a writ
of preliminary injunction. There is no showing in the record
that despite the assumption by the SOLE of the dispute
between the petitioner and the respondent, the petitioner is
bent on staging a strike against the respondent in defiance
by the petitioner of the order of the SOLE.
24. Asian Construction v CIAC, 218 SCRA 529
FACTS
 petitioner, ASIAKONSTRUKT, a domestic corporation engaged
in the business of general contracting, and the private
respondent, ROMARC, a single proprietorship, entered into a
"Subcontract Agreement" whereby the former
 subcontracted to the latter the painting and varnishing work
at the Clarion Electronics Factory for the amount of
P730,776.00.
 The parties therein agreed that the subcontractor ROMARC
shall complete the work "in strict adherence to the
`Construction Manpower Schedule'", and in case the work is
delayed, ASIAKONSTRUKT would assist ROMARC or take over
the remaining work with all costs chargeable to the
subcontractor, plus 20% thereof as supervision fee.
 The parties further agreed that any dispute in connection
with said contract will be submitted to arbitration
 ROMARC filed a request for arbitration with the Construction
Arbitration Commission alleging that ASIAKONSTRUKT failed
to comply with its obligation to pay the balance of the
contract price despite demand therefor, and praying that
ASIAKONSTRUKT be ordered to pay ROMARC
 ASIAKONSTRUKT alleged, by way of defense, that ROMARC
incurred in delay in executing the subcontracted work. The
controversy was referred to an Arbitral Tribunal composed of
Engineers Arevalo, Cruz, and Dimatatac. Arbitral Tribunal
rendered an AWARD finding that ROMARC completed the
work in accordance with the Subcontract Agreement
 Hence, the present recourse by the petitioner
ISSUE
W Award of Arbitration Commission is valid and enforceable
HELD
 Yes
 The issues raised in the petition are mainly factual and there
is no showing that the said issues have been resolved
arbitrarily or without basis;
 on the contrary, the findings of the Arbitration Commission
are supported by evidence of record. A petition for certiorari
"will lie only where a grave abuse of discretion or an act
without or in excess of jurisdiction on the part of the
Voluntary Arbitrator is clearly shown.
 It must be borne in mind that the writ of certiorari is an
extraordinary remedy and that certiorari jurisdiction is not to
be equated with appellate jurisdiction. In a special civil action
of certiorari, the Court will not engage in a review of the
facts found nor even of the law as interpreted or applied by
the Arbitrator unless the supposed errors of fact or of law
are so patent and gross and prejudicial as to amount to a
grave abuse of discretion or an excess de pouvoir on the part
of the Arbitrator.”
25. Cassels v. Reid, 9 Phil. 580
FACTS
 This is an appeal from the disallowance of a claim against an
estate to establish as preferred a supposed award of
arbitrators, amounting to P22,629.45, and also to declare the
plaintiff the owner of one-half of certain credits aggregating
P38,529.92.
 Upon the dissolution of the house of Cassells, Buchanan &
Co. of Iloilo, a new firm was formed consisting of the plaintiff,
residing in England, and John T. Grindrod, of Iloilo, who was
the resident managing partner. A disagreement having arisen
between the partners as to the terms of settlement, turning
principally on the classification of accounts and the
ownership of certain lighters, it was referred to two
arbitrators in England, one of whom wrote Grindrod.
 No reply had been received to this communication when
Grindrod died. His will contained the following clause: "It is
my desire that all my differences with Sr. J. T. Cassells
pending at the present time the decision of the arbitrators in
London, England, shall be adjusted in the most amicable
manner possible, even though in so doing it shall become
necessary to turn over the three lighters belonging to me
called Isabela, Rosario, and Paquita, in order to settle any
claim made by the said Cassells. I therefore charge my
 executors to put an end to this matter by accepting the
decision of the arbitrators as final."
 Beyond the defect of form in the award sufficient to prevent
it from taking effect over an objection of one of the parties,
we are of the opinion that by its terms it was expressly made
conditional on acceptance by the defendant's testator, which
he never gave, but on the contrary he withheld, forwarding
documents on the lack of which the arbitrators had
commented and which logically tended to change their
tentative conclusion. Nor does the sixth clause of his will
serve as an acceptance of what he had already refused. It
mentions the arbitrations as then "actually pending"
ISSUE
Whether it is necessary to take up for interpretation the terms of the
letter
HELD
 NO
 The charging of the Bassons-Alvarez account, to Cassells as
his sole property rather than to the firm, was consistent with
this explanation, and the keeping of it alive by entries of
running payments and advances appears to have been for his
benefit as the most probable method of avoiding a loss. As
this account ultimately remained uncollected it was properly
charged to him rather than to both the partners.
 Although no express assent to this view appears therein on
the part of the plaintiff, yet we do not think that he made his
opposition to it upon the trial sufficiently plain to enable him
to raise some of the minor questions treated in the brief
before us.
 We must perforce accept this statement of his interpretation
of what occurred at the trial, and in reliance thereon
overrule the fourth assignment of error to the effect that the
court erred in finding that the plaintiff had abandoned his
other claims.
 An award does not bind parties when it is informal and not
accepted by them.
 A statement of account made by an interested party since
deceased and operating in his own favor may be rendered
independently admissible by proof of its correctness given by
a third person who has duly verified its terms.
26. Robinson v. Cruz, 49 Phil. 42
FACTS
 Plaintiff is a partnership organized and existing under the
laws of Great Britain, with a resident attorney-in-fact in the
Philippine Islands.
 The defendant is a domestic partnership doing business in
the City of Manila, and it is alleged that it is represented in
London, England, by a duly appointed agent and attorney-in-
fact.
 Plaintiff claims that under a written contract, it brought from
the defendant 500 bales of Manila hemp grade J at 40
pounds less 1 per cent, equivalent in Philippine currency.
 Pursuant to the contract, defendant shipped in two parcels
from Manila to London, for delivery to plaintiff, the 500 bales
of Manila hemp grade JDC/J, freight and f.p.a. insurance for
the account of defendant, which hemp upon being weighed
in London and deducting the tare, as provided for in the
contract.
 As the contract provides, it had an invoice value of 1872
pounds. At the time of the shipment, defendant drew upon
plaintiff for P18,417.27, which draft the plaintiff paid by
means of a letter of credit.
 Upon the arrival of the hemp in London, it was found that it
was not in merchantable condition, and was not so when it
was shipped from Manila. Therefore, arbitration was had
under the provisions of clause 9 of the contract. The
arbitration resulted in an allowance to plaintiff of a reduction
 in the price of P13,150.04, which arbitration and its findings
were approved and accepted by the defendant.
 After the shipment, defendant did not, without undue delay,
provide plaintiff with Government graders' certificates for
the hemp. Defendant became indebted to the plaintiff in the
sum, of P14,461.20.
 lower court rendered judgment for the defendant, to which
the plaintiff duly excepted and filed a motion for a new trial,
which was overruled.
 This action is founded upon an alleged written contract
which the plaintiff claims was executed in London
ISSUE
Whether the contract in question is valid and binding upon the
defendant and the Merchant.
HELD
 YES
 not only had the authority to make and enter into it for and
on behalf of the defendant, but as a matter of fact the
contract was legally ratified and approved by the subsequent
acts and conduct of the defendant. It is very apparent that
the contract was executed in the ordinary course of business
and that in the executing it, Merchant was acting within the
scope of his authority as the agent of the defendant.
 In action to recover founded upon the award of the
arbitrators, the plaintiff must both allege and prove, by
competent evidence, that the defendant had notice of the
motion of the plaintiff to arbitrate; that the arbitrators were
selected in the manner and form as provided for in the By-
Laws of the Manila Hemp Association; that the arbitrators
met and performed their duties, and made and presented
their findings, based upon which, they made and signed their
award; and that the defendant was either legally a party to
the arbitration or that it ratified and approved the arbitration
after it was made. Upon all of such questions, there is a
failure of proof.
 No competent evidence that arbitrators were ever selected,
as By-Laws provides, who they were, or that they ever met in
the discharge of their duties, or of the time and place of their
meeting, or who was present. Neither is there any
competent evidence that the arbitrators ever made or signed
any findings. Neither is there any competent evidence that
the defendant was ever notified of the proposed arbitration,
or that it took part in it, or that it ever ratified or approved
the alleged findings. The proof of an arbitration should
conform to the spirit and intent of the By-Laws of the Manila
Hemp Association.
 After the arbitrators have been selected and a hearing is held
and the investigation made, it is then the duty of the
arbitrators to make their findings, based upon which they
make their award, which should be in writing. The only
competent evidence of all of such matters is the finding and
award which is made by the arbitrator. I
 In other words, where a person seeks to recover a judgment
upon the findings and award of arbitrators, he must both
allege and prove that all of the conditions precedent, and
that the necessary legal steps were taken to have an
arbitration, and submit to the court either the original or an
authenticated copy of the findings and the award of the
arbitrators, or in the absence of such preliminary proof, he
must both allege and prove that the findings and award of
the arbitrators have been ratified and approved by the
adverse party.
 where, as in this case, the plaintiff seeks to recover upon the
findings and the award of arbitrators, before it can recover, it
must both allege and prove a substantial compliance with all
of the material provisions of the By-Laws
 If it be a fact that the alleged findings and award of the
arbitrators was made in a substantial compliance with such
"By-Laws," and competent proof of that fact is submitted to
the court, plaintiff would then be entitled to judgment as
prayed for in its complaint. In such a case, the award of the
 arbitrators could only be modified or set aside for a mistake
apparent on the face of the record, or upon the ground of
fraud in the arbitration, both of which must be alleged in a
proper plea and proven as any other fact, which could not be
done under a general denial.
27. Eastboard Navigation v. Ysmael, 102 Phil. 1
HELD:
FACTS
 Atkins, Kroll & Co., Inc., Manila, wrote defendant Juan
Ysmael & Co., Inc., advising that plaintiff Eastboard
Navigation, Ltd., of Toronto, Canada, owners of the S/S
Eastwater, have accepted their terms of payment and agreed
to charter the S/S Eastwater to Juan Ysmael & Company, Inc.,
Manila.
 Pursuant to said arbitration agreement, the three arbitrators
in New York City passed upon the differences between the
plaintiff and the defendant 'after having heard and received
evidence submitted by both sides', and rendered their
arbitration decision This arbitration decision was presented
by plaintiff to the U.S. District Court, and said Court
confirmed the said arbitration decision in its Order and Final
Decree.
 Plaintiff brought this action to enforce the aforesaid "Order
and Final Decree"
 Defendant set up the defense that said judgment cannot be
enforced in this jurisdiction because (a) New York District
Court did not have jurisdiction over the person of defendant;
and (b) the proceeding where said judgment was rendered
was summary, there was no trial on the merits and
defendant did not give its consent thereto.
 LC: Affirmed the decree of the New York District Court and
ordered that it be enforced, from which defendant appealed.
Plaintiff likewise appealed.
ISSUES
 WoN or not the arbitration agreement is binding on the
defendant. YES
 WoN the arbitration agreement is valid. YES.
 WoN Eastboard has capacity to sue in the Philippines. YES
 WoN the court may enforce the Decree issued by the New
York District Court. YES
 If the defendant corporation did not really intend to submit
its dispute with the plaintiff to arbitration, the logical step it
should have taken would be to repudiate the act of its
president and general manager, but far from doing so, it
approved and ratified it by subsequent acts which clearly
indicate that it was agreeable to said arbitration.
Consequently, said arbitration agreement is binding on the
defendant corporation, and the arbitration proceedings as
well as the arbitration decision rendered pursuant thereof, as
confirmed by the District Court of New York, are valid; hence
enforceable in this jurisdiction.
 While there are authorities which hold that "a clause in a
contract providing that all matters in dispute between the
parties shall be referred to arbitrators and to them, is
contrary to public and cannot oust the courts of jurisdiction"
(Manila Electric Co. v. Pasay Transportation Co., 57 Phil., 600,
603), however, there are authorities which favor" the more
intelligent view that arbitration, as an inexpensive speedy
and amicable method of settling disputes, and as a means of
avoiding litigation, should receive every encouragement from
the courts which may be extended without contravening
sound public policy or settled law" (3 Am. Jur., p. 835).
Congress has officially adopted this modern view when it
reproduced in the new Civil Code the provisions of the Old
Code on arbitration. And only recently it approved Republic
Act No. 876 expressly authorizing arbitration of future
disputes.
 While Eastboard is a foreign corporation without license to
transact business in the Philippines, it does not follow that it
has no capacity to bring the present action. Such license is
not necessary because it is not engaged in business in the
Philippines. The law of the forum governs procedural matters
(such as notice requirements). The law of the state where a
foreign judgment is sought to be enforced cannot be invoked
to impugn the validity of the proceedings where the foreign
judgment was made. In fact, the transaction herein involved
is the first business undertaken by Eastboard in the
Philippines, although on a previous occasion Eastboard's
vessel was chartered by the National Rice and Corn
Corporation to carry rice cargo from abroad to the
Philippines. These 2 isolated transactions do not constitute
engaging in business in the Philippines within the purview of
Sections 68 and 69 of the Corporation Law so as to bar
Eastboard from seeking redress in our courts.
 The defense of Ysmael Co. that the Decree may not be
enforced in the Philippines is predicated on the alleged fact
that it was never served with notice, summons, or process
relative to the submission of the award of the arbitrators to
New York court, invoking the U.S. Arbitration Act. The law
invoked, however, does not sustain Ysmael Co. pretense
since the Arbitration Act does not necessarily require that
service of notice of the application for confirmation be made
on the adverse party himself (in case of a non-resident), it
being sufficient that it be made upon his attorney. In this
case, a copy of notice of submission of the award to the
District Court of New York was served upon Ysmael Co.’s
counsel who in due time made of record their appearance
and actually appeared when the case was heard. It is also
significant that Ysmael Co.’s counsel never impugned the
jurisdiction of the court over defendant nor did they ever
plead before it that they were bereft of authority to
represent Ysmael Co. It cannot therefore defeat the effect of
this decision by alleging want of jurisdiction, or want of
notice.
28. National Union v. Stolt-Nielsen, 184 SCRA 682
FACTS:
 United Coconut Chemicals, Inc. (SHIPPER) shipped 404.774
metric tons of distilled C6-C18 fatty acid on board MT "Stolt
Sceptre," a tanker owned by Stolt Nielsen Philippines Inc.
(CARRIER), from Bauan, Batangas, Philippines, consigned to
"Nieuwe Matex" at Rotterdam, Netherlands, covered by a
Tanker Bill of Lading. The shipment was insured under a
marine cargo policy with Petitioner National Union Fire
Insurance Company of Pittsburg (INSURER), through its
settling agent in the Philippines, the American International
Underwriters (Philippines), Inc.
 It appears that the Bill of Lading issued by the CARRIER
contained a general statement of incorporation of the terms
of a Charter Party between the SHIPPER and Parcel Tankers,
Inc., entered into in Greenwich, Connecticut, USA. Upon
receipt of the cargo by the CONSIGNEE in the Netherlands, it
was found to be discolored and totally contaminated. The
claim filed by the SHIPPER-ASSURED having been denied, the
INSURER indemnified the SHIPPER and thereafter proceeded
with its claim against the CARRIER.
 Before the trial court, the CARRIER moved to dismiss or
suspend the proceedings on the ground that the RTC had no
jurisdiction over the claim the same being an arbitrable one.
It further claimed that as subrogee of the SHIPPER-ASSURED,
the INSURER is subject to the provisions of the BIll of Lading,
which includes a provision that the shipment is carried
pursuant to the terms of the Charter Party between the
SHIPPER-ASSURED and Parcel Tankers, Inc. providing for
arbitrator. The INSURER opposed the dismissal/suspension
on the ground that it was not legally bound to submit the
claim for arbitration inasmuch as the arbitration clause
 provided in the Charter Party was not incorporated into the
Bill of Lading, and that the it is only. RTC initially denied the
Motion but subsequently reconsidered and suspended the
proceedings. On appeal before the CA, the said court set
aside the ruling of RTC and ordered the INSURER to refer its
claim for arbitration. Hence, this petition.
ISSUE:
Whether the terms of Charter Party, particularly the provision on
arbitration, are binding on the INSURER.
HELD:
 YES. Since the right of action of the SHIPPER-ASSURED is
governed by the provisions of the Bill of Lading, which
includes by reference the terms of the Charter Party,
necessarily a suit by the INSURER is subject to the same
agreements.
 It is settled law that the charter may be made part of the
contract under which the goods are carried by an
appropriate reference in the Bill of Lading. This should
include the provision on arbitration even without a
specific stipulation to that effect. The entire contract
must be read together and its clauses interpreted in
relation to one another and not by parts.
 As the respondent Appellate Court found, the INSURER
"cannot feign ignorance of the arbitration clause since it
was already charged with notice of the existence of the
charter party due to an appropriate reference thereof in
the bill of lading and, by the exercise of ordinary
diligence, it could have easily obtained a copy thereof
either from the shipper or the charterer."
 INSURER cannot avoid the binding effect of the
arbitration clause. By subrogation, it became privy to the
Charter Party as fully as the SHIPPER before the latter
was indemnified, because as subrogee, it stepped into
the shoes of the SHIPPER-ASSURED and is surbrogated
merely to the latter's rights. It can recover only the
amount that is recoverable by the assured. And since the
right of action of the SHIPPER-ASSURED is governed by
the provisions of the Bill of Lading, which includes by
reference the terms of the Charter Party, necessarily a
suit by the INSURER is subject to the same agreements.
 Arbitration, as an alternative mode of settling disputes,
has long been recognized and accepted in our
jurisdiction. Republic Act No. 876 also expressly
authorizes arbitration of domestic disputes. Foreign
arbitration is a system of settling commercial disputes of
an international character was likewise recognized when
the Philippines adhered to the United Nations
"Convention on the Recognition and the Enforcement of
Foreign Arbitral Awards of 1958" under the Resolution
No. 71 of the Philippine Senate, giving reciprocal
recognition and allowing enforcement of international
arbitration agreements between parties of different
nationalities within a contracting state.
 It has not been shown that the arbitral clause in
question is null and void, inoperative, or incapable of
being performed. Nor has any conflict been pointed out
between the Charter Party and the Bill of Lading. In fine,
referral to arbitration in New York pursuant to the
arbitration clause, and the suspension of the
proceedings, pending the return of the arbitral award, is
indeed called for.
29. BF Corporation v. Court of Appeals, 228 SCRA 267
*Number 1
30. RCBC v. Magwin Marketing Corporation, 402 SCRA 592
FACTS:
 RCBC filed a complaint for recovery of sum of money with
preliminary attachment against respondents Marwin
 Marketing Corporation. The trial court issued a writ of
attachment and this was partially satisfied since only a parcel
of land purportedly owned by defendant Benito Sy was
attached.
 Petitioner moved for an alias writ of attachment but the trial
court denied it. No pre-trial was set by the petitioner.
Thereafter, discussions between the petitioner and
respondents were undertaken to restructure the
indebtedness of respondents. Subsequently a debt payment
scheme was approved by the petitioner.
 However, the trial court, on its own initiative issued an Order
dismissing the case without prejudice for failure of the
petitioner to prosecute its action for unreasonable length of
time. Petitioner moved for reconsideration of the said order
by informing the trial court of respondent’s desire to settle
amicably through a loan restructuring program. As a result,
the trial court reconsidered petitioner’s contention and
issued another Order.
 In an undated Order, the trial court denied petitioner’s
motions. Petitioner filed a notice of appeal from the said
orders but the appellate court rejected the said appeal on
the ground that the said orders are mere interlocutory
orders, hence, no appeal may be taken. Hence, this petition
via Rule 65.
ISSUE:
Whether the trial court can coerce the parties to execute a
compromise agreement and penalize their failure to do so by refusing
to go forward with the pre-trial conference.
HELD:
 NO.
 There is no substantial policy worth pursuing by requiring
petitioner to pay again the docket fees when it has already
discharged this obligation simultaneously with the filing of
the complaint for collection of a sum of money. The
procedure for dismissed cases when re-filed is the same as
though it was initially lodged, except for the rigmarole of
raffling cases which is dispensed with since the re-filed
complaint is automatically assigned to the branch to which
the original case pertained.
 It must be emphasized however that once the dismissal
attains the attribute of finality, the trial court cannot impose
legal fees anew because a final and executory dismissal
although without prejudice divests the trial court of
jurisdiction over the civil case as well as any residual power
to order anything relative to the dismissed case; it would
have to wait until the complaint is docketed once again.
 On the other hand, if we are to concede that the trial court
retains jurisdiction over the case for it to issue the assailed
Orders, a continuation of the hearing thereon would not
trigger a disbursement for docket fees on the part of
petitioner as this would obviously imply the setting aside of
the order of dismissal and the reinstatement of the
complaint. Our ruling in Goldloop Properties, Inc., is decisive
of the instant case. In Goldloop Properties, Inc., we reversed
the action of the trial court in dismissing the complaint for
failure of the plaintiff to prosecute its case, which was in turn
based on its inability to forge a compromise with the other
parties within fifteen (15) days from notice of the order to do
so and held - Since there is nothing in the Rules that imposes
the sanction of dismissal for failing to submit a compromise
agreement, then it is obvious that the dismissal of the
complaint on the basis thereof amounts no less to a gross
procedural infirmity assailable by certiorari. For such
submission could at most be directory and could not result in
throwing out the case for failure to effect a compromise.
 While a compromise is encouraged, very strongly in fact,
failure to consummate one does not warrant any procedural
sanction, much less an authority to jettison a civil complaint
worth P4,000,000.00 x x x Plainly, submission of a
compromise agreement is never mandatory, nor is it
required by any rule.
  Whether the dismissal is with or without prejudice if
grievously erroneous is detrimental to the cause of the
affected party; does not tolerate a wrongful dismissal just
because it was without prejudice.
31. LM Power Engineering Corporation v. CICGI, 399 SCRA 562
FACTS:
 This is a Petition for Review on Certiorari filed by the
petitioner LM Power against Respondent Capitol Industrial
seeking to set aside the decision of CA. Petitioner LM Power
Engineering Corporation and Respondent Capitol Industrial
Construction Groups Inc. entered into a Subcontract
Agreement involving electrical work at the Third Port of
Zamboanga. Due to the inability of the petitioner to procure
materials, Capitol Industial took over some of the work
contracted to the former. After the completion of the
contract, petitioner billed respondent in the amount of P6,
711,813.90 but the respondent refused to pay.
 Petitioner filed with the RTC of Makati a Complaint for the
collection of the amount representing the alleged balance
due it under the subcontract. Respondent filed a Motion to
Dismiss, alleging that the Complaint was premature, due to
the absence of 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 not covered by the arbitral clause and
ruled in favor of the petitioner. Respondent appealed to the
CA, the latter reversed the decision of the RTC and ordered
the referral of the case to arbitration. Hence, this Petition.
ISSUE:
Whether or not there is a need for the prior arbitration before filing of
the complaint with the court.
HELD:
 YES. The SC ruled that the case at hand involves technical
discrepancies that are better left to an arbitral body that has
expertise in the subject matter. Moreover, the agreement
between the parties contains arbitral clause that “any
dispute or conflict as regards to interpretation and
implementation of this agreement which cannot be settled
between respondent and petitioner amicably shall be settled
by means of arbitration”.
 The resolution of the dispute between the parties herein
requires a referral to the provisions of their agreement.
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. With respect to the disputes
on the take-over/termination and the expenses incurred by
respondent in the take-over, the SC ruled that the agreement
provides specific provisions that any delay, expenses and any
other acts in violation to such agreement, the respondent
can terminate and can set off the amount it incurred in the
completion of the contract.
 Additionally, there is no need for the prior request for
arbitration by the parties with the Construction Industry
Arbitration Commission (CIAC) in order for it to acquire
jurisdiction. Pursuant to Section 1 of Article III of the new
Rules of Procedure Governing Construction Arbitration, when
a contract contains a clause for the submission of a future
controversy to arbitration, it is not necessary for the parties
to enter into a submission agreement before the claimant
may invoke the jurisdiction of CIAC.
 Furthermore, 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.
Since a complaint with the RTC has been filed without prior
recourse to arbitration, under RA 876 (Arbitration Law) the
proper procedure is to request the stay or suspension of such
action in order to settle the dispute with the CIAC.
 32. Fiesta World Mall Corporation v. Linberg , 499 SCRA 332
FACTS
 Fiesta World Mall Corporation owns and operates Fiesta
World Mall while Linberg Philippines, Inc. is a corporation
that builds and operates power plants. Respondent Linberg
filed with the RTC of Pasig City, a Complaint for Sum of
Money against petitioner.
 The complaint alleges that petitioner and respondent
executed a build-own operate agreement, entitled “Contract
Agreement for Power Supply Services, 3.8 MW Base Load
Power Plant” (the Contract). Under this Contract, respondent
will construct, at its own cost, and operate as owner a power
plant and to supply petitioner power/electricity at its
shopping mall in Lipa City. Petitioner, then, will pay
respondent “energy fees” to be computed in accordance
with the Seventh Schedule of the Contract.
 The complaint further alleges that respondent constructed
the power plant in Lipa City at a cost of about P130M. In
November 1997, the power plant became operational
 petitioner’s unpaid obligation amounted to P15,241,747.58,
exclusive of interest. However, petitioner questioned the
said amount and refused to pay despite respondent’s
repeated demands. Petitioner specifically denied the
allegations in the complaint, claiming that respondent failed
to fulfill its obligations under the Contract by failing to supply
all its power/fuel needs.
 Petitioner personally shouldered the cost of fuel. Petitioner
also disputed the amount of energy fees specified in the
billings made by respondent because the latter failed to
monitor, measure, and record the quantities of electricity
delivered by taking photographs of the electricity meter
reading prior to the issuance of its invoices and billings, also
in violation of the Contract.
 This fact was admitted by respondent. While both parties
had discussions on the questioned billings, however, “there
were no earnest efforts to resolve the differences in
accordance with the arbitration clause provided for in the
Contract.”
 Finally, as a special affirmative defense in its answer,
petitioner alleged that respondent’s filing of the complaint is
premature and should be dismissed on the ground of non-
compliance with paragraph 7.4 of the Contract
 Thereafter, petitioner filed a Motion to Set Case for
Preliminary Hearing on the ground that respondent violated
the arbitration clause provided in the Contract, thereby
rendering its cause of action premature. This was opposed by
respondent, claiming that paragraph 7.4 of the Contract on
arbitration is not the provision applicable to this case; and
that since the parties failed to settle their dispute, then
respondent may resort to court action pursuant to paragraph
17.2 of the same Contract
 RTC denied petitioner’s motion for lack of merit. Petitioner
then filed a MR but it was denied. Dissatisfied, petitioner
elevated the matter to the CI via a Petition for Certiorari. The
CA dismissed the petition.
ISSUE
Whether or not the filing with the trial court of respondent’s
complaint is premature.
HELD
 YES, the filing with the trial court of the complaint is
premature. Paragraph 7.4 of the Contract, quoted earlier,
mandates that should petitioner dispute any amount of
energy fees in the invoice and billings made by respondent,
the same “shall be resolved by arbitration of three (3)
persons, one (1) by mutual choice, while the other two (2) to
be each chosen by the parties themselves.”
 The parties expressly intended that the said matter in dispute
must first be resolved by an arbitration panel before it
reaches the court. They made such arbitration mandatory.
  However, respondent, without prior recourse to arbitration
as required in the Contract, filed directly with the trial court
its complaint, thus violating the arbitration clause in the
Contract. It bears stressing that such arbitration agreement is
the law between the parties. Since that agreement is binding
between them, they are expected to abide by it in good faith.
 Thus, it is well within petitioner’s right to demand recourse
to arbitration.
 Moreover, the computation of the energy fees disputed by
petitioner also involves technical matters that are better left
to an arbitration panel who has expertise in those areas.
Alternative dispute resolution methods or ADRs – like
arbitration, mediation, negotiation and conciliation – are
encouraged by this Court. By enabling the parties to resolve
their disputes amicably, they provide solutions that are less
time-consuming, less tedious, less confrontational, and more
productive of goodwill and lasting relationships
33. Maria Luisa Park Association, Inc. v. Almendras , 588 SCRA
663
FACTS
 Respondents Samantha and Pia Almendras purchased from
MRO Development Corporation a residential lot in Cebu City.
They then filed with Maria Luisa Park Association Inc an
application to construct a residential house which was
approved.
 Upon ocular inspection MLPAI found out that Almendras
violated the prohibition against multi-dwelling. Respondents,
denied having violated MLPAI’s Deed of Restriction MLPAI, in
its reply, pointed out respondents’ specific violations of the
subdivision rules: Installation of a second water meter and
tapping the subdivision’s main water pipeline construction of
“two separate entrances that are mutually exclusive of each
other.” Respondents filed a complaint with the RTC of Cebu
for Injunction, Declatory Relief, Annulment of Provisions of
Articles and By-Laws with Prayer for Issuance of a Temporary
Restraining Order (TRO)/Preliminary Injunction.
 MLPAI moved for dismissal of the complaint on the ground of
lack of jurisdiction and failure to comply with the arbitration
clause provided for in MLPAI’s by-laws.
 RTC dismissed the complaint holding that it was HLURB that
has original and exclusive jurisdiction over the case. MR filed
by respondents was denied. CA declared the decision of RTC
null and void, and ordering it to take cognizance of the case
ISSUE
Whether HLURB and not the RTC has jurisdiction over the case
HELD
 YES. Pursuant to EO No 535, the HIGC (now HLURB) assumes
the regulatory and adjudicative functions of the SEC over
homeowners’ associations. HIGC also assumed the SEC’s
original and exclusive jurisdiction under Section 5 of
Presidential Decree No. 902-A to hear and decide cases
involving: b) Controversies arising out of intra-corporate or
partnership relations, between and among stockholders,
members, or associates; between any and/or all of them and
the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and
between such corporation, partnership or association and
the state insofar as it concerns their individual franchise or
right to exist as such entity;
 PRESENT CASE: respondents are members of MLPAI as they
have even admitted it. Therefore, as correctly ruled by the
trial court, the case involves a controversy between the
homeowners’ association and some of its members. Thus,
the exclusive and original jurisdiction lies with the HLURB.
 The legality of the by-laws in its entirety was never an issue
in the instant controversy but merely the provision
prohibiting multi-dwelling which respondents assert they did
not violate. There is no justiciable controversy here that
 would warrant declaratory relief, or even an annulment of
contracts.
 Under the doctrine of primary administrative jurisdiction,
courts cannot or will not determine a controversy where the
issues for resolution demand the exercise of sound
administrative discretion requiring the special knowledge,
experience, and services of the administrative tribunal to
determine technical and intricate matters of fact the HLURB
has the expertise to resolve the basic technical issue of
whether the house built by the respondents violated the
Deed of Restriction, specifically the prohibition against multi-
dwelling. The parties failed to abide by the arbitration
agreement in the MLPAI by-laws.
34. Korea Technologies Co., Ltd. v. Alberto A. Lerma, 542 SCRA 1
FACTS
 Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean
corporation which is engaged in the supply and installation of
LPG Cylinder manufacturing plants, while private respondent
Pacific General Steel Manufacturing Corp. (PGSMC) is a
domestic corporation
 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 No. KLP-970301 amending the terms of
payment.
 The contract and its amendment stipulated that KOGIES will
ship the machinery and facilities necessary for manufacturing
LPG cylinders for which PGSMC would pay USD 1,224,000.
KOGIES would install and initiate the operation of the plant
for which PGSMC bound itself to pay USD 306,000 upon the
plants production of the 11-kg. LPG cylinder samples. Thus,
the total contract price amounted to USD 1,530,000.
 PGSMC entered into a Contract of Lease with Worth
Properties, Inc. (Worth) for use of Worth’s warehouse
building to house the LPG manufacturing plant. The monthly
rental was PhP 322,560 with a 10% annual increment clause.
Subsequently, the machineries, equipment, and facilities for
the manufacture of LPG cylinders were shipped, delivered,
and installed in the Carmona plant. PGSMC paid KOGIES USD
1,224,000.
 However, gleaned from the Certificate executed by the
parties, 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. KOGIES sent a demand
letter to PGSMC threatening criminal action for violation of
Batas Pambansa Blg. 22 in case of nonpayment. On the same
date, the wife of PGSMCs President faxed a letter dated May
7, 1998 to KOGIES President who was then staying at a
Makati City hotel. She complained that not only did KOGIES
deliver a different brand of hydraulic press from that agreed
upon but it had not delivered several equipment parts
already paid for
ISSUE
Whether arbitration clause in the contract of the parties should
govern.
HELD
 YES. Established in this jurisdiction is the rule that the law of
the place where the contract is made governs. Lex loci
contractus.
 The contract in this case was perfected here in the
Philippines. Therefore, our laws ought to govern.
 Nonetheless, Art. 2044 of the Civil Code sanctions the validity
of mutually agreed arbitral clause or the finality and binding
effect of an arbitral award.
 Art. 2044 provides, Any stipulation that the arbitrators award
or decision shall be final, is valid, without prejudice to
Articles 2038, 2039 and 2040. The arbitration clause was
mutually and voluntarily agreed upon by the parties. It has
not been shown to be contrary to any law, or against morals,
good customs, public order, or public policy. There has been
no showing that the parties have not dealt with each other
on equal footing. We find no reason why the arbitration
clause should not be respected and complied with by both
parties.
 Having said that the instant arbitration clause is not against
public policy, we come to the question on what governs an
arbitration clause specifying that in case of any dispute
arising from the contract, an arbitral panel will be
constituted in a foreign country and the arbitration rules of
the foreign country would govern and its award shall be final
and binding.
35. Benguet Corporation v. DENR – Mines Adjudication Board ,
545 SCRA 196
FACTS
 Benguet and J.G. Realty entered into a RAWOP, wherein J.G.
Realty was acknowledged as the owner of four mining claims
situated in Camarines Norte. Executive Vice-President of
Benguet, Antonio N. Tachuling, issued a letter informing J.G.
Realty of its intention to develop the mining claims.
 However, J.G. Realty, through its President, Johnny L. Tan,
then sent a letter to the President of Benguet informing the
latter that it was terminating the RAWOP on the following
grounds: a. The fact that your company has failed to perform
the obligations set forth in the RAWOP, i.e., to undertake
development works within 2 years from the execution of the
Agreement; b. Violation of the Contract by allowing high
graders to operate on our claim. c. No stipulation was
provided with respect to the term limit of the RAWOP. d.
Non-payment of the royalties thereon as provided in the
RAWOP.
 J.G. Realty filed a Petition for Declaration of
Nullity/Cancellation of the RAWOP with the Legaspi City POA,
Region V, docketed as DENR Case No. 2000-01 and entitled
J.G. Realty v. Benguet. POA declared the RAWOP cancelled.
MAB: affirmed POA
ISSUES
1. Whether or not the controversy should have first been
submitted to arbitration before the POA took cognizance of
the case.
2. Whether or not the cancellation of the RAWOP supported by
evidence.
3. Whether or not the cancellation of the RAWOP amount to
unjust enrichment of J.G. Realty at the expense of Benguet
HELD
1. YES, the case should have first been brought to voluntary
arbitration before the POA.
 To reiterate, availment of voluntary arbitration before resort
is made to the courts or quasi-judicial agencies of the
government is a valid contractual stipulation that must be
adhered to by the parties. In other words, in the event a case
that should properly be the subject of voluntary arbitration is
erroneously filed with the courts or quasi-judicial agencies,
on motion of the defendant, the court or quasi-judicial
agency shall determine whether such contractual provision
for arbitration is sufficient and effective.
 If in affirmative, the court or quasi-judicial agency shall then
order the enforcement of said provision. In sum, on the issue
of whether POA should have referred the case to voluntary
arbitration, we find that, indeed, POA has no jurisdiction over
the dispute which is governed by RA 876, the arbitration law.
 However, ESTOPPEL APPLIES. the Court rules that the
jurisdiction of POA and that of MAB can no longer be
questioned by Benguet at this late hour. What Benguet
should have done was to immediately challenge the POA's
jurisdiction by a special civil action for certiorari when POA
ruled that it has jurisdiction over the dispute.
 The cancellation of the RAWOP was supported by evidence.
There is no unjust enrichment in the instant case. There is no
unjust enrichment when the person who will benefit has a
valid claim to such benefit. The principle of unjust
enrichment under Article 22 requires two conditions: (1) that
a person is benefited without a valid basis or justification,
and (2) that such benefit is derived at another's expense or
damage. Clearly, there is no unjust enrichment in the instant
case as the cancellation of the RAWOP, which left Benguet
without any legal right to participate in further developing
the mining claims, was brought about by its violation of the
RAWOP. Hence, Benguet has no one to blame but itself for its
predicament.
 Difference between compulsory & voluntary arbitration
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.
36. Tuna Processing, Inc. v. Philippine Kingford, Inc., 667 SCRA
287
FACTS
 Kanemitsu Yamaoka (“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”), 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 MOA.
 The parties likewise executed a Supplemental Memorandum
of Agreement and an Agreement to Amend Memorandum of
Agreement. Due to a series of events, the licensees, including
respondent Kingford, withdrew from petitioner TPI and
reneged on their obligations.
 Petitioner submitted the dispute for arbitration before the
International Centre for Dispute Resolution in the State of
California, US and won the case. To enforce the award,
petitioner TPI filed a Petition for Confirmation, Recognition,
and Enforcement of Foreign Arbitral Award before the RTC of
Makati City.
 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
 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. Petitioner TPI now seeks to nullify, in this instant
Petition for Review on Certiorari under Rule 45, the order of
the trial court dismissing its Petition for Confirmation,
Recognition, and Enforcement of Foreign Arbitral Award
ISSUE
Whether or not a foreign corporation not licensed to do business in
the Philippines have the legal capacity to sue under the provisions of
the Alternative Dispute Resolution Act of 2004
HELD
 Yes. In the present case, enforcement has been effectively
refused on a ground not found in the the [Alternative
Dispute Resolution Act of 2004], New York Convention, or
Model Law. It is for this reason that TPI has brought this
matter before this most Honorable Court, as it [i]s imperative
to clarify whether the Philippines’ international obligations
and State policy to strengthen arbitration as a means of
dispute resolution may be defeated by misplaced technical
considerations not found in the relevant laws.
 the Alternative Dispute Resolution Act of 2004 shall apply in
this case as the Act, as its title –An Act to Institutionalize the
Use of an Alternative Dispute Resolution System in the
Philippines and to to Establish the Office for Alternative
Dispute Resolution, and for Other Purposes – would suggest,
is a law especially enacted “to actively promote party
autonomy in the resolution of disputes or the freedom of the
party to make their own arrangements to resolve their
disputes.”
 It specifically provides exclusive grounds available to the
party opposing an application for recognition and
enforcement of the arbitral award. Indeed, it is in the best
interest of justice that in the enforcement 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.
 Finally, even assuming, only for the sake of argument, that
the court a quo correctly observed that the Model Law, not
the New York Convention, governs the subject arbitral
award, petitioner may still seek recognition and enforcement
of the award in Philippine court, since the Model Law
prescribes substantially identical exclusive grounds for
refusing recognition or enforcement.
 Thus, petitioner TPI, although not licensed to do business in
the Philippines, may seek recognition and enforcement of
the foreign arbitral award in accordance with the provisions
of the Alternative Dispute Resolution Act of 2004.
37. ABS-CBN v. World Interactive, 544 SCRA 308
FACTS
 ABS-CBN Broadcasting Corporation entered into a licensing
agreement with respondent, World Interactive Network
Systems (WINS) Japan Co., Ltd., a foreign corporation
licensed under the laws of Japan.
 Under the agreement, respondent was granted the exclusive
license to distribute and sublicense the distribution of the
television service known as the “The Filipino Channel” (TFC)
in Japan. The dispute arose between the parties, when
petitioner accused respondent of inserting nine episodes of
WINS WEEKLY, a weekly 35-minute community news
program for Filipinos in Japan, into the TFC programming
from March to May 2002 in which the petitioner claimed that
these were unauthorized insertions consisting a material
breach of their agreement.
 The parties entered into arbitration and the arbitrator ruled
in favor of the respondent. Petitioner filed in the CA petition
 to review under Rule 43 of the Rules of Court or, in the
alternative, a petition for certiorari under Rule 65 of the
same rules
 Meanwhile, the respondent filed a petition for confirmation
if the arbitral award before the RTC of Quezon City.
Consequently, petitioner file a supplemental petition in the
CA seeking to enjoin the RTC in Quezon City from further
proceeding with the hearing of respondent’s petition for
confirmation of arbitral award which was granted.
Respondent filed a motion for reconsideration in the CA and
was denied because of lack of jurisdiction. It ruled that it is
the RTC which has jurisdiction over questions relating to
arbitration. Petitioner moved for reconsideration and the
same was denied
ISSUE
Whether aggrieved party in a voluntary arbitration dispute may avail
of, directly in the CA, a petition for review under Rule 43 or a petition
for certiorari under Rule 65 of the Rules of Court, instead of filing a
petition to vacate the award in the RTC when the grounds invoked to
overturn the arbitrator’s decision are other than those for a petition
to vacate and award enumerated under R.A. 876.
HELD
 NO. R.A. 876 itself mandates that it is the Court if First
Instance, now the RTC, which has jurisdiction over questions
relating to arbitration, such as to vacate an arbitral award.
 Sec. 24 of R.A. 876 enumerates the grounds for a petition to
vacate an award made by an arbitrator. The law itself clearly
provides that the RTC must issue an order vacating an
arbitral award only “in any of the . . . . .cases” enumerated
therein. As it did not expressly provide for errors of fact
and/or law and grave abuse of discretion (proper grounds for
a petition for review under Rule 43 and a petition for
certiorari under Rule 65, respectively) as grounds
maintaining a petition to vacate an arbitral award in the RTC,
it necessarily follows that a party may not avail of the latter
remedy on the grounds of errors of fact and/or law or grave
abuse of discretion to overturn an arbitral award.
 Therefore, the remedy petitioner availed of, namely: petition
to review under Rule 43 and petition for certiorari under Rule
65, was wrong.
38. Aboitiz Transport v. Carlos Gothong Lines, 730 SCRA 178
FACTS
 ASC, CAGLI, and William Lines, Inc. (WLI), principally owned
by the Aboitiz, Gothong, and Chiongbian families,
respectively, entered into an Agreement 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.
 Among the attachments to the Agreement was a letter
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
₱400 Million. In this relation, a valuation of CAGLI’s inventory
was conducted wherein it was shown that the same
amounted to ₱514 Million.
 Thereafter, WLI received inventory valued at ₱558.89
Million, but only paid CAGLI the amount of ₱400 Million as
agreed upon in the Agreement.
 Dissatisfied, CAGLI sent to WLI various letters, demanding
that the latter pay or return the inventory that it received in
excess of ₱400 Million.
  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 to ATSC
demanding that the latter pay the excess inventory it
delivered to WLI amounting to 158,399,700.00. 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.
 ATSC filed a Motion for Reconsideration. RTC found CAGLI’s
Notice of Dismissal meritorious, and, thus, confirmed the
same and ordered the case dismissed without prejudice.
ISSUES
1. Whether RTC was correct in confirming CAGLI’s notice of
dismissal and, consequently, dismissing the case without
prejudice. NO.
2. Whether respondent Chiongbian should be excluded from
the arbitration proceedings. YES.
HELD
1. Propriety of CAGLI’s Notice of Dismissal 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 8766.
 Sec. 6 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.
 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. Such Order partakes of a
judgment on the merits of the complaint for the
enforcement of the arbitration agreement.
 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 137 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. Parties covered by Arbitration Proceedings.
 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
 As a rule, contracts are respected as the law
between the contracting parties and produce effect
as between them, their assigns and heirs
 In the present case, Section 11.06 of the
Agreement, which embodies the Arbitration
Agreement among the parties, provides: All disputes
arising out of or in connection with this Agreement
including any issue as to this Agreement's validity or
enforceability, which cannot be settled amicably
among the parties, shall be finally settled by
arbitration in accordance with the Arbitration Law
(Republic Act No. 876)
 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.
39. Stronghold Insurance Company, Inc. v. Spouses Stroem , G.R.
No. 204689, 21 January 2015
FACTS
 Spouses Stroem entered an Owners-Contractor Agreement
with Asis-Leif & Company, Inc. (ALCI) represented by Cynthia
Asis-Leif for the construction of a two-storey house on their
lot. ALCI secured a performance bond in the amount of
P4.5M from Stronghold Insurance Company (SIC) whereby
the latter and ALCI bound themselves solidarily to pay the
Stroem spouses the agreed amount in the event the
construction is not completed.
 ALCI failed to finish the project on time despite repeated
demands and the Spouses Stroem rescinded the agreement
and hired an independent appraiser to evaluate the progress
of the construction project. They later filed a complaint for
breach of contract with damages against ALCI and SIC.
 Only SIC was served with summons. The RTC ruled in favor of
the Spouses Stroem and ordered SIC to pay damages. SIC
argued that the RTC should have dismissed the case in view
of the arbitration clause in the agreement and that the
stipulations in the Owners-Contractor Agreement are part
and parcel of the conditions in the bond issued by it. On the
other hand, Spouses Stroem argued that the Owners-
Contractor Agreement is ―separate and distinct from the
Bond.
 The parties to the Agreement are ALCI/Ms. Asis-Leif and
Spouses Stroem, while the parties to the Bond are Spouses
Stroem and Stronghold. The considerations for the two
contracts are likewise distinct. Thus, the arbitration clause in
the Agreement is binding only on the parties thereto,
specifically ALCI/Ms. Asis-Leif and Spouses Stroem.
ISSUE
Whether or not the SIC as surety can invoke the CIAC has jurisdiction
over the case based on the principal contract.
HELD
 NO. The SC ruled that SIC cannot invoke the stipulation in the
principal contract providing for arbitration. What is at issue
in this case is the parties‘ agreement, or lack thereof, to
submit the case to arbitration. Spouses Stroem argue that SIC
is not a party to the arbitration agreement.
 SIC did not consent to arbitration. Only Spouses Stroem and
Asis-Leif may invoke the arbitration clause in the contract.
This court has previously held that a performance bond,
 which is meant "to guarantee the supply of labor, materials,
tools, equipment, and necessary supervision to complete the
project is significantly and substantially connected to the
construction contract and, therefore, falls under the
jurisdiction of the CIAC.
 The Owners-Contractor Agreement and the performance
bond referred to each other; the performance bond was
issued pursuant to the construction agreement. In enforcing
a surety contract, the complementary-contracts-construed-
together doctrine finds application. According to this
principle, an accessory contract must be read in its entirety
and together with the principal agreement.
 The ruling in Prudential Guarantee and Assurance Inc. v.
Anscor Land, Inc., (G.R. No. 177240, September 8, 2010) to
the effect that the Prudential willingly acceded to the terms
of the principal contract providing for arbitration despite the
absence of a similar stipulation in the performance bond
because the construction contract breathes life into the
performance bond will not apply to the present case. In
Prudential, the construction contract (principal contract)
expressly incorporated the performance bond into the
principal contract.
 In the present case, the Owners-Contractor Agreement
between ALCI and Spouses Stroem merely stated that a
performance bond shall be issued in favor of the latter. The
performance bond merely referenced (not incorporated) the
contract entered into by Spouses Stroem and ALCI, which
pertained to ALCI‘s duty to construct a two-storey residence
building.
 It is in the Owners-Contractor Agreement that the arbitration
clause is found. The construction agreement was signed only
by Spouses Stroem and the contractor, ALCI, as represented
by Ms. Ma. Cynthia Asis-Leif. It is basic that “contracts take
effect only between the parties, their assigns and heirs”. Not
being a party to the construction agreement, SIC cannot
invoke the arbitration clause and cannot thus invoke the
jurisdiction of the CIAC.
40. Department of Environment and Natural Resources v. United
Planners Consultants, Inc., G.R. No. 212081, 23 February
2015
FACTS
 Petitioner, through the Land Management Bureau (LMB),
entered into a Consultancy Agreement with respondent
United Planners Consultants, Inc. in connection with the
LMB’s Land Resource Management Master Plan Project
(LRMMP). Under the Consultancy Agreement, petitioner
committed to pay a total contract price of P4,337,141.00,
based on a predetermined percentage corresponding to the
particular stage of work accomplished.
 Respondent completed the work required, which petitioner
formally accepted. However, petitioner was able to pay only
47% of the total contract price. COA released TSO finding the
contract price of the Agreement to be 84.14% excessive. This
notwithstanding, petitioner acknowledged its liability.
 respondent instituted a Complaint against petitioner before
the RTC of Quezon City. Due to the existence of Arbitration
clause, the respondent moved for the issue to be tried
through arbitration.
 The Arbitral Tribunal rendered its Award in favor of
respondent. Petitioner filed a motion for reconsideration.
Arbitral Tribunal claimed that it had already lost jurisdiction
over the case after it had submitted to the RTC its Report
together with a copy of the Arbitral Award.
 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
 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. RTC granted efficient resolution of disputes and curb a litigious culture,
respondent’s motion. Petitioner moved to quash the writ of every interpretation thereof should be made consistent with
execution. RTC denied. CA dismissed Certiorari. these objectives.
ISSUE
Whether or not the Special ADR Rules be applied even until the
execution of the Arbitral Award, even if the Special Rules are silent as
to execution of a confirmed arbitral award.
HELD
 Yes. While it appears that the Special ADR Rules remain silent
on the procedure for the execution of a confirmed arbitral
award, it is the Court’s considered view that the Rules’
procedural mechanisms cover not only aspects of
confirmation but necessarily extend to a confirmed award’s
execution in light of the doctrine of necessary implication
which states that every statutory grant of power, right or
privilege is deemed to include all incidental power, right or
privilege.
 As the Court sees it, execution is but a necessary incident to
the Court’s confirmation of an arbitral award. To construe it
otherwise would result in an absurd situation whereby the
confirming court previously applying the Special ADR Rules in
its confirmation of the arbitral award would later shift to the
regular Rules of Procedure come execution.
 A Court’s power to confirm a judgment award under the
Special ADR Rules should be deemed to include the power to
order its execution for such is but a collateral and subsidiary
consequence that may be fairly and logically inferred from
the statutory grant to regional trial courts of the power to
confirm domestic arbitral awards.
 All the more is such interpretation warranted under the
principle of ratio legis est anima which provides that a
statute must be read according to its spirit or intent, for what
is within the spirit is within the statute although it is not
within its letter, and that which is within the letter but not
within the spirit is not within the statute. Accordingly, since
the Special ADR Rules are intended to achieve speedy and