JACQUES A. DUPASQUIER vs.

ASCENDAS (PHILIPPINES) CORPORATION

G.R. No. 211044, July 24, 2019

FACTS: The Net Group and Ascendas entered into a Memorandum of Understanding (MOU).The MOU
provided an Arbitration clause, as part of Clause 14 entitled "Miscellaneous Provision," which reads:

i. Arbitration.  In case of any dispute arising out of or in connection with this MOU, the Parties
agree to negotiate in good faith within a period of thirty (30) days after written notice by one Party
to the other Party of the existence of such dispute, failing which the said dispute shall be referred
to and finally resolved by arbitration under the Rules of the United Nations Commission of
International Trade Law, which Rules are deemed to be incorporated by reference into this
Clause. The arbitration shall be held in Hong Kong. The language to be used in the arbitration
shall be English.

On September 14, 2007, Ascendas wrote another letter to The Net Group specifying that the parties have
until September 28, 2007 to resolve the disputes between them, otherwise, Ascendas will refer the
dispute to arbitration.

The Net Group filed a petition for declaratory relief with an application for preliminary injunction/temporary
restraining order (TRO) before the RTC in Makati City In its petition, The Net Group alleged that
Ascendas' demand to arbitrate is baseless. According to its interpretation of the MOU, the Arbitration
Clause would not survive the lapse of the MOU on March 31, 2007 because the parties agreed that only
the confidentiality clause will survive the termination or lapse of the MOU. Hence, The Net Group pleaded
for a judicial declaration that the arbitration agreement contained in the MOU be declared ineffective and
that Ascendas can no longer compel The Net Group to submit to arbitration pursuant to the relevant
clause. In addition, The Net Group sought for a judicial declaration that it is already entitled to the Due
Diligence L/C on the basis of the MOU. 

Ascendas argued that the MOU had not lapsed and assuming it had lapsed, the Arbitration Clause therein
survived and thus, the condition precedent, which is the referral to arbitration, for filing the claim was not
complied with.

RTC declared that respondent cannot compel petitioners to proceed to arbitration on the basis of said
arbitration clause.chanRoblesvtua1ibrary

Ascendas then filed a notice of appeal. CA unanimously set aside the RTC's Order. It ruled that
considering the separability doctrine wherein the Arbitration Clause remains operative despite the
termination of the contract, the RTC cannot exercise jurisdiction over the dispute because the parties
should have referred the matter to arbitration.

ISSUE: Whether or not the expiration of the MOU also terminated the effectivity of the subject arbitration
clause;

HELD:

Article 1370 of the Civil Code on the interpretation of contracts mandates that the literal meaning of the
stipulations shall prevail if the contract's terms are clear and leave no doubt as to the intention of the
contracting parties. If, however, the words of the contract are contrary to the evident intention of the
parties, the intention of the parties shall be controlling.

In the present case, while there is no doubt that the parties intended that disputes be referred to
arbitration, the parties, nonetheless, are in conflict as to whether the Arbitration Clause is time-limited.
Using the guidelines for interpreting a contract, the literal meaning of Clause 14(e) of the MOU is that the
lapse of the MOU shall have an effect of making all its provisions, except Clause 14(e) on Confidentiality,
ineffectual. The MOU itself provides that its "Closing Date" shall be two calendar weeks after the signing
of the MOA, but not later than March 31, 2007. Since no MOA was signed by the parties, the MOU lapsed
on March 31, 2007 by operation of the provisions of the MOU. Reading Clause 14(e) in relation to the
MOU's definition of "Closing Date", the MOU's provisions, including the Arbitration Clause, shall be of no
effect as of March 31, 2007. This is the manifest intent of the contracting parties.