1. Heirs of Salas v. Laperal Realty, Corp., GR No. 135362, Dec.

13, 1999

2. Home Bankers Savings and Trust Co. v. CA, GR No. 115412, Nov. 19, 1999

3. LM Power Engineering Corp. v. Capitol Industrial Construction Groups, GR No. 141833,

March 26, 2003

4. Sea Land Service, Inc. vs. CA, GR No. 126212, March 2, 2000

5. Magellan Capital Management, Corp. vs. Zosa, G.R. No. 129916, March 26, 2009

6. Del Monte Corp. - USA vs. CA, G.R. 136154, February 7, 2001

7. Cargill Phils., Inc. vs. San Fernando Regala Trading, Inc., G. R. No. 175404, January 31,
2011

8. RCBC vs. BDO, GR No. 196171, December 10, 2012

9. Tuna Processing, Inc. vs. Philippine Kingford, Inc., GR No. 185582, Feb. 29, 2012

10. ABSCBN v. WINS, GR No. 169332, Feb. 11, 2008

11. Busan Universal Rail, Inc. vs. DOT-MRT3, GR No. 235878, Feb. 26, 2020

12. PCSO vs. DFNN, Inc., GR No. 206611, Feb. 20, 2017

G.R. No. 135362 December 13, 1999

HEIRS OF AUGUSTO L. SALAS, JR., namely: TERESITA D. SALAS for herself and as legal
guardian of the minor FABRICE CYRILL D. SALAS, MA. CRISTINA S. LESACA, and KARINA
TERESA D. SALAS, petitioners,
vs.
LAPERAL REALTY CORPORATION, ROCKWAY REAL ESTATE CORPORATION, SOUTH
RIDGE VILLAGE, INC., MAHARAMI DEVELOPMENT CORPORATION, Spouses THELMA D.
ABRAJANO and GREGORIO ABRAJANO, OSCAR DACILLO, Spouses VIRGINIA D. LAVA and
RODEL LAVA, EDUARDO A. VACUNA, FLORANTE DE LA CRUZ, JESUS VICENTE B.
CAPELLAN, and the REGISTER OF DEEDS FOR LIPA CITY, respondents.

DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Order   of Branch 85 of the Regional Trial Court
1

of Lipa City   dismissing petitioners' complaint   for rescission of several sale transactions involving
2 3

land owned by Augusto L. Salas, Jr., their predecessor-in-interest, on the ground that they failed to
first resort to arbitration.
Salas, Jr. was the registered owner of a vast tract of land in Lipa City, Batangas spanning 1,484,354
square meters.

On May 15, 1987, he entered into an Owner-Contractor Agreement   (hereinafter referred to as the
4

Agreement) with respondent Laperal Realty Corporation (hereinafter referred to as Laperal Realty)
to render and provide complete (horizontal) construction services on his land.

On September 23, 1988, Salas, Jr. executed a Special Power of Attorney in favor of respondent
Laperal Realty to exercise general control, supervision and management of the sale of his land, for
cash or on installment basis.

On June 10, 1989, Salas, Jr. left his home in the morning for a business trip to Nueva Ecija. He
never returned.

On August 6, 1996, Teresita Diaz Salas filed with the Regional Trial Court of Makati City a verified
petition for the declaration of presumptive death of her husband, Salas, Jr., who had then been
missing for more than seven (7) years. It was granted on December 12, 1996.  5

Meantime, respondent Laperal Realty subdivided the land of Salas, Jr. and sold subdivided portions
thereof to respondents Rockway Real Estate Corporation and South Ridge Village, Inc. on February
22, 1990; to respondent spouses Abrajano and Lava and Oscar Dacillo on June 27, 1991; and to
respondents Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capalan on June 4, 1996 (all
of whom are hereinafter referred to as respondent lot buyers).

On February 3, 1998, petitioners as heirs of Salas, Jr. filed in the Regional Trial Court of Lipa City a
Complaint   for declaration of nullity of sale, reconveyance, cancellation of contract, accounting and
6

damages against herein respondents which was docketed as Civil Case No. 98-0047.

On April 24, 1998, respondent Laperal Realty filed a Motion to

Dismiss   on the ground that petitioners failed to submit their grievance to arbitration as required
7

under Article VI of the Agreement which provides:

Art. VI. ARBITRATION.

All cases of dispute between CONTRACTOR and OWNER'S representative shall be

referred to the committee represented by:

a. One representative of the OWNER;

b. One representative of the CONTRACTOR;

c. One representative acceptable to both OWNER

and CONTRACTOR.  8

On May 5, 1998, respondent spouses Abrajano and Lava and respondent Dacillo filed a Joint
Answer with Counterclaim and Crossclaim   praying for dismissal of petitioners' Complaint for the
9

same reason.

On August 9, 1998, the trial court issued the herein assailed Order dismissing petitioners' Complaint
for non-compliance with the foregoing arbitration clause.
Hence this petition.

Petitioners argue, thus:

The petitioners' causes of action did not emanate from the Owner-Contractor
Agreement.

The petitioners' causes of action for cancellation of contract and accounting are
covered by the exception under the Arbitration Law.

Failure to arbitrate is not a ground for dismissal. 

10

In a catena of cases   inspired by Justice Malcolm's provocative dissent in Vega v. San Carlos
11

Milling Co.  , this Court has recognized arbitration agreements as valid, binding, enforceable and not
12

contrary to public policy so much so that when there obtains a written provision for arbitration which
is not complied with, the trial court should suspend the proceedings and order the parties to proceed
to arbitration in accordance with the terms of their
agreement  . Arbitration is the "wave of the future" in dispute resolution.   To brush aside a
13 14

contractual agreement calling for arbitration in case of disagreement between parties would be a
step backward.  15

Nonetheless, we grant the petition.

A submission to arbitration is a contract.   As such, the Agreement, containing the stipulation on
16

arbitration, binds the parties thereto, as well as their assigns and heirs.   But only they. Petitioners,
17

as heirs of Salas, Jr., and respondent Laperal Realty are certainly bound by the Agreement. If
respondent Laperal Realty had assigned its rights under the Agreement to a third party, making the
former, the assignor, and the latter, the assignee, such assignee would also be bound by the
arbitration provision since assignment involves such transfer of rights as to vest in the assignee the
power to enforce them to the same extent as the assignor could have enforced them against the
debtor   or in this case, against the heirs of the original party to the Agreement. However,
18

respondents Rockway Real Estate Corporation, South Ridge Village, Inc., Maharami Development
Corporation, spouses Abrajano, spouses Lava, Oscar Dacillo, Eduardo Vacuna, Florante de la Cruz
and Jesus Vicente Capellan are not assignees of the rights of respondent Laperal Realty under the
Agreement to develop Salas, Jr.'s land and sell the same. They are, rather, buyers of the land that
respondent Laperal Realty was given the authority to develop and sell under the Agreement. As
such, they are not "assigns" contemplated in Art. 1311 of the New Civil Code which provides that
"contracts take effect only between the parties, their assigns and heirs".

Petitioners claim that they suffered lesion of more than one-fourth (1/4) of the value of Salas, Jr.'s
land when respondent Laperal Realty subdivided it and sold portions thereof to respondent lot
buyers. Thus, they instituted action   against both respondent Laperal Realty and respondent lot
19

buyers for rescission of the sale transactions and reconveyance to them of the subdivided lots. They
argue that rescission, being their cause of action, falls under the exception clause in Sec. 2 of
Republic Act No. 876 which provides that "such submission [to] or contract [of arbitration] shall be
valid, enforceable and irrevocable, save upon such grounds as exist at law for the revocation of any
contract".

The petitioners' contention is without merit. For while rescission, as a general rule, is an arbitrable
issue,   they impleaded in the suit for rescission the respondent lot buyers who are neither parties to
20

the Agreement nor the latter's assigns or heirs. Consequently, the right to arbitrate as provided in
Article VI of the Agreement was never vested in respondent lot buyers.
Respondent Laperal Realty, as a contracting party to the Agreement, has the right to compel
petitioners to first arbitrate before seeking judicial relief. However, to split the proceedings into
arbitration for respondent Laperal Realty and trial for the respondent lot buyers, or to hold trial in
abeyance pending arbitration between petitioners and respondent Laperal Realty, would in effect
result in multiplicity of suits, duplicitous procedure and unnecessary delay. On the other hand, it
would be in the interest of justice if the trial court hears the complaint against all herein respondents
and adjudicates petitioners' rights as against theirs in a single and complete proceeding.

WHEREFORE, the instant petition is hereby GRANTED. The Order dated August 19, 1998 of
Branch 85 of the Regional Trial Court of Lipa City is hereby NULLIFIED and SET ASIDE. Said court
is hereby ordered to proceed with the hearing of Civil Case No. 98-0047.

Costs against private respondents.

SO ORDERED.

G.R. No. 115412 November 19, 1999

HOME BANKERS SAVINGS AND TRUST COMPANY, petitioner,

vs.
COURT OF APPEALS and FAR EAST BANK & TRUST CO., INC. respondents.

BUENA, J.:

This appeal by certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the
decision   of the Court of Appeals   dated January 21, 1994 in CA-G.R. SP No. 29725, dismissing the
1 2

petition for certiorari filed by petitioner to annul the two (2) orders issued by the Regional Trial Court
of Makati   in Civil Case No. 92-145, the first, dated April 30, 1992, denying petitioner's motion to
3

dismiss and the second, dated October 1, 1992 denying petitioner's motion for reconsideration
thereof.

The pertinent facts may be briefly stated as follows: Victor Tancuan, one of the defendants in Civil
Case No. 92-145, issued Home Bankers Savings and Trust Company (HBSTC) check No. 193498
for P25,250,000.00 while Eugene Arriesgado issued Far East Bank and Trust Company (FEBTC)
check Nos. 464264, 464272 and 464271 for P8,600,000.00, P8,500,000.00 and P8,100,000.00,
respectively, the three checks amounting to P25,200,000.00. Tancuan and Arriesgado exchanged
each other's checks and deposited them with their respective banks for collection. When FEBTC
presented Tancuan's HBSTC check for clearing, HBSTC dishonored it for being "Drawn Against
Insufficient Funds." On October 15, 1991, HBSTC sent Arriesgado's three (3) FEBTC checks
through the Philippine Clearing House Corporation (PCHC) to FEBTC but was returned on October
18, 1991 as "Drawn Against Insufficient Funds." HBSTC received the notice of dishonor on October
21, 1991 but refused to accept the checks and on October 22, 1991, returned them to FEBTC
through the PCHC for the reason "Beyond Reglementary Period," implying that HBSTC already
treated the three (3) FEBTC checks as cleared and allowed the proceeds thereof to be
withdrawn.   FEBTC demanded reimbursement for the returned checks and inquired from HBSTC
4

whether it had permitted any withdrawal of funds against the unfunded checks and if so, on what
date. HBSTC, however, refused to make any reimbursement and to provide FEBTC with the needed
information.
Thus, on December 12, 1991, FEBTC submitted the dispute for arbitration before the PCHC
Arbitration Committee,   under the PCHC's Supplementary Rules on Regional Clearing to which
5

FEBTC and HBSTC are bound as participants in the regional clearing operations administered by
the PCHC.  6

On January 17, 1992, while the arbitration proceeding was still pending, FEBTC filed an action for
sum of money and damages with preliminary
attachment   against HBSTC, Robert Young, Victor Tancuan and Eugene Arriesgado with the
7

Regional Trial Court of Makati, Branch 133. A motion to dismiss was filed by HBSTC claiming that
the complaint stated no cause of action and accordingly ". . . should be dismissed because it seeks
to enforce an arbitral award which as yet does not exist."   The trial court issued an omnibus order
8

dated April 30, 1992 denying the motion to dismiss and an order dated October 1, 1992 denying the
motion for reconsideration.

On December 16, 1992, HBSTC filed a petition for certiorari with the respondent Court of Appeals
contending that the trial court acted with grave abuse of discretion amounting to lack of jurisdiction in
denying the motion to dismiss filed by HBSTC.

In a Decision   dated January 21, 1994, the respondent court dismissed the petition for lack of merit
9

and held that "FEBTC can reiterate its cause of action before the courts which it had already raised
in the arbitration case"   after finding that the complaint filed by FEBTC ". . . seeks to collect a sum of
10

money from HBT [HBSTC] and not to enforce or confirm an arbitral award."   The respondent court
11

observed that "[i]n the Complaint, FEBTC applied for the issuance of a writ of preliminary attachment
over HBT's [HBSTC] property"   and citing section 14 of Republic Act No. 876, otherwise known as
12

the Arbitration Law, maintained that "[n]ecessarily, it has to reiterate its main cause of action for sum
of money against HBT [HBSTC],"   and that "[t]his prayer for conservatory relief [writ of preliminary
13

attachment] satisfies the requirement of a cause of action which FEBTC may pursue in the courts."  14

Furthermore, the respondent court ruled that based on section 7 of the Arbitration Law and the
cases of National Union Fire Insurance Company of Pittsburg vs. Stolt-Nielsen Philippines,
Inc.,   and Bengson vs. Chan,   ". . . when there is a condition requiring prior submission to
15 16

arbitration before the institution of a court action, the complaint is not to be dismissed but should be
suspended for arbitration."   Finding no merit in HBSTC's contention that section 7 of the Arbitration
17

Law ". . . contemplates a situation in which a party to an arbitration agreement has filed a court
action without first resorting to arbitration, while in the case at bar, FEBTC has initiated arbitration
proceedings before filing a court action," the respondent court held that ". . . if the absence of a prior
arbitration may stay court action, so too and with more reason, should an arbitration already pending
as obtains in this case stay the court action. A party to a pending arbitral proceeding may go to court
to obtain conservatory reliefs in connection with his cause of action although the disposal of that
action on the merits cannot as yet be obtained."   The respondent court discarded Puromines,
18

Inc. vs. Court of Appeals,   stating that ". . . perhaps Puromines may have been decided on a

19

different factual basis."  20

In the instant petition,   petitioner contends that first, "no party litigant can file a non-existent
21

complaint,"   arguing that ". . . one cannot file a complaint in court over a subject that is undergoing
22

arbitration."   Second, petitioner submits that "[s]ince arbitration is a special proceeding by a clear
23

provision of law,   the civil suit filed below is, without a shadow of doubt, barred by litis
24

pendentia and should be dismissed de plano insofar as HBSTC is concerned."   Third, petitioner

25

insists that "[w]hen arbitration is agreed upon and suit is filed without arbitration having been held
and terminated, the case that is filed should be dismissed,"   citing Associated Bank vs. Court of
26

Appeals,   Puromines, Inc. vs. Court of Appeals,   as and Ledesma vs. Court of

27 28
Appeals.   Petitioner demurs that the Puromines ruling was deliberately not followed by the
29

respondent court which claimed that:

x x x           x x x          x x x

It would really be much easier for Us to rule to dismiss the complaint as the petitioner
here seeks to do, following Puromines. But with utmost deference to the Honorable
Supreme Court, perhaps Puromines may have been decided on a different factual
basis.

xxx xxx xxx  30

Petitioner takes exception to FEBTC's contention that Puromines cannot modify or reverse

the rulings in National Union Fire Insurance Company of Pittsburg vs. Stolt-Nielsen
Philippines, Inc.,   and Bengson vs. Chan,   where this Court suspended the action filed
31 32

pending arbitration, and argues that "[s]ound policy requires that the conclusion of whether a
Supreme Court decision has or has not reversed or modified [a] previous doctrine, should be
left to the Supreme Court itself; until then, the latest pronouncement should
prevail."   Fourth, petitioner alleges that the writ of preliminary attachment issued by the trial
33

court is void considering that the case filed before it "is a separate action
which cannot exist,"   and ". . . there is even no need for the attachment as far as HBSTC is
34

concerned because such automatic debit/credit procedure   may be regarded as a security

35

for the transactions involved and, as jurisprudence confirms, one requirement in the
issuance of an attachment [writ of preliminary attachment] is that the debtor has no sufficient
security."   Petitioner asserts further that a writ of preliminary attachment is unwarranted
36

because no ground exists for its issuance. According to petitioner, ". . . the only allegations
against it [HBSTC] are that it refused to refund the amounts of the checks of FEBTC and that
it knew about the fraud perpetrated by the other defendants,"   which, at best, constitute only
37

"incidental fraud" and not causal fraud which justifies the issuance of the writ of preliminary
attachment.

Private respondent FEBTC, on the other hand, contends that ". . . the cause of action for collection
[of a sum of money] can coexist in the civil suit and the arbitration [proceeding]"   citing section 7 of
38

the Arbitration Law which provides for the stay of the civil action until an arbitration has been had in
accordance with the terms of the agreement providing for arbitration. Private respondent further
asserts that following section 4(3), article VIII   of the 1987 Constitution, the subsequent case
39

of Puromines does not overturn the ruling in the earlier cases of National Union Fire Insurance
Company of Pittsburg vs. Stolt-Nielsen Philippines, Inc.,   and Bengson vs. Chan,   hence, private
40 41

respondent concludes that the prevailing doctrine is that the civil action must be stayed rather than
dismissed pending arbitration.

In this petition, the lone issue presented for the consideration of this Court is:

WHETHER OR NOT PRIVATE RESPONDENT WHICH COMMENCED AN

ARBITRATION PROCEEDING UNDER THE AUSPICES OF THE PHILIPPINE
CLEARING HOUSE CORPORATION (PCHC) MAY SUBSEQUENTLY FILE A
SEPARATE CASE IN COURT OVER THE SAME SUBJECT MATTER OF
ARBITRATION DESPITE THE PENDENCY OF THAT ARBITRATION, SIMPLY TO
OBTAIN THE PROVISIONAL REMEDY OF ATTACHMENT AGAINST THE BANK
THE ADVERSE PARTY IN THE ARBITRATION PROCEEDING.  42
We find no merit in the petition. Section 14 of Republic Act 876, otherwise known as the Arbitration
Law, allows any party to the arbitration proceeding to petition the court to take measures to
safeguard and/or conserve any matter which is the subject of the dispute in arbitration, thus:

Sec. 14. Subpoena and subpoena duces tecum. — Arbitrators shall have the power
to require any person to attend a hearing as a witness. They shall have the power to
subpoena witnesses and documents when the relevancy of the testimony and the
materiality thereof has been demonstrated to the arbitrators. Arbitrators may also
require the retirement of any witness during the testimony of any other witness. All of
the arbitrators appointed in any controversy must attend all the hearings in that
matter and hear all the allegations and proofs of the parties; but an award by the
majority of them is valid unless the concurrence of all of them is expressly required in
the submission or contract to arbitrate. The arbitrator or arbitrators shall have the
power at any time, before rendering the award, without prejudice to the rights of any
party to petition the court to take measures to safeguard and/or conserve any matter
which is the subject of the dispute in arbitration. (emphasis supplied)

Petitioner's exposition of the foregoing provision deserves scant consideration. Section 14 simply
grants an arbitrator the power to issue subpoena and subpoena duces tecum at any time before
rendering the award. The exercise of such power is without prejudice to the right of a party to file a
petition in court to safeguard any matter which is the subject of the dispute in arbitration. In the case
at bar, private respondent filed an action for a sum of money with prayer for a writ of preliminary
attachment. Undoubtedly, such action involved the same subject matter as that in arbitration, i.e., the
sum of P25,200,000.00 which was allegedly deprived from private respondent in what is known in
banking as a "kiting scheme." However, the civil action was not a simple case of a money claim
since private respondent has included a prayer for a writ of preliminary attachment, which is
sanctioned by section 14 of the Arbitration Law.

Petitioner cites the cases of Associated Bank vs. Court of Appeals,   Puromines, Inc. vs. Court of
43

Appeals,   and Ledesma vs. Court of Appeals   in contending that "[w]hen arbitration is agreed upon
44 45

and suit is filed without arbitration having been held and terminated, the case that is filed should be
dismissed."   However, the said cases are not in point. In Associated Bank, we affirmed the
46

dismissal of the third-party complaint filed by Associated Bank against Philippine Commercial
International Bank, Far East Bank & Trust Company, Security Bank and Trust Company, and
Citytrust Banking Corporation for lack of jurisdiction, it being shown that the said parties were bound
by the Clearing House Rules and Regulations on Arbitration of the Philippine Clearing House
Corporation. In Associated Bank, we declared that:

. . . . . .. Under the rules and regulations of the Philippine Clearing House Corporation
(PCHC), the mere act of participation of the parties concerned in its operations in
effect amounts to a manifestation of agreement by the parties to abide by its rules
and regulations. As a consequence of such participation, a party cannot invoke the
jurisdiction of the courts over disputes and controversies which fall under the PCHC
Rules and Regulations without first going through the arbitration processes laid out
by the body.   (emphasis supplied)
47

And thus we concluded:

Clearly therefore, petitioner Associated Bank, by its voluntary participation and its
consent to the arbitration rules cannot go directly to the Regional Trial Court when it
finds it convenient to do so. The jurisdiction of the PCHC under the rules and
regulations is clear, undeniable and is particularly applicable to all the parties in the
 third party complaint under their obligation to first seek redress of their disputes and
grievances with the PCHC before going to the trial court.   (emphasis supplied)
48

Simply put, participants in the regional clearing operations of the Philippine Clearing House
Corporation cannot bypass the arbitration process laid out by the body and seek relief directly from
the courts. In the case at bar, undeniably, private respondent has initiated arbitration proceedings as
required by the PCHC rules and regulations, and pending arbitration has sought relief from the trial
court for measures to safeguard and/or conserve the subject of the dispute under arbitration, as
sanctioned by section 14 of the Arbitration Law, and otherwise not shown to be contrary to the
PCHC rules and regulations.

Likewise, in the case of Puromines, Inc. vs. Court of Appeals,   we have ruled that:
49

In any case, whether the liability of respondent should be based on the sales contract
or that of the bill of lading, the parties are nevertheless obligated to respect the
arbitration provisions on the sales contract and/or 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.

In Puromines, we found the arbitration clause stated in the sales contract to be valid and
applicable, thus, we ruled that the parties, being signatories to the sales contract, are
obligated to respect the arbitration provisions on the contract and cannot escape from such
obligation by filing an action for breach of contract in court without resorting first to
arbitration, as agreed upon by the parties.

At this point, we emphasize that arbitration, as an alternative method of dispute resolution, is

encouraged by this Court. Aside from unclogging judicial dockets, it also hastens solutions especially
of commercial disputes.   The Court looks with favor upon such amicable arrangement and will only
50

interfere with great reluctance to anticipate or nullify the action of the arbitrator. 
51

WHEREFORE, premises considered, the petition is hereby DISMISSED and the decision of the
court a quo is AFFIRMED.

SO ORDERED.

G.R. No. 141833            March 26, 2003

LM POWER ENGINEERING CORPORATION, petitioner,

vs.
CAPITOL INDUSTRIAL CONSTRUCTION GROUPS, INC., respondent.

PANGANIBAN, J.:

Alternative dispute resolution methods or ADRs -- like arbitration, mediation, negotiation and
conciliation -- are encouraged by the Supreme Court. By enabling 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.1

The Case
Before us is a Petition for Review on Certiorari2 under Rule 45 of the Rules of Court, seeking to set
aside the January 28, 2000 Decision of the Court of Appeals3 (CA) in CA-GR CV No. 54232. The
dispositive portion of the Decision reads as follows:

"WHEREFORE, the judgment appealed from is REVERSED and SET ASIDE. The parties
are ORDERED to present their dispute to arbitration in accordance with their Sub-contract
Agreement. The surety bond posted by [respondent] is [d]ischarged."4

The Facts

On February 22, 1983, 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.5

On April 25, 1985, respondent took over some of the work contracted to petitioner.6 Allegedly, the
latter had failed to finish it because of its inability to procure materials.7

Upon completing its task under the Contract, petitioner billed respondent in the amount of
P6,711,813.90.8 Contesting the accuracy of the amount of advances and billable accomplishments
listed by the former, the latter refused to pay. Respondent also took refuge in the termination clause
of the Agreement.9 That clause allowed it to set off the cost of the work that petitioner had failed to
undertake -- due to termination or take-over -- against the amount it owed the latter.

Because of the dispute, petitioner filed with the Regional Trial Court (RTC) of Makati (Branch 141) a
Complaint10 for the collection of the amount representing the alleged balance due it under the
Subcontract. Instead of submitting an Answer, respondent filed a Motion to Dismiss,11 alleging that
the Complaint was premature, because there was no prior recourse to arbitration.

In its Order12 dated September 15, 1987, the RTC denied the Motion on the ground that the dispute
did not involve the interpretation or the implementation of the Agreement and was, therefore, not
covered by the arbitral clause.13

After trial on the merits, the RTC14 ruled that the take-over of some work items by respondent was
not equivalent to a termination, but a mere modification, of the Subcontract. The latter was ordered
to give full payment for the work completed by petitioner.

Ruling of the Court of Appeals

On appeal, the CA reversed the RTC and ordered the referral of the case to arbitration. The
appellate court held as arbitrable the issue of whether respondent’s take-over of some work items
had been intended to be a termination of the original contract under Letter "K" of the Subcontract. It
ruled likewise on two other issues: whether petitioner was liable under the warranty clause of the
Agreement, and whether it should reimburse respondent for the work the latter had taken over.15

Hence, this Petition.16

The Issues

In its Memorandum, petitioner raises the following issues for the Court’s consideration:

"A
Whether or not there exist[s] a controversy/dispute between petitioner and respondent regarding the
interpretation and implementation of the Sub-Contract Agreement dated February 22, 1983 that
requires prior recourse to voluntary arbitration;

"B

In the affirmative, whether or not the requirements provided in Article III 1 of CIAC Arbitration Rules
regarding request for arbitration ha[ve] been complied with[.]"17

The Court’s Ruling

The Petition is unmeritorious.

First Issue:
Whether Dispute Is Arbitrable

Petitioner claims that there is no conflict regarding the interpretation or the implementation of the
Agreement. Thus, without having to resort to prior arbitration, it is entitled to collect the value of the
services it rendered through an ordinary action for the collection of a sum of money from respondent.
On the other hand, the latter contends that there is a need for prior arbitration as provided in the
Agreement. This is because there are some disparities between the parties’ positions regarding the
extent of the work done, the amount of advances and billable accomplishments, and the set off of
expenses incurred by respondent in its take-over of petitioner’s work.

We side with respondent. Essentially, the dispute arose from the parties’ ncongruent positions on
whether certain provisions of their Agreement could be applied to the facts. The instant case
involves technical discrepancies that are better left to an arbitral body that has expertise in those
areas. In any event, the inclusion of an arbitration clause in a contract does not ipso facto divest the
courts of jurisdiction to pass upon the findings of arbitral bodies, because the awards are still
judicially reviewable under certain conditions.18

In the case before us, the Subcontract has the following arbitral clause:

"6. The Parties hereto agree 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 x x x."19

Clearly, 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.

A review of the factual allegations of the parties reveals that they differ on the following questions:
(1) Did a take-over/termination occur? (2) May the expenses incurred by respondent in the take-over
be set off against the amounts it owed petitioner? (3) How much were the advances and billable
accomplishments?

The resolution of the foregoing issues lies in the interpretation of the provisions of the Agreement.
According to respondent, the take-over was caused by petitioner’s delay in completing the work.
Such delay was in violation of the provision in the Agreement as to time schedule:
"G. TIME SCHEDULE

"[Petitioner] shall adhere strictly to the schedule related to the WORK and complete the
WORK within the period set forth in Annex C hereof. NO time extension shall be granted by
[respondent] to [petitioner] unless a corresponding time extension is granted by [the Ministry
of Public Works and Highways] to the CONSORTIUM."20

Because of the delay, respondent alleges that it took over some of the work contracted to petitioner,
pursuant to the following provision in the Agreement:

"K. TERMINATION OF AGREEMENT

"[Respondent] has the right to terminate and/or take over this Agreement for any of the
following causes:

x x x           x x x           x x x

‘6. If despite previous warnings by [respondent], [petitioner] does not execute the
WORK in accordance with this Agreement, or persistently or flagrantly neglects to
carry out [its] obligations under this Agreement."21

Supposedly, as a result of the "take-over," respondent incurred expenses in excess of the contracted
price. It sought to set off those expenses against the amount claimed by petitioner for the work the
latter accomplished, pursuant to the following provision:

"If the total direct and indirect cost of completing the remaining part of the WORK exceed the
sum which would have been payable to [petitioner] had it completed the WORK, the amount
of such excess [may be] claimed by [respondent] from either of the following:

‘1. Any amount due [petitioner] from [respondent] at the time of the termination of this
Agreement."22

The issue as to the correct amount of petitioner’s advances and billable accomplishments involves
an evaluation of the manner in which the parties completed the work, the extent to which they did it,
and the expenses each of them incurred in connection therewith. Arbitrators also need to look into
the computation of foreign and local costs of materials, foreign and local advances, retention fees
and letters of credit, and taxes and duties as set forth in the Agreement. These data can be gathered
from a review of the Agreement, pertinent portions of which are reproduced hereunder:

"C. CONTRACT PRICE AND TERMS OF PAYMENT

x x x           x x x           x x x

"All progress payments to be made by [respondent] to [petitioner] shall be subject to a

retention sum of ten percent (10%) of the value of the approved quantities. Any claims by
[respondent] on [petitioner] may be deducted by [respondent] from the progress payments
and/or retained amount. Any excess from the retained amount after deducting [respondent’s]
claims shall be released by [respondent] to [petitioner] after the issuance of [the Ministry of
Public Works and Highways] of the Certificate of Completion and final acceptance of the
WORK by [the Ministry of Public Works and Highways].
 x x x           x x x           x x x

"D. IMPORTED MATERIALS AND EQUIPMENT

"[Respondent shall open the letters of credit for the importation of equipment and materials
listed in Annex E hereof after the drawings, brochures, and other technical data of each
items in the list have been formally approved by [the Ministry of Public Works and Highways].
However, petitioner will still be fully responsible for all imported materials and equipment.

"All expenses incurred by [respondent], both in foreign and local currencies in connection
with the opening of the letters of credit shall be deducted from the Contract Prices.

x x x           x x x           x x x

"N. OTHER CONDITIONS

x x x           x x x           x x x

"2. All customs duties, import duties, contractor’s taxes, income taxes, and other taxes that
may be required by any government agencies in connection with this Agreement shall be for
the sole account of [petitioner]."23

Being an inexpensive, speedy and amicable method of settling disputes,24 arbitration -- along with
mediation, conciliation and negotiation -- is encouraged by the Supreme Court. Aside from
unclogging judicial dockets, arbitration also hastens the resolution of disputes, especially of the
commercial kind.25 It is thus regarded as the "wave of the future" in international civil and commercial
disputes.26 Brushing aside a contractual agreement calling for arbitration between the parties would
be a step backward.27

Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods,
courts should liberally construe arbitration clauses. Provided such clause is susceptible of an
interpretation that covers the asserted dispute, an order to arbitrate should be granted.28 Any doubt
should be resolved in favor of arbitration.29

Second Issue:
Prior Request for Arbitration

According to petitioner, assuming arguendo that the dispute is arbitrable, the failure to file a formal
request for arbitration with the Construction Industry Arbitration Commission (CIAC) precluded the
latter from acquiring jurisdiction over the question. To bolster its position, petitioner even cites our
ruling in Tesco Services Incorporated v. Vera.30 We are not persuaded.

Section 1 of Article II of the old Rules of Procedure Governing Construction Arbitration indeed
required the submission of a request for arbitration, as follows:

"SECTION. 1. Submission to Arbitration -- Any party to a construction contract wishing to

have recourse to arbitration by the Construction Industry Arbitration Commission (CIAC)
shall submit its Request for Arbitration in sufficient copies to the Secretariat of the CIAC;
PROVIDED, that in the case of government construction contracts, all administrative
remedies available to the parties must have been exhausted within 90 days from the time the
dispute arose."
Tesco was promulgated by this Court, using the foregoing provision as reference.

On the other hand, Section 1 of Article III of the new Rules of Procedure Governing Construction
Arbitration has dispensed with this requirement and recourse to the CIAC may now be availed of
whenever a contract "contains a clause for the submission of a future controversy to arbitration," in
this wise:

"SECTION 1. Submission to CIAC Jurisdiction — An arbitration clause in a construction

contract or a submission to arbitration of a construction dispute shall be deemed an
agreement to submit an existing or future controversy to CIAC jurisdiction, notwithstanding
the reference to a different arbitration institution or arbitral body in such contract or
submission. 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."

The foregoing amendments in the Rules were formalized by CIAC Resolution Nos. 2-91 and 3-93.31

The difference in the two provisions was clearly explained in China Chang Jiang Energy Corporation
(Philippines) v. Rosal Infrastructure Builders et al.32 (an extended unsigned Resolution) and
reiterated in National Irrigation Administration v. Court of Appeals,33 from which we quote thus:

"Under the present Rules of Procedure, for a particular construction contract to fall within the
jurisdiction of CIAC, it is merely required that the parties agree to submit the same to
voluntary arbitration Unlike in the original version of Section 1, as applied in the Tesco case,
the law as it now stands does not provide that the parties should agree to submit disputes
arising from their agreement specifically to the CIAC for the latter to acquire jurisdiction over
the same. Rather, it is plain and clear that as long as the parties agree to submit to voluntary
arbitration, regardless of what forum they may choose, their agreement will fall within the
jurisdiction of the CIAC, such that, even if they specifically choose another forum, the parties
will not be precluded from electing to submit their dispute before the CIAC because this right
has been vested upon each party by law, i.e., E.O. No. 1008."34

Clearly, there is no more need to file a request with the CIAC in order to vest it with jurisdiction to
decide a construction dispute.

The arbitral clause in the Agreement is a commitment on the part of the parties to submit to
arbitration the disputes covered therein. Because that clause is binding, they are expected to abide
by it in good faith.35 And because it covers the dispute between the parties in the present case, either
of them may compel the other to arbitrate.36

Since petitioner has already filed a Complaint with the RTC without prior recourse to arbitration, the
proper procedure to enable the CIAC to decide on the dispute is to request the stay or suspension of
such action, as provided under RA 876 [the Arbitration Law].37

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.

SO ORDERED.

G.R. No. 126212             March 2, 2000

SEA-LAND SERVICE, INC., petitioner,
vs.
COURT OF APPEALS, A.P. MOLLER/MAERSK LINE and MAERSK-TABACALERA SHIPPING
AGENCY (FILIPINAS), INC., respondents.

YNARES-SANTIAGO, J.:

This petition for review on certiorari seeks to annul and set aside the decision of the Court of
Appeals dated September 29, 1995 in CA-G.R. SP No. 35777, dismissing the petition
1 

for certiorari filed by petitioner to annul the two (2) orders issued by the Regional Trial Court of
Quezon City, Branch 216, in Civil Case No. Q-92-12593.

The facts are as follows:

On April 29, 1991, 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
2 

"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, or on 18 May 1991, 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. The corresponding
Bill of Lading No. MAEU MNL110263 was issued to Florex by respondent AMML. 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, on
June 26, 1992, Florex filed a complaint against respondent Maersk-Tabacalera Shipping Agency
(Filipinas), Inc. for reimbursement of the value of the cargo and other charges. According to Florex,
3 

the cargo was received by the consignee only on June 28, 1991, since it was discharged in Long
Beach, California, instead of in Oakland, California on June 5, 1991 as stipulated.

Respondent AMML filed its Answer alleging that even on the assumption that Florex was entitled to
4 

reimbursement, it was petitioner who should be liable. Accordingly, respondent AMML filed a Third
Party Complaint against petitioner on November 10, 1992, averring that whatever damages
5 

sustained by Florex were caused by petitioner, which actually received and transported Florex's
cargo on its vessels and unloaded them.

On January 1, 1993, petitioner filed a Motion to Dismiss the Third Party Complaint on the ground of
6 

failure to state a cause of action and lack of jurisdiction, the amount of damages not having been
specified therein. 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. On September 27, 1993, the lower court issued an Order denying petitioner's Motion to
Dismiss. Petitioner's Motion for Reconsideration was likewise denied by the lower court in its August
22, 1994 Order.
Undaunted, petitioner filed a petition for certiorari with the Court of Appeals on November 23, 1994.
7 

Meanwhile, petitioner also filed its Answer to the Third Party Complaint in the trial court.

On September 29, 1995, respondent Court of Appeals rendered the assailed Decision dismissing
the petition for certiorari. With the denial of its Motion for Reconsideration, petitioner filed the instant
petition for review, raising the following issues —

I.

THE COURT OF APPEALS DISREGARDED AN AGREEMENT TO ARBITRATE IN

VIOLATION OF STATUTE AND SUPREME COURT DECISIONS HOLDING THAT
ARBITRATION IS A CONDITION PRECEDENT TO SUIT WHERE SUCH AN AGREEMENT
TO ARBITRATE EXISTS.

II.

THE COURT OF APPEALS HAS RULED IN A MANNER NOT IN ACCORD WITH

JURISPRUDENCE WHEN IT REFUSED 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. 8

Resolving first the issue of failure to state a cause of action, respondent Court of Appeals did not err
in reading the Complaint of Florex and respondent AMML's Answer together with the Third Party
Complaint to determine whether a cause of action is properly alleged. In Fil-Estate Golf and
Development, Inc. vs. Court of Appeals, this Court ruled that in the determination of whether or not
9 

the complaint states a cause of action, the annexes attached to the complaint may be considered,
they being parts of the complaint.

Coming now to the main issue of arbitration, the pertinent clauses of the "Co-operation in the Pacific"
contract entered into by the parties provide:

16. For the purposes of this agreement the Containership Operator shall be deemed to have
2 

issued to the Principal Carrier for good consideration and for both loaded and empty
containers its non-negotiable memo bills of lading in the form attached hereto as Appendix 6,
consigned only to the Principal Carrier or its agents, provisions of which shall govern the
liability between the Principal Carrier and the Containership Operator and that for the
purpose of determining the liability in accordance with either Lines' memo bill of lading, the
number of packages or customary freight units shown on the bill of lading issued by the
Principal Carrier to its shippers shall be controlling.

16. The Principal Carrier shall use all reasonable endeavours to defend all
3 

in personam and in rem suits for loss of or damage to cargo carried pursuant to bills of

lading issued by it, or to settle such suits for as low a figure as reasonably possible. The
Principal Carrier shall have the right to seek damages and/or an indemnity from the
Containership Operator by arbitration pursuant to Clause 32 hereof. Notwithstanding the
provisions of the Lines' memo bills of lading or any statutory rules incorporated therein or
applicable thereto, the Principal Carrier shall be entitled to commence such arbitration at any
time until one year after its liability has been finally determined by agreement, arbitration
award or judgment, such award or judgment not being the subject of appeal, provided that
the Containership Operator has been given notice of the said claim in writing by the Principal
Carrier within three months of the Principal Carrier receiving notice in writing of the claim.
 Further the Principal Carrier shall have the right to grant extensions of time for the
commencement of suit to any third party interested in the cargo without prior reference to the
Containership Operator provided that notice of any extension so granted is given to the
Containership Operator within 30 days of any such extension being granted.

x x x           x x x          x x x

32. ARBITRATION

32. If at any time a dispute or claim arises out of or in connection with the Agreement the
1 

Lines shall endeavour to settle such amicably, failing which it shall be referred to arbitration
by a single arbitrator in London, such arbitrator to be appointed by agreement between the
Lines within 14 days after service by one Line upon the other of a notice specifying the
nature of the dispute or claim and requiring reference of such dispute or claim to arbitration
pursuant to this Article.

32. Failing agreement upon an arbitrator within such period of 14 days, the dispute shall be
2 

settled by three Arbitrators, each party appointing one Arbitrator, the third being appointed by
the President of the London Maritime Arbitrators Association.

32. If either of the appointed Arbitrators refuses or is incapable of acting, the party who
3 

appointed him shall appoint a new Arbitrator in his place.

32. If one of the parties fails to appoint an Arbitrator — either originally or by way of
4 

substitution — for two weeks after the other party having appointed his Arbitrator has sent
the party making default notice by mail, fax or telex to make the appointment, the party
appointing the third Arbitrator shall, after application from the party having appointed his
Arbitrator, also appoint an Arbitrator in behalf of the party making default.

32. Any such arbitration shall be in accordance with the Arbitration Act 1950 as amended by
5 

the Arbitration Act 1979 or any other subsequent legislation and the arbitrator's award shall
be final and binding upon Lines. To the extent permitted by the Arbitration Act 1979 the Lines
hereto exclude pursuant to S 3(1) of that Act the jurisdiction of the English High Court of
Justice to entertain any appeal or application under Section 1 and 2 of the Arbitration Act
1979.  10

From the foregoing, the following matters are 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.

Prescinding from the foregoing matters, we find that both the trial court and the Court of Appeals
erred in denying petitioner's prayer for arbitration.
To begin with, allowing respondent AMML's Third Party Claim against petitioner to proceed would be
in violation of Clause 16.2 of the Agreement. As summarized, the clause provides that whatever
dispute there may be between the Principal Carrier and the Containership Operator arising from
contracts of carriage shall be governed by the provisions of the bills of lading deemed issued to the
Principal Carrier by the Containership Operator. On the other hand, to sustain the Third Party
Complaint would be to allow private respondent to hold petitioner liable under the provisions of the
bill of lading issued by the Principal Carrier to Florex, under which the latter is suing in its Complaint,
not under the bill of lading petitioner, as containership operator, issued to respondent AMML, as
Principal Carrier, contrary to what is contemplated in Clause 16.2.

The Court of Appeals ruled that the terms of the Agreement "explicitly required that the principal
carrier's claim against the containership operator first be finally determined by, among others, a court
judgment, before the right to arbitration accrues." 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".

For respondent Court of Appeals to say that the terms of the contract do not require arbitration as a
condition precedent to judicial action is erroneous. In the light of the Agreement clauses
aforequoted, 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.

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

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
11 

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.  12

WHEREFORE, premises considered, the instant Petition for Review on Certiorari is GRANTED. The
decision of the Court of Appeals in CA-G.R. SP No. 35777 is REVERSED and SET ASIDE. The
Regional Trial Court of Quezon City, Branch 77, is ordered to DISMISS Respondent AMML's Third
Party Complaint in Civil Case No. Q-92-12593. No pronouncement as to costs.

SO ORDERED. 1âwphi1.nêt
G.R. No. 129916            March 26, 2001

MAGELLAN CAPITAL MANAGEMENT CORPORATION and MAGELLAN CAPITAL HOLDINGS

CORPORATION, petitioners,
vs.
ROLANDO M. ZOSA and HON. JOSE P. SOBERANO, JR., in his capacity as Presiding Judge
of Branch 58 of the Regional Trial Court of Cebu, 7th Judicial Region, respondents.

BUENA, J.:

Under a management agreement entered into on March 18, 1994, Magellan Capital Holdings
Corporation [MCHC] appointed Magellan Capital Management Corporation [MCMC] as manager for
the operation of its business and affairs.1 Pursuant thereto, on the same month, MCHC, MCMC, and
private respondent Rolando M. Zosa entered into an "Employment Agreement" designating Zosa as
President and Chief Executive Officer of MCHC.

Under the "Employment Agreement", the term of respondent Zosa's employment shall be co-
terminous with the management agreement, or until March 1996,2 unless sooner terminated
pursuant to the provisions of the Employment Agreement.3 The grounds for termination of
employment are also provided in the Employment Agreement.

On May 10, 1995, the majority of MCHC's Board of Directors decided not to re-elect respondent
Zosa as President and Chief Executive Officer of MCHC on account of loss of trust and
confidence4 arising from alleged violation of the resolution issued by MCHC's board of directors and
of the non-competition clause of the Employment Agreement.5 Nevertheless, respondent Zosa was
elected to a new position as MCHC's Vice-Chairman/Chairman for New Ventures Development.6

On September 26, 1995, respondent Zosa communicated his resignation for good reason from the
position of Vice-Chairman under paragraph 7 of the Employment Agreement on the ground that said
position had less responsibility and scope than President and Chief Executive Officer. He demanded
that he be given termination benefits as provided for in Section 8 (c) (i) (ii) and (iii) of
the Employment Agreement.7

In a letter dated October 20, 1995, MCHC communicated its non-acceptance of respondent Zosa's
resignation for good reason, but instead informed him that the Employment Agreement is terminated
for cause, effective November 19, 1995, in accordance with Section 7 (a) (v) of the said agreement,
on account of his breach of Section 12 thereof. Respondent Zosa was further advised that he shall
have no further rights under the said Agreement or any claims against the Manager or the
Corporation except the right to receive within thirty (30) days from November 19, 1995, the amounts
stated in Section 8 (a) (i) (ii) of the Agreement.8

Disagreeing with the position taken by petitioners, respondent Zosa invoked the Arbitration Clause of
the Employment Agreement, to wit:

"23. Arbitration. In the event that any dispute, controversy or claim arises out of or under any
provisions of this Agreement, then the parties hereto agree to submit such dispute,
controversy or claim to arbitration as set forth in this Section and the determination to be
made in such arbitration shall be final and binding. Arbitration shall be effected by a panel of
three arbitrators. The Manager, Employee and Corporation shall designate one (1) arbitrator
who shall, in turn, nominate and elect who among them shall be the chairman of the
committee. Any such arbitration, including the rendering of an arbitration award, shall take
place in Metro Manila. The arbitrators shall interpret this Agreement in accordance with the
 substantive laws of the Republic of the Philippines. The arbitrators shall have no power to
add to, subtract from or otherwise modify the terms of Agreement or to grant injunctive relief
of any nature. Any judgment upon the award of the arbitrators may be entered in any court
having jurisdiction thereof, with costs of the arbitration to be borne equally by the parties,
except that each party shall pay the fees and expenses of its own counsel in the arbitration."

On November 10, 1995, respondent Zosa designated his brother, Atty. Francis Zosa, as his
representative in the arbitration panel9 while MCHC designated Atty. Inigo S. Fojas10 and MCMC
nominated Atty. Enrique I. Quiason11 as their respective representatives in the arbitration panel.
However, instead of submitting the dispute to arbitration, respondent Zosa, on April 17, 1996, filed
an action for damages against petitioners before the Regional Trial Court of Cebu12 to enforce his
benefits under the Employment Agreement.

On July 3, 1996, petitioners filed a motion to dismiss13 arguing that (1) the trial court has no
jurisdiction over the instant case since respondent Zosa's claims should be resolved through
arbitration pursuant to Section 23 of the Employment Agreement with petitioners; and (2) the venue
is improperly laid since respondent Zosa, like the petitioners, is a resident of Pasig City and thus, the
venue of this case, granting without admitting that the respondent has a cause of action against the
petitioners cognizable by the RTC, should be limited only to RTC-Pasig City.14

Meanwhile, respondent Zosa filed an amended complaint dated July 5, 1996.

On August 1, 1996, the RTC Branch 58 of Cebu City issued an Order denying petitioners motion to
dismiss upon the findings that (1) the validity and legality of the arbitration provision can only be
determined after trial on the merits; and (2) the amount of damages claimed, which is over
P100,000.00, falls within the jurisdiction of the RTC.15 Petitioners filed a motion for reconsideration
which was denied by the RTC in an order dated September 5, 1996.16

In the interim, on August 22, 1996, in compliance with the earlier order of the court directing
petitioners to file responsive pleading to the amended complaint, petitioners filed their Answer Ad
Cautelam with counterclaim reiterating their position that the dispute should be settled through
arbitration and the court had no jurisdiction over the nature of the action.17

On October 21, 1996, the trial court issued its pre-trial order declaring the pre-trial stage terminated
and setting the case for hearing. The order states:

"ISSUES:

"The Court will only resolve one issue in so far as this case is concerned, to wit:

"Whether or not the Arbitration Clause contained in Sec. 23 of the Employment Agreement is
void and of no effect: and, if it is void and of no effect, whether or not the plaintiff is entitled to
damages in accordance with his complaint and the defendants in accordance with their
counterclaim.

"It is understood, that in the event the arbitration clause is valid and binding between the
parties, the parties shall submit their respective claim to the Arbitration Committee in
accordance with the said arbitration clause, in which event, this case shall be deemed
dismissed."18
On November 18, 1996, petitioners filed their Motion Ad Cautelam for the Correction, Addition and
Clarification of the Pre-trial Order dated November 15, 1996,19 which was denied by the court in an
order dated November 28, 1996.20

Thereafter, petitioners MCMC and MCHC filed a Motion Ad Cautelam for the parties to file their
Memoranda to support their respective stand on the issue of the validity of the "arbitration clause"
contained in the Employment Agreement. In an order dated December 13, 1996, the trial court
denied the motion of petitioners MCMC and MCHC.

On January 17, 1997, petitioners MCMC and MCHC filed a petition for certiorari and prohibition
under Rule 65 of the Rules of Court with the Court of Appeals, questioning the trial court orders
dated August 1, 1996, September 5, 1996, and December 13, 1996.21

On March 21, 1997, the Court of Appeals rendered a decision, giving due course to the petition, the
decretal portion of which reads:

"WHEREFORE, the petition is GIVEN DUE COURSE. The respondent court is directed to
resolve the issue on the validity or effectivity of the arbitration clause in the Employment
Agreement, and to suspend further proceedings in the trial on the merits until the said issue
is resolved. The questioned orders are set aside insofar as they contravene this Court's
resolution of the issues raised as herein pronounced.

"The petitioner is required to remit to this Court the sum of P81.80 for cost within five (5)
days from notice.

"SO ORDERED."22

Petitioners filed a motions for partial reconsideration of the CA decision praying (1) for the dismissal
of the case in the trial court, on the ground of lack of jurisdiction, and (2) that the parties be directed
to submit their dispute to arbitration in accordance with the Employment Agreement dated March
1994. The CA, in a resolution promulgated on June 20, 1997, denied the motion for partial
reconsideration for lack of merit.

In compliance with the CA decision, the trial court, on July 18, 1997, rendered a decision declaring
the "arbitration clause" in the Employment Agreement partially void and of no effect. The dispositive
portion of the decision reads:

"WHEREFORE, premises considered, judgment is hereby rendered partially declaring the

arbitration clause of the Employment Agreement void and of no effect, only insofar as it
concerns the composition of the panel of arbitrators, and directing the parties to proceed to
arbitration in accordance with the Employment Agreement under the panel of three (3)
arbitrators, one for the plaintiff, one for the defendants, and the third to be chosen by both
the plaintiff and defendants. The other terms, conditions and stipulations in the arbitration
clause remain in force and effect."23

In view of the trial court's decision, petitioners filed this petition for review on certiorari, under Rule 45
of the Rules of Court, assigning the following errors for the Court's resolution:

"I. The trial court gravely erred when it ruled that the arbitration clause under the employment
agreement is partially void and of no effect, considering that:
 "A. The arbitration clause in the employment agreement dated March 1994 between
respondent Zosa and defendants MCHC and MCMC is valid and binding upon the
parties thereto.

"B. In view of the fact that there are three parties to the employment agreement, it is
but proper that each party be represented in the arbitration panel.

"C. The trial court grievously erred in its conclusion that petitioners MCMC and
MCHC represent the same interest.

"D. Respondent Zosa is estopped from questioning the validity of the arbitration
clause, including the right of petitioner MCMC to nominate its own arbitrator, which
he himself has invoked.

"II. In any event, the trial court acted without jurisdiction in hearing the case below,
considering that it has no jurisdiction over the nature of the action or suit since controversies
in the election or appointment of officers or managers of a corporation, such as the action
brought by respondent Zosa, fall within the original and exclusive jurisdiction of the Securities
and Exchange Commission.

"III. Contrary to respondent Zosa's allegation, the issue of the trial court's jurisdiction over the
case below has not yet been resolved with finality considering that petitioners have expressly
reserved their right to raise said issue in the instant petition. Moreover, the principle of the
law of the case is not applicable in the instant case.

"IV. Contrary to respondent Zosa's allegation, petitioners MCMC and MCHC are not guilty of
forum shopping.

"V. Contrary to respondent Zosa's allegation, the instant petition for review involves only
questions of law and not of fact."24

We rule against the petitioners.

It is error for the petitioners to claim that the case should fall under the jurisdiction of the Securities
and Exchange Commission [SEC, for brevity]. The controversy does not in anyway involve the
election/appointment of officers of petitioner MCHC, as claimed by petitioners in their assignment of
errors. Respondent Zosa's amended complaint focuses heavily on the illegality of the Employment
Agreement's "Arbitration Clause" initially invoked by him in seeking his termination benefits under
Section 8 of the employment contract. And under Republic Act No. 876, otherwise known as the
"Arbitration Law," it is the regional trial court which exercises jurisdiction over questions relating to
arbitration. We thus advert to the following discussions made by the Court of Appeals, speaking thru
Justice Minerva P. Gonzaga-Reyes,25 in C.A.-G.R. S.P. No. 43059, viz.

"As regards the fourth assigned error, asserting that jurisdiction lies with the SEC, which is
raised for the first time in this petition, suffice it to state that the Amended Complaint squarely
put in issue the question whether the Arbitration Clause is valid and effective between the
parties. Although the controversy which spawned the action concerns the validity of the
termination of the service of a corporate officer, the issue on the validity and effectivity of the
arbitration clause is determinable by the regular courts, and do not fall within the exclusive
and original jurisdiction of the SEC.
 "The determination and validity of the agreement is not a matter intrinsically connected with
the regulation and internal affairs of corporations (see Pereyra vs. IAC, 181 SCRA 244;
Sales vs. SEC, 169 SCRA 121); it is rather an ordinary case to be decided in accordance
with the general laws, and do not require any particular expertise or training to interpret and
apply (Viray vs. CA, 191 SCRA 308)."26

Furthermore, the decision of the Court of Appeals in CA-G.R. SP No. 43059 affirming the trial court's
assumption of jurisdiction over the case has become the "law of the case" which now binds the
petitioners. The "law of the case" doctrine has been defined as "a term applied to an established rule
that when an appellate court passes on a question and remands the cause to the lower court for
further proceedings, the question there settled becomes the law of the case upon subsequent
appeal."27 To note, the CA's decision in CA-G.R. SP No. 43059 has already attained finality as
evidenced by a Resolution of this Court ordering entry of judgment of said case, to wit:

"ENTRY OF JUDGMENT

This is to certify that on September 8, 1997 a decision/resolution rendered in the above-

entitled case was filed in this Office, the dispositive part of which reads as follows:

'G.R. No. 129615. (Magellan Capital Management Corporation, et al. vs. Court of
Appeals, Rolando Zosa, et al.). Considering the petitioner's manifestation dated
August 11, 1997 and withdrawal of intention to file petition for review on certiorari, the
Court Resolved to DECLARE THIS CASE TERMINATED and DIRECT the Clerk of
Court to INFORM the parties that the judgment sought to be reviewed has become
final and executory, no appeal therefore having been timely perfected.'

and that the same has, on September 17, 1997, become final and executory and is hereby
recorded in the Book of Entries of Judgments."28

Petitioners, therefore, are barred from challenging anew, through another remedial measure and in
any other forum, the authority of the regional trial court to resolve the validity of the arbitration
clause, lest they be truly guilty of forum-shopping which the courts consistently consider as a
contumacious practice that derails the orderly administration of justice.

Equally unavailing for the petitioners is the review by this Court, via the instant petition, of the factual
findings made by the trial court that the composition of the panel of arbitrators would, in all
probability, work injustice to respondent Zosa. We have repeatedly stressed that the jurisdiction of
this Court in a petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited
to reviewing only errors of law, not of fact, unless the factual findings complained of are devoid of
support by the evidence on record, or the assailed judgment is based on misapprehension of facts.29

Even if procedural rules are disregarded, and a scrutiny of the merits of the case is undertaken, this
Court finds the trial court's observations on why the composition of the panel of arbitrators should be
voided, incisively correct so as to merit our approval. Thus,

"From the memoranda of both sides, the Court is of the view that the defendants [petitioner]
MCMC and MCHC represent the same interest. There is no quarrel that both defendants are
entirely two different corporations with personalities distinct and separate from each other
and that a corporation has a personality distinct and separate from those persons composing
the corporation as well as from that of any other legal entity to which it may be related.
 "But as the defendants [herein petitioner] represent the same interest, it could never be
expected, in the arbitration proceedings, that they would not protect and preserve their own
interest, much less, would both or either favor the interest of the plaintiff. The arbitration law,
as all other laws, is intended for the good and welfare of everybody. In fact, what is being
challenged by the plaintiff herein is not the law itself but the provision of the Employment
Agreement based on the said law, which is the arbitration clause but only as regards the
composition of the panel of arbitrators. The arbitration clause in question provides, thus:

'In the event that any dispute, controversy or claim arise out of or under any
provisions of this Agreement, then the parties hereto agree to submit such dispute,
controversy or claim to arbitration as set forth in this Section and the determination to
be made in such arbitration shall be final and binding. Arbitration shall be effected by
a panel of three arbitrators. The Manager, Employee, and Corporation shall
designate one (1) arbitrator who shall, in turn, nominate and elect as who among
them shall be the chairman of the committee. Any such arbitration, including the
rendering of an arbitration award, shall take place in Metro Manila. The arbitrators
shall interpret this Agreement in accordance with the substantive laws of the
Republic of the Philippines. The arbitrators shall have no power to add to, subtract
from or otherwise modify the terms of this Agreement or to grant injunctive relief of
any nature. Any judgment upon the award of the arbitrators may be entered in any
court having jurisdiction thereof, with costs of the arbitration to be borne equally by
the parties, except that each party shall pay the fees and expenses of its own
counsel in the arbitration.' (Emphasis supplied).

"From the foregoing arbitration clause, it appears that the two (2) defendants [petitioners]
(MCMC and MCHC) have one (1) arbitrator each to compose the panel of three (3)
arbitrators. As the defendant MCMC is the Manager of defendant MCHC, its decision or vote
in the arbitration proceeding would naturally and certainly be in favor of its employer and the
defendant MCHC would have to protect and preserve its own interest; hence, the two (2)
votes of both defendants (MCMC and MCHC) would certainly be against the lone arbitrator
for the plaintiff [herein defendant]. Hence, apparently, plaintiff [defendant] would never get or
receive justice and fairness in the arbitration proceedings from the panel of arbitrators as
provided in the aforequoted arbitration clause. In fairness and justice to the plaintiff
[defendant], the two defendants (MCMC and MCHC) [herein petitioners] which represent the
same interest should be considered as one and should be entitled to only one arbitrator to
represent them in the arbitration proceedings. Accordingly, the arbitration clause, insofar as
the composition of the panel of arbitrators is concerned should be declared void and of no
effect, because the law says, "Any clause giving one of the parties power to choose more
arbitrators than the other is void and of no effect" (Article 2045, Civil Code).

"The dispute or controversy between the defendants (MCMC and MCHC) [herein petitioners]
and the plaintiff [herein defendant] should be settled in the arbitration proceeding in
accordance with the Employment Agreement, but under the panel of three (3) arbitrators,
one (1) arbitrator to represent the plaintiff, one (1) arbitrator to represent both defendants
(MCMC and MCHC) [herein petitioners] and the third arbitrator to be chosen by the plaintiff
[defendant Zosa] and defendants [petitioners].

"xxx           xxx            xxx"30

In this connection, petitioners' attempt to put respondent in estoppel in assailing the arbitration
clause must be struck down. For one, this issue of estoppel, as likewise noted by the Court of
Appeals, found its way for the first time only on appeal. Well-settled is the rule that issues not raised
below cannot be resolved on review in higher courts.31 Secondly, employment agreements such as
the one at bar are usually contracts of adhesion. Any ambiguity in its provisions is generally resolved
against the party who drafted the document. Thus, in the relatively recent case of Phil. Federation of
Credit Cooperatives, Inc. (PFCCI) and Fr. Benedicto Jayoma vs. NLRC and Victoria Abril,32 we had
the occasion to stress that "where a contract of employment, being a contract of adhesion, is
ambiguous, any ambiguity therein should be construed strictly against the party who prepared it."
And, finally, respondent Zosa never submitted himself to arbitration proceedings (as there was none
yet) before bewailing the composition of the panel of arbitrators. He in fact, lost no time in assailing
the "arbitration clause" upon realizing the inequities that may mar the arbitration proceedings if the
existing line-up of arbitrators remained unchecked.

We need only to emphasize in closing that arbitration proceedings are designed to level the playing
field among the parties in pursuit of a mutually acceptable solution to their conflicting claims. Any
arrangement or scheme that would give undue advantage to a party in the negotiating table is
anathema to the very purpose of arbitration and should, therefore, be resisted.

WHEREFORE, premises considered, the petition is hereby DISMISSED and the decision of the trial
court dated July 18, 1997 is AFFIRMED.

SO ORDERED.

G.R. No. 136154        February 7, 2001

DEL MONTE CORPORATION-USA, PAUL E. DERBY, JR., DANIEL COLLINS and LUIS

HIDALGO, petitioners,
vs.
COURT OF APPEALS, JUDGE BIENVENIDO L. REYES in his capacity as Presiding Judge, RTC-
Br. 74, Malabon, Metro Manila, MONTEBUENO MARKETING, INC., LIONG LIONG C.
SY and SABROSA FOODS, INC., respondents.

BELLOSILLO, J.:

This Petition for Review on certiorari assails the 17 July 1998 Decision1 of the Court of Appeals
affirming the 11 November 1997 Order2 of the Regional Trial Court which denied petitioners' Motion
to Suspend Proceedings in Civil Case No. 2637-MN. It also questions the appellate
court's Resolution3 of 30 October 1998 which denied petitioners' Motion for Reconsideration.

On 1 July 1994, in a Distributorship Agreement, petitioner Del Monte Corporation-USA (DMC-USA)

appointed private respondent Montebueno Marketing, Inc. (MMI) as the sole and exclusive
distributor of its Del Monte products in the Philippines for a period of five (5) years, renewable for two
(2) consecutive five (5) year periods with the consent of the parties. The agreement provided, among
others, for an arbitration clause which states –

12. GOVERNING LAW AND ARBITRATION4

This Agreement shall be governed by the laws of the State of California and/or, if applicable,
the United States of America. All disputes arising out of or relating to this Agreement or the
parties' relationship, including the termination thereof, shall be resolved by arbitration in the
City of San Francisco, State of California, under the Rules of the American Arbitration
Association. The arbitration panel shall consist of three members, one of whom shall be
 selected by DMC-USA, one of whom shall be selected by MMI, and third of whom shall be
selected by the other two members and shall have relevant experience in the industry x x x x

In October 1994 the appointment of private respondent MMI as the sole and exclusive distributor of
Del Monte products in the Philippines was published in several newspapers in the country.
Immediately after its appointment, private respondent MMI appointed Sabrosa Foods, Inc. (SFI), with
the approval of petitioner DMC-USA, as MMI's marketing arm to concentrate on its marketing and
selling function as well as to manage its critical relationship with the trade.

On 3 October 1996 private respondents MMI, SFI and MMI's Managing Director Liong Liong C. Sy
(LILY SY) filed a Complaint5 against petitioners DMC-USA, Paul E. Derby, Jr.,6 Daniel Collins7 and
Luis Hidalgo,8 and Dewey Ltd.9 before the Regional Trial Court of Malabon, Metro Manila. Private
respondents predicated their complaint on the alleged violations by petitioners of Arts. 20,10 2111 and
2312 of the Civil Code. According to private respondents, DMC-USA products continued to be
brought into the country by parallel importers despite the appointment of private respondent MMI as
the sole and exclusive distributor of Del Monte products thereby causing them great embarrassment
and substantial damage. They alleged that the products brought into the country by these importers
were aged, damaged, fake or counterfeit, so that in March 1995 they had to cause, after prior
consultation with Antonio Ongpin, Market Director for Special Markets of Del Monte Philippines, Inc.,
the publication of a "warning to the trade" paid advertisement in leading newspapers. Petitioners
DMC-USA and Paul E. Derby, Jr., apparently upset with the publication, instructed private
respondent MMI to stop coordinating with Antonio Ongpin and to communicate directly instead with
petitioner DMC-USA through Paul E. Derby, Jr.

Private respondents further averred that petitioners knowingly and surreptitiously continued to deal
with the former in bad faith by involving disinterested third parties and by proposing solutions which
were entirely out of their control. Private respondents claimed that they had exhausted all possible
avenues for an amicable resolution and settlement of their grievances; that as a result of the fraud,
bad faith, malice and wanton attitude of petitioners, they should be held responsible for all the actual
expenses incurred by private respondents in the delayed shipment of orders which resulted in the
extra handling thereof, the actual expenses and cost of money for the unused Letters of Credit (LCs)
and the substantial opportunity losses due to created out-of-stock situations and unauthorized
shipments of Del Monte-USA products to the Philippine Duty Free Area and Economic zone; that the
bad faith, fraudulent acts and willful negligence of petitioners, motivated by their determination to
squeeze private respondents out of the outstanding and ongoing Distributorship Agreement in favor
of another party, had placed private respondent LILY SY on tenterhooks since then; and, that the
shrewd and subtle manner with which petitioners concocted imaginary violations by private
respondent MMI of the Distributorship Agreement in order to justify the untimely termination thereof
was a subterfuge. For the foregoing, private respondents claimed, among other reliefs, the payment
of actual damages, exemplary damages, attorney's fees and litigation expenses.

On 21 October 1996 petitioners filed a Motion to Suspend Proceedings13 invoking the arbitration

clause in their Agreement with private respondents. 1âwphi1.nêt

In a Resolution14 dated 23 December 1996 the trial court deferred consideration of

petitioners' Motion to Suspend Proceedings as the grounds alleged therein did not constitute the
suspension of the proceedings considering that the action was for damages with prayer for the
issuance of Writ of Preliminary Attachment and not on the Distributorship Agreement.

On 15 January 1997 petitioners filed a Motion for Reconsideration to which respondents filed
their Comment/Opposition. On 31 January 1997 petitioners filed their Reply. Subsequently, private
respondents filed an Urgent Motion for Leave to Admit Supplemental Pleading dated 2 April 1997.
This Motion was admitted, over petitioners' opposition, in an Order of the trial court dated 27 June
1997.

As a result of the admission of the Supplemental Complaint, petitioners filed on 22 July 1997

a Manifestation adopting their Motion to Suspend Proceedings of 17 October 1996 and Motion for
Reconsideration of 14 January 1997.

On 11 November 1997 the Motion to Suspend Proceedings was denied by the trial court on the
ground that it "will not serve the ends of justice and to allow said suspension will only delay the
determination of the issues, frustrate the quest of the parties for a judicious determination of their
respective claims, and/or deprive and delay their rights to seek redress." 15

On appeal, the Court of appeals affirmed the decision of the trial court. It held that the alleged
damaging acts recited in the Complaint, constituting petitioners' causes of action, required the
interpretation of Art. 21 of the Civil Code16 and that in determining whether petitioners had violated it
"would require a full blown trial" making arbitration "out of the question."17 Petitioners' Motion for
Reconsideration of the affirmation was denied. Hence, this Petition for Review.

The crux of the controversy boils down to whether the dispute between the parties warrants an order
compelling them to submit to arbitration.

Petitioners contend that the subject matter of private respondents' causes of action arises out of or
relates to the Agreement between petitioners and private respondents. Thus, considering that the
arbitration clause of the Agreement provides that all disputes arising out of or relating to the
Agreement or the parties' relationship, including the termination thereof, shall be resolved by
arbitration, they insist on the suspension of the proceedings in Civil Case No. 2637-MN as mandated
by Sec. 7 of RA 87618 –

Sec. 7. Stay of Civil Action. If any suit or proceeding be brought upon an issue arising out of
an agreement providing for arbitration thereof, the court in which such suit or proceeding is
pending, upon being satisfied that the issue involved in such suit or proceeding is referable
to arbitration, shall stay the action or proceeding until an arbitration has been had in
accordance with the terms of the agreement. Provided, That the applicant for the stay is not
in default in proceeding with such arbitration.

Private respondents claim, on the other hand, that their causes of action are rooted in Arts. 20, 21
and 23 of the Civil Code,19 the determination of which demands a full blown trial, as correctly held by
the Court of Appeals. Moreover, they claim that the issues before the trial court were not joined so
that the Honorable Judge was not given the opportunity to satisfy himself that the issue involved in
the case was referable to arbitration. They submit that, apparently, petitioners filed a motion to
suspend proceedings instead of sending a written demand to private respondents to arbitrate
because petitioners were not sure whether the case could be a subject of arbitration. They maintain
that had petitioners done so and private respondents failed to answer the demand, petitioners could
have filed with the trial court their demand for arbitration that would warrant a determination by the
judge whether to refer the case to arbitration. Accordingly, private respondents assert that arbitration
is out of the question.

Private respondents further contend that the arbitration clause centers more on venue rather than on
arbitration. They finally allege that petitioners filed their motion for extension of time to file this
petition on the same date20 petitioner DMC-USA filed a petition to compel private respondent MMI to
arbitrate before the United States District Court in Northern California, docketed as Case No. C-98-
4446. They insist that the filing of the petition to compel arbitration in the United States made the
petition filed before this Court an alternative remedy and, in a way, an abandonment of the cause
they are fighting for her in the Philippines, thus warranting the dismissal of the present petition
before this Court.

There is no doubt that arbitration is valid and constitutional in our jurisdiction.21 Even before the
enactment of RA 876, this Court has countenanced the settlement of disputes through arbitration.
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 arrangement and
will only interfere with great reluctance to anticipate or nullify the action of the arbitrator.22 Moreover,
as RA 876 expressly authorizes arbitration of domestic disputes, foreign arbitration as a system of
settling commercial disputes 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 10 May 1965 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.23

A careful examination of the instant case shows that the arbitration clause in the Distributorship
Agreement between petitioner DMC-USA and private respondent MMI is valid and the dispute
between the parties is arbitrable. However, this Court must deny the petition.

The Agreement between petitioner DMC-USA and private respondent MMI is a contract. The
provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is
part of that contract and is itself a contract. As a rule, contracts are respected as the law between
the contracting parties and produce effect as between them, their assigns and heirs.24 Clearly, only
parties to the Agreement, i.e., petitioners DMC-USA and its Managing Director for Export Sales Paul
E. Derby, Jr., and private respondents MMI and its Managing Director LILY SY are bound by the
Agreement and its arbitration clause as they are the only signatories thereto. Petitioners Daniel
Collins and Luis Hidalgo, and private respondent SFI, not parties to the Agreement and cannot even
be considered assigns or heirs of the parties, are not bound by the Agreement and the arbitration
clause therein. Consequently, referral to arbitration in the State of California pursuant to the
arbitration clause and the suspension of the proceedings in Civil Case No. 2637-MN pending the
return of the arbitral award could be called for25 but only as to petitioners DMC-USA and Paul E.
Derby, Jr., and private respondents MMI and LILY SY, and not as to the other parties in this case.
This is consistent with the recent case of Heirs of Augusto L. Salas, Jr. v. Laperal Realty
Corporation,26 which superseded that of Toyota Motor Philippines Corp. v. Court of Appeals.27

In Toyota, the Court ruled that "[t]he contention that the arbitration clause has become dysfunctional
because of the presence of third parties is untenable" ratiocinating that "[c]ontracts are respected as
the law between the contracting parties"28 and that "[a]s such, the parties are thereby expected to
abide with good faith in their contractual commitments."29 However, in Salas, Jr., only parties to the
Agreement, their assigns or heirs have the right to arbitrate or could be compelled to arbitrate. The
Court went further by declaring that in recognizing the right of the contracting parties to arbitrate or to
compel arbitration, the splitting of the proceedings to arbitration as to some of the parties on one
hand and trial for the others on the other hand, or the suspension of trial pending arbitration between
some of the parties, should not be allowed as it would, in effect, result in multiplicity of suits,
duplicitous procedure and unnecessary delay.30

The object of arbitration is to allow the expeditious determination of a dispute.31 Clearly, the issue
before us could not be speedily and efficiently resolved in its entirety if we allow simultaneous
arbitration proceedings and trial, or suspension of trial pending arbitration. Accordingly, the interest
of justice would only be served if the trial court hears and adjudicates the case in a single and
complete proceeding.32
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals affirming the Order of
the Regional Trial Court of Malabon, Metro Manila, in Civil Case No. 2637-MN, which denied
petitioners' Motion to Suspend Proceedings, is AFFIRMED. The Regional Trial Court concerned is
directed to proceed with the hearing of Civil Case No. 2637-MN with dispatch. No costs.

SO ORDERED.

G.R. No. 175404               January 31, 2011

CARGILL PHILIPPINES, INC., Petitioner,

vs.
SAN FERNANDO REGALA TRADING, INC., Respondent.

DECISION

PERALTA, J.:

Before us is a petition for review on certiorari seeking to reverse and set aside the Decision1 dated
July 31, 2006 and the Resolution2 dated November 13, 2006 of the Court of Appeals (CA) in CA
G.R. SP No. 50304.

The factual antecedents are as follows:

On June 18, 1998, respondent San Fernando Regala Trading, Inc. filed with the Regional Trial Court
(RTC) of Makati City a Complaint for Rescission of Contract with Damages3 against petitioner Cargill
Philippines, Inc. In its Complaint, respondent alleged that it was engaged in buying and selling of
molasses and petitioner was one of its various sources from whom it purchased molasses.
Respondent alleged that it entered into a contract dated July 11, 1996 with petitioner, wherein it was
agreed upon that respondent would purchase from petitioner 12,000 metric tons of Thailand origin
cane blackstrap molasses at the price of US$192 per metric ton; that the delivery of the molasses
was to be made in January/February 1997 and payment was to be made by means of an Irrevocable
Letter of Credit payable at sight, to be opened by September 15, 1996; that sometime prior to
September 15, 1996, the parties agreed that instead of January/February 1997, the delivery would
be made in April/May 1997 and that payment would be by an Irrevocable Letter of Credit payable at
sight, to be opened upon petitioner's advice. Petitioner, as seller, failed to comply with its obligations
under the contract, despite demands from respondent, thus, the latter prayed for rescission of the
contract and payment of damages.

On July 24, 1998, petitioner filed a Motion to Dismiss/Suspend Proceedings and To Refer
Controversy to Voluntary Arbitration,4 wherein it argued that the alleged contract between the
parties, dated July 11, 1996, was never consummated because respondent never returned the
proposed agreement bearing its written acceptance or conformity nor did respondent open the
Irrevocable Letter of Credit at sight. Petitioner contended that the controversy between the parties
was whether or not the alleged contract between the parties was legally in existence and the RTC
was not the proper forum to ventilate such issue. It claimed that the contract contained an arbitration
clause, to wit:

ARBITRATION
Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be
settled by arbitration in the City of New York before the American Arbitration Association. The
Arbitration Award shall be final and binding on both parties.5

that respondent must first comply with the arbitration clause before resorting to court, thus, the RTC
must either dismiss the case or suspend the proceedings and direct the parties to proceed with
arbitration, pursuant to Sections 66 and 77 of Republic Act (R.A.) No. 876, or the Arbitration Law.

Respondent filed an Opposition, wherein it argued that the RTC has jurisdiction over the action for
rescission of contract and could not be changed by the subject arbitration clause. It cited cases
wherein arbitration clauses, such as the subject clause in the contract, had been struck down as void
for being contrary to public policy since it provided that the arbitration award shall be final and
binding on both parties, thus, ousting the courts of jurisdiction.

In its Reply, petitioner maintained that the cited decisions were already inapplicable, having been
rendered prior to the effectivity of the New Civil Code in 1950 and the Arbitration Law in 1953.

In its Rejoinder, respondent argued that the arbitration clause relied upon by petitioner is invalid and
unenforceable, considering that the requirements imposed by the provisions of the Arbitration Law
had not been complied with.

By way of Sur-Rejoinder, petitioner contended that respondent had even clarified that the issue
boiled down to whether the arbitration clause contained in the contract subject of the complaint is
valid and enforceable; that the arbitration clause did not violate any of the cited provisions of the
Arbitration Law.

On September 17, 1998, the RTC rendered an Order,8 the dispositive portion of which reads:

Premises considered, defendant's "Motion To Dismiss/Suspend Proceedings and To Refer

Controversy To Voluntary Arbitration" is hereby DENIED. Defendant is directed to file its answer
within ten (10) days from receipt of a copy of this order.9

In denying the motion, the RTC found that there was no clear basis for petitioner's plea to dismiss
the case, pursuant to Section 7 of the Arbitration Law. The RTC said that the provision directed the
court concerned only to stay the action or proceeding brought upon an issue arising out of an
agreement providing for the arbitration thereof, but did not impose the sanction of dismissal.
However, the RTC did not find the suspension of the proceedings warranted, since the Arbitration
Law contemplates an arbitration proceeding that must be conducted in the Philippines under the
jurisdiction and control of the RTC; and before an arbitrator who resides in the country; and that the
arbitral award is subject to court approval, disapproval and modification, and that there must be an
appeal from the judgment of the RTC. The RTC found that the arbitration clause in question
contravened these procedures, i.e., the arbitration clause contemplated an arbitration proceeding in
New York before a non-resident arbitrator (American Arbitration Association); that the arbitral award
shall be final and binding on both parties. The RTC said that to apply Section 7 of the Arbitration Law
to such an agreement would result in disregarding the other sections of the same law and rendered
them useless and mere surplusages.

Petitioner filed its Motion for Reconsideration, which the RTC denied in an Order10 dated November
25, 1998.
Petitioner filed a petition for certiorari with the CA raising the sole issue that the RTC acted in excess
of jurisdiction or with grave abuse of discretion in refusing to dismiss or at least suspend the
proceedings a quo, despite the fact that the party's agreement to arbitrate had not been complied
with.

Respondent filed its Comment and Reply. The parties were then required to file their respective
Memoranda.

On July 31, 2006, the CA rendered its assailed Decision denying the petition and affirming the RTC
Orders.

In denying the petition, the CA found that stipulation providing for arbitration in contractual obligation
is both valid and constitutional; that arbitration as an alternative mode of dispute resolution has long
been accepted in our jurisdiction and expressly provided for in the Civil Code; that R.A. No. 876 (the
Arbitration Law) also expressly authorized the arbitration of domestic disputes. The CA found error in
the RTC's holding that Section 7 of R.A. No. 876 was inapplicable to arbitration clause simply
because the clause failed to comply with the requirements prescribed by the law. The CA found that
there was nothing in the Civil Code, or R.A. No. 876, that require that arbitration proceedings must
be conducted only in the Philippines and the arbitrators should be Philippine residents. It also found
that the RTC ruling effectively invalidated not only the disputed arbitration clause, but all other
agreements which provide for foreign arbitration. The CA did not find illegal or against public policy
the arbitration clause so as to render it null and void or ineffectual.

Notwithstanding such findings, the CA still held that the case cannot be brought under the Arbitration
Law for the purpose of suspending the proceedings before the RTC, since in its Motion to
Dismiss/Suspend proceedings, petitioner alleged, as one of the grounds thereof, that the subject
contract between the parties did not exist or it was invalid; that the said contract bearing the
arbitration clause was never consummated by the parties, thus, it was proper that such issue be first
resolved by the court through an appropriate trial; that the issue involved a question of fact that the
RTC should first resolve. Arbitration is not proper when one of the parties repudiated the existence
or validity of the contract.

Petitioner's motion for reconsideration was denied in a Resolution dated November 13, 2006.

Hence, this petition.

Petitioner alleges that the CA committed an error of law in ruling that arbitration cannot proceed
despite the fact that: (a) it had ruled, in its assailed decision, that the arbitration clause is valid,
enforceable and binding on the parties; (b) the case of Gonzales v. Climax Mining Ltd.11 is
inapplicable here; (c) parties are generally allowed, under the Rules of Court, to adopt several
defenses, alternatively or hypothetically, even if such

defenses are inconsistent with each other; and (d) the complaint filed by respondent with the trial
court is premature.

Petitioner alleges that the CA adopted inconsistent positions when it found the arbitration clause
between the parties as valid and enforceable and yet in the same breath decreed that the arbitration
cannot proceed because petitioner assailed the existence of the entire agreement containing the
arbitration clause. Petitioner claims the inapplicability of the cited Gonzales case decided in 2005,
because in the present case, it was respondent who had filed the complaint for rescission and
damages with the RTC, which based its cause of action against petitioner on the alleged agreement
dated July 11, 2006 between the parties; and that the same agreement contained the arbitration
clause sought to be enforced by petitioner in this case. Thus, whether petitioner assails the
genuineness and due execution of the agreement, the fact remains that the agreement sued upon
provides for an arbitration clause; that respondent cannot use the provisions favorable to him and
completely disregard those that are unfavorable, such as the arbitration clause.

Petitioner contends that as the defendant in the RTC, it presented two alternative defenses, i.e., the
parties had not entered into any agreement upon which respondent as plaintiff can sue upon; and,
assuming that such agreement existed, there was an arbitration clause that should be enforced,
thus, the dispute must first be submitted to arbitration before an action can be instituted in court.
Petitioner argues that under Section 1(j) of Rule 16 of the Rules of Court, included as a ground to
dismiss a complaint is when a condition precedent for filing the complaint has not been complied
with; and that submission to arbitration when such has been agreed upon is one such condition
precedent. Petitioner submits that the proceedings in the RTC must be dismissed, or at least
suspended, and the parties be ordered to proceed with arbitration.

On March 12, 2007, petitioner filed a Manifestation12 saying that the CA's rationale in declining to
order arbitration based on the 2005 Gonzales ruling had been modified upon a motion for
reconsideration decided in 2007; that the CA decision lost its legal basis, because it had been ruled
that the arbitration agreement can be implemented notwithstanding that one of the parties thereto
repudiated the contract which contained such agreement based on the doctrine of separability.

In its Comment, respondent argues that certiorari under Rule 65 is not the remedy against an order
denying a Motion to Dismiss/Suspend Proceedings and To Refer Controversy to Voluntary
Arbitration. It claims that the Arbitration Law which petitioner invoked as basis for its Motion
prescribed, under its Section 29, a remedy, i.e., appeal by a petition for review on certiorari under
Rule 45. Respondent contends that the Gonzales case, which was decided in 2007, is inapplicable
in this case, especially as to the doctrine of separability enunciated therein. Respondent argues that
even if the existence of the contract and the arbitration clause is conceded, the decisions of the RTC
and the CA declining referral of the dispute between the parties to arbitration would still be correct.
This is so because respondent's complaint filed in Civil Case No. 98-1376 presents the principal
issue of whether under the facts alleged in the complaint, respondent is entitled to rescind its
contract with petitioner and for the latter to pay damages; that such issue constitutes a judicial
question or one that requires the exercise of judicial function and cannot be the subject of arbitration.

Respondent contends that Section 8 of the Rules of Court, which allowed a defendant to adopt in the
same action several defenses, alternatively or hypothetically, even if such defenses are inconsistent
with each other refers to allegations in the pleadings, such as complaint, counterclaim, cross-claim,
third-party complaint, answer, but not to a motion to dismiss. Finally, respondent claims that
petitioner's argument is premised on the existence of a contract with respondent containing a
provision for arbitration. However, its reliance on the contract, which it repudiates, is inappropriate.

In its Reply, petitioner insists that respondent filed an action for rescission and damages on the basis
of the contract, thus, respondent admitted the existence of all the provisions contained thereunder,
including the arbitration clause; that if respondent relies on said contract for its cause of action
against petitioner, it must also consider itself bound by the rest of the terms and conditions contained
thereunder notwithstanding that respondent may find some provisions to be adverse to its position;
that respondent’s citation of the Gonzales case, decided in 2005, to show that the validity of the
contract cannot be the subject of the arbitration proceeding and that it is the RTC which has the
jurisdiction to resolve the situation between the parties herein, is not correct since in the resolution of
the Gonzales' motion for reconsideration in 2007, it had been ruled that an arbitration agreement is
effective notwithstanding the fact that one of the parties thereto repudiated the main contract which
contained it.
We first address the procedural issue raised by respondent that petitioner’s petition
for certiorari under Rule 65 filed in the CA against an RTC Order denying a Motion to
Dismiss/Suspend Proceedings and to Refer Controversy to Voluntary Arbitration was a wrong
remedy invoking Section 29 of R.A. No. 876, which provides:

Section 29.

x x x An appeal may be taken from an order made in a proceeding under this Act, or from a
judgment entered upon an award through certiorari proceedings, but such appeals shall be limited to
question of law. x x x.

To support its argument, respondent cites the case of Gonzales v. Climax Mining Ltd.13 (Gonzales
case), wherein we ruled the impropriety of a petition for certiorari under Rule 65 as a mode of appeal
from an RTC Order directing the parties to arbitration.

We find the cited case not in point.

In the Gonzales case, Climax-Arimco filed before the RTC of Makati a petition to compel arbitration
under R.A. No. 876, pursuant to the arbitration clause found in the Addendum Contract it entered
with Gonzales. Judge Oscar Pimentel of the RTC of Makati then directed the parties to arbitration
proceedings. Gonzales filed a petition for certiorari with Us contending that Judge Pimentel acted
with grave abuse of discretion in immediately ordering the parties to proceed with arbitration despite
the proper, valid and timely raised argument in his Answer with counterclaim that the Addendum
Contract containing the arbitration clause was null and void. Climax-Arimco assailed the mode of
review availed of by Gonzales, citing Section 29 of R.A. No. 876 contending that certiorari under
Rule 65 can be availed of only if there was no appeal or any adequate remedy in the ordinary course
of law; that R.A. No. 876 provides for an appeal from such order. We then ruled that Gonzales'
petition for certiorari should be dismissed as it was filed in lieu of an appeal by certiorari which was
the prescribed remedy under R.A. No. 876 and the petition was filed far beyond the reglementary
period.

We found that Gonzales’ petition for certiorari raises a question of law, but not a question of
jurisdiction; that Judge Pimentel acted in accordance with the procedure prescribed in R.A. No. 876
when he ordered Gonzales to proceed with arbitration and appointed a sole arbitrator after making
the determination that there was indeed an arbitration agreement. It had been held that as long as a
court acts within its jurisdiction and does not gravely abuse its discretion in the exercise thereof, any
supposed error committed by it will amount to nothing more than an error of judgment reviewable by
a timely appeal and not assailable by a special civil action of certiorari.14

In this case, petitioner raises before the CA the issue that the respondent Judge acted in excess of
jurisdiction or with grave abuse of discretion in refusing to dismiss, or at least suspend, the
proceedings a quo, despite the fact that the party’s agreement to arbitrate had not been complied
with. Notably, the RTC found the existence of the arbitration clause, since it said in its decision that
"hardly disputed is the fact that the arbitration clause in question contravenes several provisions of
the Arbitration Law x x x and to apply Section 7 of the Arbitration Law to such an agreement would
result in the disregard of the afore-cited sections of the Arbitration Law and render them useless and
mere surplusages." However, notwithstanding the finding that an arbitration agreement existed, the
RTC denied petitioner's motion and directed petitioner to file an answer.

In La Naval Drug Corporation v. Court of Appeals,15 it was held that R.A. No. 876 explicitly confines
the court’s authority only to the determination of whether or not there is an agreement in writing
providing for arbitration. In the affirmative, the statute ordains that the court shall issue an order
summarily directing the parties to proceed with the arbitration in accordance with the terms thereof. If
the court, upon the other hand, finds that no such agreement exists, the proceedings shall be
dismissed.

In issuing the Order which denied petitioner's Motion to Dismiss/Suspend Proceedings and to Refer
Controversy to Voluntary Arbitration, the RTC went beyond its authority of determining only the issue
of whether or not there is an agreement in writing providing for arbitration by directing petitioner to
file an answer, instead of ordering the parties to proceed to arbitration. In so doing, it acted in excess
of its jurisdiction and since there is no plain, speedy, and adequate remedy in the ordinary course of
law, petitioner’s resort to a petition for certiorari is the proper remedy.

We now proceed to the substantive issue of whether the CA erred in finding that this case cannot be
brought under the arbitration law for the purpose of suspending the proceedings in the RTC.

We find merit in the petition.

Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in
our jurisdiction.16 R.A. No. 87617 authorizes arbitration of domestic disputes. Foreign arbitration, as a
system of settling commercial disputes of an international character, is likewise recognized.18 The
enactment of R.A. No. 9285 on April 2, 2004 further institutionalized the use of alternative dispute
resolution systems, including arbitration, in the settlement of disputes.19

A contract is required for arbitration to take place and to be binding.20 Submission to arbitration is a

contract 21 and a clause in a contract providing that all matters in dispute between the parties shall be
referred to arbitration is a contract.22 The provision to submit to arbitration any dispute arising
therefrom and the relationship of the parties is part of the contract and is itself a contract.23

In this case, the contract sued upon by respondent provides for an arbitration clause, to wit:

ARBITRATION

Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be
settled by arbitration in the City of New York before the American Arbitration Association, The
Arbitration Award shall be final and binding on both parties.

The CA ruled that arbitration cannot be ordered in this case, since petitioner alleged that the contract
between the parties did not exist or was invalid and arbitration is not proper when one of the parties
repudiates the existence or validity of the contract. Thus, said the CA:

Notwithstanding our ruling on the validity and enforceability of the assailed arbitration clause
providing for foreign arbitration, it is our considered opinion that the case at bench still cannot be
brought under the Arbitration Law for the purpose of suspending the proceedings before the trial
court. We note that in its Motion to Dismiss/Suspend Proceedings, etc, petitioner Cargill alleged, as
one of the grounds thereof, that the alleged contract between the parties do not legally exist or is
invalid. As posited by petitioner, it is their contention that the said contract, bearing the arbitration
clause, was never consummated by the parties. That being the case, it is but proper that such issue
be first resolved by the court through an appropriate trial. The issue involves a question of fact that
the trial court should first resolve.
Arbitration is not proper when one of the parties repudiates the existence or validity of the contract.
Apropos is Gonzales v. Climax Mining Ltd., 452 SCRA 607, (G.R.No.161957), where the Supreme
Court held that:

The question of validity of the contract containing the agreement to submit to arbitration will
affect the applicability of the arbitration clause itself. A party cannot rely on the contract and
claim rights or obligations under it and at the same time impugn its existence or validity.
Indeed, litigants are enjoined from taking inconsistent positions....

Consequently, the petitioner herein cannot claim that the contract was never consummated and, at
the same time, invokes the arbitration clause provided for under the contract which it alleges to be
non-existent or invalid. Petitioner claims that private respondent's complaint lacks a cause of action
due to the absence of any valid contract between the parties. Apparently, the arbitration clause is
being invoked merely as a fallback position. The petitioner must first adduce evidence in support of
its claim that there is no valid contract between them and should the court a quo find the claim to be
meritorious, the parties may then be spared the rigors and expenses that arbitration in a foreign land
would surely entail.24

However, the Gonzales case,25 which the CA relied upon for not ordering arbitration, had been
modified upon a motion for reconsideration in this wise:

x x x The adjudication of the petition in G.R. No. 167994 effectively modifies part of the
Decision dated 28 February 2005 in G.R. No. 161957. Hence, we now hold that the validity of
the contract containing the agreement to submit to arbitration does not affect the
applicability of the arbitration clause itself. A contrary ruling would suggest that a party's
mere repudiation of the main contract is sufficient to avoid arbitration. That is exactly the
situation that the separability doctrine, as well as jurisprudence applying it, seeks to
avoid. We add that when it was declared in G.R. No. 161957 that the case should not be brought for
arbitration, it should be clarified that the case referred to is the case actually filed by Gonzales before
the DENR Panel of Arbitrators, which was for the nullification of the main contract on the ground of
fraud, as it had already been determined that the case should have been brought before the regular
courts involving as it did judicial issues.26

In so ruling that the validity of the contract containing the arbitration agreement does not affect the
applicability of the arbitration clause itself, we then applied the doctrine of separability, thus:

The doctrine of separability, or severability as other writers call it, enunciates that an arbitration
agreement is independent of the main contract. The arbitration agreement is to be treated as a
separate agreement and the arbitration agreement does not automatically terminate when the
contract of which it is a part comes to an end.

The separability of the arbitration agreement is especially significant to the determination of whether
the invalidity of the main contract also nullifies the arbitration clause. Indeed, the doctrine denotes
that the invalidity of the main contract, also referred to as the "container" contract, does not affect the
validity of the arbitration agreement. Irrespective of the fact that the main contract is invalid, the
arbitration clause/agreement still remains valid and enforceable.27

Respondent argues that the separability doctrine is not applicable in petitioner's case, since in
the Gonzales case, Climax-Arimco sought to enforce the arbitration clause of its contract with
Gonzales and the former's move was premised on the existence of a valid contract; while Gonzales,
who resisted the move of Climax-Arimco for arbitration, did not deny the existence of the contract but
merely assailed the validity thereof on the ground of fraud and oppression. Respondent claims that
in the case before Us, petitioner who is the party insistent on arbitration also claimed in their Motion
to Dismiss/Suspend Proceedings that the contract sought by respondent to be rescinded did not
exist or was not consummated; thus, there is no room for the application of the separability doctrine,
since there is no container or main contract or an arbitration clause to speak of.

We are not persuaded.

Applying the Gonzales ruling, an arbitration agreement which forms part of the main contract shall
not be regarded as invalid or non-existent just because the main contract is invalid or did not come
into existence, since the arbitration agreement shall be treated as a separate agreement
independent of the main contract. To reiterate. a contrary ruling would suggest that a party's mere
repudiation of the main contract is sufficient to avoid arbitration and that is exactly the situation that
the separability doctrine sought to avoid. Thus, we find that even the party who has repudiated the
main contract is not prevented from enforcing its arbitration clause.

Moreover, it is worthy to note that respondent filed a complaint for rescission of contract and
damages with the RTC. In so doing, respondent alleged that a contract exists between respondent
and petitioner. It is that contract which provides for an arbitration clause which states that "any
dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be settled
before the City of New York by the American Arbitration Association. The arbitration agreement
clearly expressed the parties' intention that any dispute between them as buyer and seller should be
referred to arbitration. It is for the arbitrator and not the courts to decide whether a contract between
the parties exists or is valid.

Respondent contends that assuming that the existence of the contract and the arbitration clause is
conceded, the CA's decision declining referral of the parties' dispute to arbitration is still correct. It
claims that its complaint in the RTC presents the issue of whether under the facts alleged, it is
entitled to rescind the contract with damages; and that issue constitutes a judicial question or one
that requires the exercise of judicial function and cannot be the subject of an arbitration proceeding.
Respondent cites our ruling in Gonzales, wherein we held that a panel of arbitrator is bereft of
jurisdiction over the complaint for declaration of nullity/or termination of the subject contracts on the
grounds of fraud and oppression attendant to the execution of the addendum contract and the other
contracts emanating from it, and that the complaint should have been filed with the regular courts as
it involved issues which are judicial in nature.

Such argument is misplaced and respondent cannot rely on the Gonzales case to support its
argument.

In Gonzales, petitioner Gonzales filed a complaint before the Panel of Arbitrators, Region II, Mines
and Geosciences Bureau, of the Department of Environment and Natural Resources (DENR)
against respondents Climax- Mining Ltd, Climax-Arimco and Australasian Philippines Mining Inc,
seeking the declaration of nullity or termination of the addendum contract and the other contracts
emanating from it on the grounds of fraud and oppression. The Panel dismissed the complaint for
lack of jurisdiction. However, the Panel, upon petitioner's motion for reconsideration, ruled that it had
jurisdiction over the dispute maintaining that it was a mining dispute, since the subject complaint
arose from a contract between the parties which involved the exploration and exploitation of minerals
over the disputed area.  Respondents assailed the order of the Panel of Arbitrators via a petition
1âwphi1

for certiorari before the CA. The CA granted the petition and declared that the Panel of Arbitrators
did not have jurisdiction over the complaint, since its jurisdiction was limited to the resolution of
mining disputes, such as those which raised a question of fact or matter requiring the technical
knowledge and experience of mining authorities and not when the complaint alleged fraud and
oppression which called for the interpretation and application of laws. The CA further ruled that the
petition should have been settled through arbitration under R.A. No. 876 − the Arbitration Law − as
provided under the addendum contract.

On a review on certiorari, we affirmed the CA’s finding that the Panel of Arbitrators who, under R.A.
No. 7942 of the Philippine Mining Act of 1995, has exclusive and original jurisdiction to hear and
decide mining disputes, such as mining areas, mineral agreements, FTAAs or permits and surface
owners, occupants and claimholders/concessionaires, is bereft of jurisdiction over the complaint for
declaration of nullity of the addendum contract; thus, the Panels' jurisdiction is limited only to those
mining disputes which raised question of facts or matters requiring the technical knowledge and
experience of mining authorities. We then said:

In Pearson v. Intermediate Appellate Court, this Court observed that the trend has been to make the
adjudication of mining cases a purely administrative matter. Decisions of the Supreme Court on
mining disputes have recognized a distinction between (1) the primary powers granted by pertinent
provisions of law to the then Secretary of Agriculture and Natural Resources (and the bureau
directors) of an executive or administrative nature, such as granting of license, permits, lease and
contracts, or approving, rejecting, reinstating or canceling applications, or deciding conflicting
applications, and (2) controversies or disagreements of civil or contractual nature between litigants
which are questions of a judicial nature that may be adjudicated only by the courts of justice. This
distinction is carried on even in Rep. Act No. 7942.28

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

Arbitration before the Panel of Arbitrators is proper only when there is a disagreement between the
parties as to some provisions of the contract between them, which needs the interpretation and the
application of that particular knowledge and expertise possessed by members of that Panel. It is not
proper when one of the parties repudiates the existence or validity of such contract or agreement on
the ground of fraud or oppression as in this case. The validity of the contract cannot be subject of
arbitration proceedings. Allegations of fraud and duress in the execution of a contract are matters
within the jurisdiction of the ordinary courts of law. These questions are legal in nature and require
the application and interpretation of laws and jurisprudence which is necessarily a judicial function.29

In fact, We even clarified in our resolution on Gonzales’ motion for reconsideration that "when we
declared that the case should not be brought for arbitration, it should be clarified that the case
referred to is the case actually filed by Gonzales before the DENR Panel of Arbitrators, which was
for the nullification of the main contract on the ground of fraud, as it had already been determined
that the case should have been brought before the regular courts involving as it did judicial issues."
We made such clarification in our resolution of the motion for reconsideration after ruling that the
parties in that case can proceed to arbitration under the Arbitration Law, as provided under the
Arbitration Clause in their Addendum Contract.

WHEREFORE, the petition is GRANTED. The Decision dated July 31, 2006 and the Resolution
dated November 13, 2006 of the Court of Appeals in CA-G.R. SP No. 50304 are REVERSED and
SET ASIDE. The parties are hereby ORDERED to SUBMIT themselves to the arbitration of their
dispute, pursuant to their July 11, 1996 agreement.
SO ORDERED.

G.R. No. 196171               December 10, 2012

RCBC CAPITAL CORPORATION, Petitioners,

vs.
BANCO DE ORO UNIBANK, INC., Respondent.

X- - - - - - - - - - - - - - - - - - - - - - - - - -X

G.R. No. 199238

BANCO DE ORO UNIBANK, INC., Petitioner,

vs.
COURT OF APPEALS and RCBC CAPITAL CORPORATION, Respondents.

DECISION

VILLARAMA, JR., J.:

Before the Court are two consolidated petitions separately filed by the parties in an arbitration case
administered by the International Chamber of Commerce-International Court of Arbitration (ICC-ICA)
pursuant to the arbitration clause in their contract.

The Case

In G.R. No. 196171, a petition for review under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, RCBC Capital Corporation (RCBC) seeks to reverse the Court of Appeals (CA)
Decision dated December 23, 2010 in CA-G.R. SP No. 113525 which reversed and set aside the
1 

June 24, 2009 Order of the Regional Trial Court (RTC) of Makati City, Branch 148 in SP Proc. Case
2 

No. M-6046.

In G.R. No. 199238,a petition for certiorari under Rule 65, Banco De Oro Unibank, Inc. (BDO)assails
the Resolution dated September 13, 2011 in CA-G.R. SP No. 120888 which denied BDO’s
3 

application for the issuance of a stay order and/or temporary restraining order (TRO)/preliminary
injunction against the implementation of the Writ of Execution dated August 22, 2011 issued by the
4 

Makati City RTC, Branch 148 in SP Proc. Case No. M-6046.

Factual Antecedents

On May 24, 2000, RCBC entered into a Share Purchase Agreement (SPA) with Equitable-PCI Bank,
5 

Inc. (EPCIB), George L. Go and the individual shareholders of Bankard, Inc. (Bankard) for the sale
6 

to RCBC of 226,460,000 shares (Subject Shares) of Bankard, constituting 67% of the latter’s capital
stock. After completing payment of the contract price (₱1,786,769,400), the corresponding deeds of
sale over the subject shares were executed in January 2001.

The dispute between the parties arose sometime in May 2003 when RCBC informed EPCIB and the
other selling shareholdersof an overpayment of the subject shares, claiming there was an
overstatement of valuation of accounts amounting to ₱478 million and that the sellers violated their
warrantyunder Section 5(g)of the SPA. 7
As no settlement was reached, RCBC commenced arbitration proceedings with the ICC-ICA in
accordance with Section 10 of the SPA which states:

Section 10.Arbitration

Should there be any dispute arising between the parties relating to this Agreement including the
interpretation or performance hereof which cannot be resolved by agreement of the parties within
fifteen (15) days after written notice by a party to another, such matter shall then be finally settled by
arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce
in force as of the time of arbitration, by three arbitrators appointed in accordance with such rules.
The venue of arbitration shall be in Makati City, Philippines and the arbitration proceedings shall be
conducted in the English language. Substantive aspects of the dispute shall be settled by applying
the laws of the Philippines. The decision of the arbitrators shall be final and binding upon the parties
hereto and the expenses of arbitration (including without limitation the award of attorney’s fees to the
prevailing party) shall be paid as the arbitrators shall determine.8

In its Request for Arbitration dated May 12, 2004, Claimant RCBC charged Bankard with deviating
9 

from and contravening generally accepted accounting principles and practices, due to which the
financial statements of Bankard prior to the stock purchase were far from fair and accurate, and
resulted in the overpayment of ₱556 million. For this violation of sellers’representations and
warranties under the SPA, RCBC sought its rescission, as well as payment of actual damages in the
amount of ₱573,132,110, legal interest on the purchase price until actual restitution, moral damages
and litigation and attorney’s fees, with alternative prayer for award of damages in the amount of at
least ₱809,796,082 plus legal interest.

In their Answer, EPCIB, Go and the other selling individual shareholders (Respondents) denied
10 

RCBC’s allegations contending that RCBC’s claim is one for overpayment or price reduction under
Section 5(h) of the SPA which is already time-barred, the remedy of rescission is unavailable, and
even assuming that rescission is permitted by the SPA, RCBC failed to file its claim within a
reasonable time. They further asserted that RCBC is not entitled to its alternative prayer for
damages, being guilty of laches and failing to set out the details of the breach as required under
Section 7 of the SPA. A counterclaim for litigation expenses and costs of arbitration in the amount of
US$300,000, as well as moral and exemplary damages, was likewise raised by the Respondents.

RCBC submitted a Reply to the aforesaid Answer.

11 

Subsequently, the Arbitration Tribunal was constituted. Mr. Neil Kaplan was nominated by RCBC;
Justice Santiago M. Kapunan (a retired Member of this Court) was nominated by the Respondents;
and Sir Ian Barker was appointed by the ICC-ICA as Chairman.

On August 13, 2004, the ICC-ICA informed the parties that they are required to pay US$350,000 as
advance on costs pursuant to Article 30 (3) of the ICC Rules of Arbitration (ICC Rules). RCBC paid
its share of US$107,000, the balance remaining after deducting payments of US$2,500 and
US$65,000 it made earlier. Respondents’ share of the advance on costs was thus fixed at
US$175,000.

Respondents filed an Application for Separate Advances on Costs dated September 17, 2004 under
12 

Article 30(2) of the ICC Rules, praying that the ICC fix separate advances on the cost of the parties’
respective claims and counterclaims, instead of directing them to share equally on the advance cost
of Claimant’s (RCBC) claim. Respondents deemed this advance cost allocation to be proper,
pointing out that the total amount of RCBC’s claim is substantially higher – more than 40 times –the
total amount of their counterclaims, and that it would be unfair to require them to share in the costs
of arbitrating what is essentially a price issue that is now time-barred under the SPA.

On September 20, 2004, the ICC-ICA informed Respondents that their application for separate
advances on costs was premature pending the execution of the Terms of Reference (TOR). The 13 

TOR was settled by the parties and signed by the Chairman and Members of the Arbitral Tribunal by
October 11, 2004. On December 3, 2004, the ICC-ICA denied the application for separate advances
14 

on costs and invited anew the Respondents to pay its share in the advance on costs. However,
despite reminders from the ICC-ICA, Respondents refused to pay their share in the advance cost
fixed by the ICC-ICA. On December 16, 2004, the ICC-ICA informed the parties that if Respondents
still failed to pay its share in the advance cost, it would apply Article 30(4) of the ICC Rules and
request the Arbitration Tribunal to suspend its work and set a new time limit, and if such requested
deposit remains unpaid at the expiry thereof, the counterclaims would be considered withdrawn. 15

In a fax-letter dated January 4, 2005, the ICC-ICA invited RCBC to pay the said amount in
substitution of Respondents.It also granted an extension until January 17, 2005 within which to pay
the balance of the advance cost (US$175,000). RCBC replied that it was not willing to shoulder the
share of Respondents in the advance on costs but nevertheless requested for a clarification as to
the effect of such refusal to substitute for Respondents’share.16

On March 10, 2005, the ICC-ICA instructed the Arbitration Tribunal to suspend its work and granted
the parties a final time-limit of 15 days to pay the balance of the advanceon costs, failing which the
claims shall be considered withdrawn, without prejudice to their reintroduction at a later date in
another proceeding. The parties were advised that if any of them objects to the measure, it should
make a request in writing within such period. For the same reason of non-receipt of the balance of
17 

the advance cost, the ICC-ICA issued Procedural Order No. 3 for the adjournment of the substantive
hearings and granting the Respondents a two-month extension within which to submit their brief of
evidence and witnesses.

RCBC objected to the cancellation of hearings, pointing out that Respondents have been given
ample time and opportunity to submit their brief of evidence and prepare for the hearings and that
their request for postponement serves no other purpose but to delay the proceedings. It alleged that
Respondents’ unjustified refusal to pay their share in the advance on costs warrants a ruling that
they have lost standing to participate in the proceedings. It thus prayed that Respondents be
declared as in default, the substantive hearings be conducted as originally scheduled, and RCBC be
allowed to submit rebuttal evidence and additional witness statements. 18

On December 15, 2005, the ICC-ICA notified the parties of its decision to increase the advances on
costs from US$350,000 to US$450,000 subject to later readjustments, and again invited the
Respondents to pay the US$100,000 increment within 30 days from notice. Respondents, however,
refused to pay the increment, insisting that RCBC should bear the cost of prosecuting its own claim
and that compelling the Respondents to fund such prosecution is inequitable. Respondents
reiterated that it was willing to pay the advance on costs for their counterclaim.
19

On December 27, 2005, the ICC-ICA advised that it was not possible to fix separate advances on
costs as explained in its December 3, 2004 letter, and again invited Respondents to pay their share
in the advance on costs. Respondents’ response contained in the letter dated January 6, 2006 was
still the same: it was willing to pay only the separate advance on costs of their counterclaim. In view
20 

of Respondents’ continuing refusal to pay its equal share in the advance on costs and increment,
RCBC wrote the ICC-ICA stating that the latter should compel the Respondents to pay as otherwise
RCBC will be prejudiced and the inaction of the ICC-ICA and the Arbitration Tribunal will detract from
the effectiveness of arbitration as a means of settling disputes. In accordance with Article 30(4) of
the ICC Rules, RCBC reiterated its request to declare the Respondents as in default without any
personality to participate in the proceedings not only with respect to their counterclaims but also to
the claim of RCBC. 21

Chairman Ian Barker, in a letter dated January 25, 2006, stated in part:

xxxx

2. The Tribunal has no power under the ICC Rules to order the Respondents to pay the
advance on costs sought by the ICC or to give the Claimant any relief against the
Respondents’ refusal to pay. The ICC Rules differ from, for example, the Rules of the LCIA
(Article 24.3) which enables a party paying the share of costs which the other party has
refused to pay, to recover "that amount as a debt immediately due from the defaulting party."

3. The only sanction under the ICC Rules is contained within Article 30 (4). Where a request
for an advance on costs has not been complied with, after consultation with the Tribunal, the
Secretary-General may direct the Tribunal to suspend its work. After expiry of a time limit, all
claims and counterclaims are then considered as withdrawn. This provision cannot assist a
Claimant who is anxious to litigate its claim. Such a Claimant has to pay the sums requested
(including the Respondents’ share) if it wishes the arbitration to proceed.

4. It may be possible for a Claimant in the course of the arbitral hearing (or whenever
costs are being considered by the Tribunal) to make submissions based on the failure
of the Respondents to pay their share of the costs advance.What relief, if any, would
have to be then determined by the Tribunal after having heard submissions from the
Respondents.

5. I should be pleased if the Claimant will advise the Tribunal of its intention in relation to the
costs advance. If the costs are not paid, the arbitration cannot proceed. (Italics in the
22 

original; emphasis supplied)

RCBC paid the additional US$100,000 under the second assessment to avert suspension of the
Arbitration Tribunal’s proceedings.

Upon the commencement of the hearings, the Arbitration Tribunal decided that hearings will be
initially confined to issues of liability (liability phase) while the substantial issues will be heard on a
later date (quantum phase).

Meanwhile, EPCIB’s corporate name was officially changed to Banco De Oro (BDO)-EPCIB after its
merger with BDO was duly approved by the Securities and Exchange Commission. As such, BDO
assumed all the obligations and liabilities of EPCIB under the SPA.

On September 27, 2007, the Arbitration Tribunal rendered a Partial Award (First Partial Award) in
23 

ICC-ICA Case No. 13290/MS/JB/JEM,as follows:

15 AWARD AND DIRECTIONS

15.1 The Tribunal makes the following declarations by way of Partial Award:

(a) The Claimant’s claim is not time-barred under the provisions of this SPA.
 (b) The Claimant is not estopped by its conduct or the equitable doctrine of laches
from pursuing its claim.

(c) As detailed in the Partial Award, the Claimant has established the following
breaches by the Respondents of clause 5(g) of the SPA:

i) the assets, revenue and net worth of Bankard were overstated by reason of
its policy on and recognition of Late Payment Fees;

ii) reported receivables were higher than their realisable values by reason of
the ‘bucketing’ method, thus overstating Bankard’s assets; and

iii) the relevant Bankard statements were inadequate and misleading in that
their disclosures caused readers to be misinformed about Bankard’s
accounting policies on revenue and receivables.

(d) Subject to proof of loss the Claimant is entitled to damages for the foregoing
breaches.

(e) The Claimant is not entitled to rescission of the SPA.

(f) All other issues, including any issue relating to costs, will be dealt with in a
further or final award.

15.2 A further Procedural Order will be necessary subsequent to the delivery of this Partial
Award to deal with the determination of quantum and in particular, whether there should be
an Expert appointed by the Tribunal under Article 20(4) of the ICC Rules to assist the
Tribunal in this regard.

15.3 This Award is delivered by a majority of the Tribunal (Sir Ian Barker and Mr. Kaplan).
Justice Kapunan is unable to agree with the majority’s conclusion on the claim of estoppel
brought by the Respondents. (Emphasis supplied)
24 

On October 26, 2007, RCBC filed with the Makati City RTC, Branch 148 (SP Proc. Case No. M-
6046)amotion to confirm the First Partial Award, while Respondents filed a motion to vacate the
same.

ICC-ICA by letter dated October 12, 2007 increased the advance on costs from US$450,000 to
25 

US$580,000. Under this third assessment, RCBC paid US$130,000 as its share on the increment.
Respondents declined to pay its adjudged total share of US$290,000 on account of its filing in the
RTC of a motion to vacate the First Partial Award. The ICC-ICA then invited RCBC to substitute for
26 

Respondents in paying the balance of US$130,000 by December 21, 2007. RCBC complied with
27 

the request, making its total payments in the amount of US$580,000. 28

While RCBC paid Respondents’ share in the increment (US$130,000), it reiterated its plea that
Respondents be declared as in default and the counterclaimsdeemed as withdrawn. 29

Chairman Barker’s letter dated December 18, 2007 states in part:

xxxx
 8. Contrary to the Complainant’s view, the Tribunal has no jurisdiction to declare that the
Respondents have no right to participate in the proceedings concerning the claim. Article
30(4) of the ICC Rules applies only to any counterclaim of the Respondents.

9. The Tribunal interprets the Claimant’s latest letter as an application by the Claimant
to the Tribunal for the issue of a partial award against the Respondents in respect of
their failure to pay their share of the ICC’s requests for advance on costs.

10. I should be grateful if the Claimant would confirm that this is the situation. If so, the
Claimant should propose a timetable for which written submissions should be made by both
parties. This is an application which can be considered by the Tribunal on written
submissions. (Emphasis supplied)
30 

RCBC, in a letter dated December 26, 2007, confirmed the Arbitration Tribunal’s interpretation that it
was applying for a partial award against Respondents’ failure to pay their share in the advance on
costs.31

Meanwhile, on January 8, 2008, the Makati City RTC, Branch 148 issued an order in SP Proc. Case
No. M-6046 confirming the First Partial Award and denying Respondents’ separate motions to
vacate and to suspend and inhibit Barker and Kaplan. Respondents’ motion for reconsideration was
likewise denied. Respondents directly filed with this Court a petition for review on certiorari under
Rule 45, docketed as G.R. No. 182248 and entitled Equitable PCI Banking Corporation v. RCBC
Capital Corporation. In our Decision dated December 18, 2008, we denied the petition and affirmed
32 

the RTC’s ruling confirming the First Partial Award.

On January 18, 2008, the Arbitration Tribunal set a timetable for the filing of submission by the
parties on whether it should issue a Second Partial Award in respect of the Respondents’ refusal to
pay an advance on costs to the ICC-ICA.

In compliance, RCBC filed on February 7, 2008an Application for Reimbursement of Advance on

Costs Paid, praying for the issuance of a partial award directing the Respondents to reimburse its
payment in the amount of US$290,000 representing Respondents’ share in the Advance on Costs
and to consider Respondents’ counterclaim for actual damages in the amount of US$300,000, and
moral and exemplary damages as withdrawn for their failure to pay their equal share in the advance
on costs. RCBC invoked the plain terms of Article 30 (2) and (3) to stress the liability of Respondents
to share equally in paying the advance on costs where the Arbitration Tribunal has fixed the same. 33

Respondents, on the other hand, filed their Opposition to the said application alleging that the
34 

Arbitration Tribunal has lost its objectivity in an unnecessary litigation over the payment of
Respondents’ share in the advance costs. They pointed out that RCBC’s letter merely asked that
Respondents be declared as in default for their failure to pay advance costs but the Arbitration
Tribunal, while denying the request offered an alternative to RCBC: a Partial Award for
Respondents’ share in the advance costs even if it was clear from the language of RCBC’s
December 11, 2007 letter that it had no intention of litigating for the advance costs. Chairman
Barker, after ruling earlier that it cannot grant RCBC’s request to declare the Respondents as having
no right to participate in the proceedings concerning the claim, interpreted RCBC’s letter as an
application for the Arbitration Tribunal to issue a partial award in respect of such refusal of
Respondents to pay their share in the advance on costs, and subsequently directed the parties to
make submissions on the matter.Aside from violating their right to due process and to be heard by
an impartial tribunal, Respondents also argued that in issuing the award for advance cost, the
ArbitrationTribunal decided an issue beyond the terms of the TOR.
Respondents also emphasized that the parties agreed on a two-part arbitration: the first part of the
Tribunal’s proceedings would determine Respondents’ liability, if any, for alleged violation of Section
5(g) and (h) of the SPA; and the second part of the proceedings would determine the amounts owed
by one party to another as a consequence of a finding of liability or lack thereof. An award for
"reimbursement of advances for costs" clearly falls outside the scope of either proceedings. Neither
can the Tribunal justify such proceedings under Article 23 of the ICC Rules (Conservatory and
Interim Measures) because that provision does not contemplate an award for the reimbursement of
advance on costs in arbitration cases. Respondents further asserted that since the advances on
costs have been paid by the Claimant (RCBC), the main claim and counterclaim may both be heard
by the Arbitration Tribunal.

In his letter dated March 13, 2008, Chairman Barker advised the parties, as follows:

1. The Tribunal acknowledges the Respondents’ response to the Claimant’s application for a
Partial Award, based on the Respondents’ failure to pay their share of the costs, as
requested by the ICC.

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

3. The Tribunal will give each party seven days within which to submit further written
comments as a consequence of being alerted to the above authorities. (Additional emphasis
35 

supplied)

The parties complied by submitting their respective comments.

RCBC refuted Respondents’ allegation of partiality on the part of Chairman Barker and reiterated the
prayer in its application for reimbursement of advance on costs paid to the ICC-ICA. RCBC
contended that based on Mr. Secomb’s article, whether the "contractual" or "provisional measures"
approach is applied, the Arbitration Tribunal is vested with jurisdiction and authority to render an
award with respect to said reimbursement of advance cost paid by the non-defaulting party. 36

Respondents, on the other hand, maintained that RCBC’s application for reimbursement of advance
cost has no basis under the ICC Rules. They contended that no manifest injustice can be inferred
from an act of a party paying for the share of the defaulting party as this scenario is allowed by the
ICC Rules. Neither can a partial award for advance cost be justified under the "contractual
approach" since the matter of costs for arbitration is between the ICC and the parties, not the
Arbitration Tribunal and the parties. An arbitration tribunal can issue decisions on costs only for
those costs not fixed by the ICC.37

Respondents reiterated their position that Article 30(3) envisions a situation whereby a party would
refuse to pay its share on the advance on costs and provides a remedy therefor – the other party
"shall be free to pay the whole of the advance on costs." Such party’s reimbursement for payments
of the defaulting party’s share depends on the final arbitral award where the party liable for costs
would be determined. This is the only remedy provided by the ICC Rules. 38

On May 28, 2008, the Arbitration Tribunal rendered the Second Partial Award, as follows:
39 
7 AWARD

7.1 Having read and considered the submissions of both parties, the Tribunal AWARDS,
DECLARES AND ORDERS as follows:

(a) The Respondents are forthwith to pay to the Claimant the sum of US$290,000.

(b) The Respondents’ counterclaim is to be considered as withdrawn.

(c) All other questions, including interest and costs, will be dealt with in a subsequent
award. 40

The above partial award was received by RCBC and Respondents on June 12, 2008.

On July 11, 2008, EPCIB filed a Motion to Vacate Second Partial Award in the Makati City RTC,
41 

Branch 148 (SP Proc. Case No. M-6046). On July 10, 2008, RCBC filed in the same court a Motion
to Confirm Second Partial Award. 42

EPCIB raised the following grounds for vacating the Second Partial Award: (a) the award is void ab
initio having been rendered by the arbitrators who exceeded their power or acted without it; and (b)
the award was procured by undue means or issued with evident partiality or attended by
misbehavior on the part of the Tribunal which resulted in a material prejudice to the rights of the
Respondents. EPCIB argued that there is no express agreement either in the SPA or the ICC Rules
for such right of reimbursement. There is likewise no implied agreement because from the ICC
Rules, the only inference is that the parties agreed to await the dispositions on costs liability in the
Final Award, not before.

On the ruling of the Arbitration Tribunal that Respondents’ application for costs are not
counterclaims, EPCIB asserted that this is contrary to Philippine law as it is basic in our jurisdiction
that counterclaims for litigation expenses, moral and exemplary damages are proper counterclaims,
which rule should be recognized in view of Section 10 of the SPA which provides that "substantive
aspects of the dispute shall be settled by applying the laws of the Philippines." Finally, EPCIB takes
issue with Chairman Barker’s interpretation of RCBC’s December 11, 2007 letter as an application
for a partial award for reimbursement of the substituted payments. Such conduct of Chairman Barker
is prejudicial and proves his evident partiality in favor of RCBC.

RCBC filed its Opposition, asserting that the Arbitration Tribunal had jurisdiction to consider
43 

Respondents’ counterclaim as withdrawn, the same having been abandoned by not presenting any
computation or substantiation by evidence, their only computation relates only to attorney’s fees
which are simply cost of litigation properly brought at the conclusion of the arbitration. It also pointed
out that the Arbitration Tribunal was empowered by the parties’ arbitral clause to determine the
manner of payment of expenses of arbitration, and that the Second Partial Award was based on
authorities and treatiseson the mandatory and contractual nature of the obligation to pay advances
on costs.

In its Reply, EPCIB contended that RCBC had the option to agree to its proposal for separate
44 

advances on costs but decided against it; RCBC’s act of paying the balance of the advance cost in
substitution of EPCIB was for the purpose of having EPCIB defaulted and the latter’s counterclaim
withdrawn. Having agreed to finance the arbitration until its completion, RCBC is not entitled to
immediate reimbursement of the amount it paid in substitution of EPCIB under an interim award, as
its right to a partial or total reimbursement will have to be determined under the final award. EPCIB
asserted that the matter of reimbursement of advance cost paid cannot be said to have properly
arisen during arbitration. EPCIB reiterated that Chairman Barker’s interpretation of RCBC’s
December 11, 2007 letter as an application for interim award for reimbursement is tantamount to a
promise that the award will be issued in due course.

After a further exchange of pleadings, and other motions seeking relief from the court in connection
with the arbitration proceedings (quantum phase), the Makati City RTC, Branch 148 issued the
Order dated June 24, 2009 confirming the Second Partial Award and denying EPCIB’s motion to
45 

vacate the same. Said court held that since the parties agreed to submit any dispute under the SPA
to arbitration and to be bound by the ICC Rules, they are also bound to pay in equal shares the
advance on costs as provided in Article 30 (2) and (3). It noted that RCBC was forced to pay the
share of EPCIB in substitution of the latter to prevent a suspension of the arbitration proceedings,
while EPCIB’s non-payment seems more like a scheme to delay such proceedings. On the
Arbitration Tribunal’s ruling on EPCIB’s counterclaim, no error was committed in considering it
withdrawn for failure of EPCIB to quantify and substantiate it with supporting evidence. As to
EPCIB’s claim for attorney’s fees, the RTC agreed that these should be brought only at the close of
arbitration.

EPCIB moved to reconsider the June 24, 2009 Order and for the voluntary inhibition of the Presiding
Judge (Judge Oscar B. Pimentel) on the ground that EPCIB’s new counsel represented another
client in another case before him in which said counsel assailed his conduct and had likewise sought
his inhibition. Both motions were denied in the Joint Order dated March 23, 2010.
46 

On April 14, 2010, EPCIB filed in the CA a petition for review with application for TRO and/or writ of
47 

preliminary injunction (CA-G.R. SP No. 113525) in accordance with Rule 19, Section 4 of the Special
Rules of Court on Alternative Dispute Resolution (Special ADR Rules). EPCIB assailed the Makati
48 

City RTC, Branch 148 in denying its motion to vacate the Second Partial Award despite (a) said
award having been rendered in excess of jurisdiction or power, and contrary to public policy; (b) the
fact that it was issued with evident partiality and serious misconduct; (c) the award deals with a
dispute not contemplated within the terms of submission to arbitration or beyond the scope of such
submission, which therefore ought to be vacated pursuant to Article 34 of the UNCITRAL Model
Law; and (d) the Presiding Judge having exhibited bias and prejudice against BDO and its counsel
as confirmed by his pronouncements in the Joint Order dated March 23, 2010 in which, instead of
recusing himself, he imputed malice and unethical conduct in the entry of appearance of Belo Gozon
Elma Asuncion and Lucila Law Offices in SP Proc. Case No. M-6046, which warrants his voluntary
inhibition.

Meanwhile, on June 16, 2010, the Arbitration Tribunal issued the Final Award, as follows:
49 

15 AWARD

15.1 The Tribunal by a majority (Sir Ian Barker & Mr. Kaplan) awards, declares and adjudges as
follows:

(a) the Respondents are to pay damages to the Claimant for breach of the sale and
purchase agreement for Bankard shares in the sum of ₱348,736,920.29.

(b) The Respondents are to pay to the Claimant the sum of US$880,000 in respect of the
costs of the arbitration as fixed by the ICC Court.

(c) The Respondents are to pay to the Claimant the sum of US$582,936.56 for the fees and
expenses of Mr. Best.
 (d) The Respondents are to pay to the Claimant their expenses of the arbitration as follows:

(i) Experts’ fees ₱7,082,788.55

(ii) Costs of without prejudice meeting ₱22,571.45

(iii) Costs of arbitration hearings ₱553,420.66

(iv) Costs of transcription service ₱483,597.26

Total ₱8,144,377.62

(e) The Respondents are to pay to the Claimant the sum of ₱7,000,000 for party-and-party
legal costs.

(f) The Counterclaims of the Respondents are all dismissed.

(g) All claims of the Claimant are dismissed, other than those referred to above.

15.2 Justice Kapunan does not agree with the majority of the members of the Tribunal and has
issued a dissenting opinion. He has refused to sign this Award. 50

On July 1, 2010 BDO filed in the Makati City RTC a Petition to Vacate Final Award Ad
Cautelam, docketed as SP Proc. Case No. M-6995, which was raffled to Branch 65.
51 

On July 28, 2010, RCBC filed with the Makati City RTC, Branch 148 (SP Proc. Case No. M-6046) a
Motion to Confirm Final Award. BDO filed its Opposition With Motion to Dismiss on grounds that a
52  53 

Petition to Vacate Final Award Ad Cautelamhad already been filed in SP Proc. Case No. M-6995.
BDO also pointed out that RCBC did not file the required petition but instead filed a mere motion
which did not go through the process of raffling to a proper branch of the RTC of Makati City and the
payment of the required docket/filing fees. Even assuming that Branch 148 has jurisdiction over
RCBC’s motion to confirm final award, BDO asserted that RCBC had filed before the Arbitration
Tribunal an Application for Correction and Interpretation of Award under Article 29 of the ICC Rules,
which is irreconcilable with its Motion to Confirm Final Award before said court. Hence, the Motion to
Confirm Award was filed precipitately.

On August 18, 2010, RCBC filed an Omnibus Motion in SP Proc. Case No. M-6995 (Branch 65)
praying for the dismissal of BDO’s Petition to Vacate Final Award or the transfer of the same to
Branch 148 for consolidation with SP Proc. Case No. M-6046. RCBC contended that BDO’s filing of
its petition with another court is a blatant violation of the Special ADR Rules and is merely a
subterfuge to commit forum-shopping. BDO filed its Opposition to the Omnibus Motion. 54

On October 28, 2010, Branch 65 issued a Resolution denying RCBC’s omnibus motion and
55 

directing the service of the petition to RCBC for the latter’s filing of a comment thereon. RCBC’s
motion for reconsideration was likewise denied in the said court’s Order dated December 15, 2010.
RCBC then filed its Opposition to the Petition to Vacate Final Award Ad Cautelam.

Meanwhile, on November 10, 2010, Branch 148 (SP Proc. Case No. M-6046) issued an
Order confirming the Final Award "subject to the correction/interpretation thereof by the Arbitral
56 

Tribunal pursuant to the ICC Rules and the UNCITRAL Model Law," and denying BDO’s Opposition
with Motion to Dismiss.
On December 30, 2010, George L. Go, in his personal capacity and as attorney-in-fact of the other
listed shareholders of Bankard, Inc. in the SPA (Individual Shareholders), filed a petition in the CA,
CA-G.R. SP No. 117451, seeking to set aside the above-cited November 10, 2010 Order and to
enjoin Branch 148 from further proceeding in SP Proc. Case No. M-6046. By Decision dated June
57 

15, 2011, the CA dismissed the said petition. Their motion for reconsideration of the said decision
was likewise denied by the CA in its Resolution dated December 14, 2011.
58 

On December 23, 2010, the CA rendered its Decision in CA-G.R. SP No. 113525, the dispositive
portion of which states:

WHEREFORE, premises considered, the following are hereby REVERSED and SET ASIDE:

1. the Order dated June 24, 2009 issued in SP Proc. Case No. M-6046 by the Regional Trial
Court of Makati City, Branch 148, insofar as it denied the Motion to Vacate Second Partial
Award dated July 8, 2008 and granted the Motion to Confirm Second Partial Award dated
July 10, 2008;

2. the Joint Order dated March 23, 2010 issued in SP Proc. Case No. M-6046 by the
Regional Trial Court of Makati City, Branch 148, insofar as it denied the Motion For
Reconsideration dated July 28, 2009 relative to the motions concerning the Second Partial
Award immediately mentioned above; and

3. the Second Partial Award dated May 28, 2008 issued in International Chamber of
Commerce Court of Arbitration Reference No. 13290/MS/JB/JEM.

SO ORDERED. 59

RCBC filed a motion for reconsideration but the CA denied the same in its Resolution dated March
60 

16, 2011. On April 6, 2011, it filed a petition for review on certiorari in this Court (G.R. No. 196171).

On February 25, 2011, Branch 65 rendered a Decision in SP Proc. Case No. M-6995, as follows:
61 

WHEREFORE, premises considered, the Final Award dated June 16, 2010 in ICC Ref. No.
13290/MS/JB/JEM is hereby VACATED with cost against the respondent.

SO ORDERED. 62

In SP Proc. Case No. M-6046, Branch 148 issued an Order dated August 8, 2011 resolving the
63 

following motions: (1) Motion for Reconsideration filed by BDO, Go and Individual Shareholders of
the November 10, 2010 Order confirming the Final Award; (2) RCBC’s Omnibus Motion to expunge
the motion for reconsideration filed by Go and Individual Shareholders, and for execution of the Final
Award; (3) Motion for Execution filed by RCBC against BDO; (4) BDO’s Motion for Leave to File
Supplement to the Motion for Reconsideration; and (5) Motion for Inhibition filed by Go and
Individual Shareholders. Said Order decreed:

WHEREFORE, premises considered, it is hereby ORDERED, to wit:

1. Banco De Oro’s Motion for Reconsideration, Motion for Leave to File Supplement to
Motion for Reconsideration, and Motion to Inhibit are DENIED for lack of merit.
 2. RCBC Capital’s Motion to Expunge, Motion to Execute against Mr. George L. Go and the
Bankard Shareholders, and the Motion to Execute against Banco De Oro are
hereby GRANTED.

3. The damages awarded to RCBC Capital Corporation in the amount of Ph₱348,736,920.29

is subject to an interest of 6% per annum reckoned from the date of RCBC Capital’s extra-
judicial demand or from May 5, 2003 until the confirmation of the Final Award. Likewise, this
compounded amount is subject to 12% interest per annum from the date of the confirmation
of the Final Award until its satisfaction. The costs of the arbitration amounting to
US$880,000.00, the fees and expenses of Mr. Best amounting to US$582,936.56, the
Claimant’s expenses of the arbitration amounting to Ph₱8,144,377.62, and the party-and-
party legal costs amounting to Ph₱7,000,000.00 all ruled in favor of RCBC Capital
Corporation in the Final Award of the Arbitral Tribunal dated June 16, 2010 are subject to
12% legal interest per annum, also reckoned from the date of the confirmation of the Final
Award until its satisfaction.

4. Pursuant to Section 40 of R.A. No. 9285, otherwise known as the Alternative Dispute
Resolution Act of 2004 in relation to Rule 39 of the Rules of Court, since the Final Award
have been confirmed, the same shall be enforced in the same manner as final and executory
decisions of the Regional Trial Court, let a writ of execution be issued commanding the
Sheriff to enforce this instant Order confirming this Court’s Order dated November 10, 2010
that judicially confirmed the June 16, 2010 Final Award.

SO ORDERED. 64

Immediately thereafter, RCBC filed an Urgent Motion for Issuance of a Writ of Execution. On August
65 

22, 2011, after approving the execution bond, Branch 148 issued a Writ of Execution for the
implementation of the said court’s "Order dated August 8, 2011 confirming the November 10, 2010
Order that judicially confirmed the June 16, 2010 Final Award x x x."
66

BDO then filed in the CA, a "Petition for Review (With Application for a Stay Order or Temporary
Restraining Order and/or Writ of Preliminary Injunction," docketed as CA-G.R. SP No. 120888. BDO
sought to reverse and set aside the Orders dated November 10, 2010 and August 8, 2011, and any
writ of execution issued pursuant thereto, as well as the Final Award dated June 16, 2010 issued by
the Arbitration Tribunal.

In its Urgent Omnibus Motion to resolve the application for a stay order and/or TRO/writ of
67 

preliminary injunction, and to quash the Writ of Execution dated August 22, 2011 and lift the Notices
of Garnishment dated August 22, 2011, BDO argued that the assailed orders of execution (Writ of
Execution and Notice of Garnishment) were issued with indecent haste and despite the non-
compliance with the procedures in Special ADR Rules of the November 10, 2010 Order confirming
the Final Award. BDO was not given sufficient time to respond to the demand for payment or to elect
the method of satisfaction of the judgment debt or the property to be levied upon. In any case, with
the posting of a bond by BDO, Branch 148 has no jurisdiction to implement the appealed orders as it
would pre-empt the CA from exercising its review under Rule 19 of the Special ADR Rules after
BDO had perfected its appeal. BDO stressed that the bond posted by RCBC was for a measly sum
of ₱3,000,000.00 to cause execution pending appeal of a monetary award that may reach
₱631,429,345.29. RCBC also failed to adduce evidence of "good cause" or "good reason" to justify
discretionary execution under Section 2(a), Rule 39 of the Rules of Court.

BDO further contended that the writ of execution should be quashed for having been issued with
grave abuse of discretion amounting to lack or excess of jurisdiction as Branch 148 modified the
Final Award at the time of execution by imposing the payment of interests though none was provided
therein nor in the Order confirming the same.

During the pendency of CA-G.R. SP No. 120888, Branch 148 continued with execution proceedings
and on motion by RCBC designated/deputized additional sheriffs to replace Sheriff Flora who was
supposedly physically indisposed. These court personnel went to the offices/branches of BDO
68 

attempting to serve notices of garnishment and to levy the furniture, fixtures and equipment.

On September 12, 2011, BDO filed a Very Urgent Motion to Lift Levy and For Leave to Post
Counter-Bond before Branch 148 praying for the lifting of the levy of BDO Private Bank, Inc. (BPBI)
69 

shares and the cancellation of the execution sale thereof scheduled on September 15, 2011, which
was set for hearing on September 14, 2011. BDO claimed that the levy was invalid because it was
served by the RTC Sheriffs not to the authorized representatives of BPBI, as provided under Section
9(b), Rule 39 in relation to Section 7, Rule 57 of the Rules of Court stating that a notice of levy on
shares of stock must be served to the president or managing agent of the company which issued the
shares. However, BDO was advised by court staff that Judge Sarabia was on leave and the case
could not be set for hearing.

In its Opposition to BDO’s application for injunctive relief, RCBC prayed for its outright denial as
BDO’s petition raises questions of fact and/or law which call for the CA to substitute its judgment
with that of the Arbitration Tribunal, in patent violation of applicable rules of procedure governing
domestic arbitration and beyond the appellate court’s jurisdiction. RCBC asserted that BDO’s
application has become moot and academic as the writ of execution was already implemented
and/or enforced. It also contended that BDO has no clear and unmistakable right to warrant
injunctive relief because the issue of jurisdiction was already ruled upon in CA-G.R. SP No. 117451
which dismissed the petition filed by Go and the Individual Shareholders of Bankard questioning the
authority of Branch 148 over RCBC’s motion to confirm the Final Award despite the earlier filing by
BDO in another branch of the RTC (Branch 65) of a petition to vacate the said award.

On September 13, 2011, BDO, to avert the sale of the BPBI shares scheduled on September 15,
2011 and prevent further disruption in the operations of BDO and BPBI, paid under protest by
tendering a Manager’s Check in the amount of ₱637,941,185.55, which was accepted by RCBC as
full and complete satisfaction of the writ of execution. BDO manifested before Branch 148 that such
payment was made without prejudice to its appeal before the CA. 70

On even date, the CA denied BDO’s application for a stay order and/or TRO/preliminary injunction
for non-compliance with Rule 19.25 of the Special ADR Rules. The CA ruled that BDO failed to show
the existence of a clear right to be protected and that the acts sought to be enjoined violated any
right. Neither was BDO able to demonstrate that the injury to be suffered by it is irreparable or not
susceptible to mathematical computation.

BDO did not file a motion for reconsideration and directly filed with this Court a petition for certiorari
with urgent application for writ of preliminary mandatory injunction (G.R. No. 199238).

The Petitions

In G.R. No. 196171, RCBC set forth the following grounds for the reversal of the CA Decision dated
December 23, 2010:

I.
 THE COURT OF APPEALS ACTED CONTRARY TO LAW AND PRIOR RULINGS OF THIS
HONORABLE COURT AND COMMITTED REVERSIBLE ERROR IN VACATING THE
SECOND PARTIAL AWARD ON THE BASIS OF CHAIRMAN BARKER’S ALLEGED
PARTIALITY, WHICH IT CLAIMS IS INDICATIVE OF BIAS CONSIDERING THAT THE
ALLEGATIONS CONTAINED IN BDO/EPCIB’S PETITION FALL SHORT OF THE
JURISPRUDENTIAL REQUIREMENT THAT THE SAME BE SUPPORTED BY CLEAR AND
CONVINCING EVIDENCE.

II.

THE COURT OF APPEALS ACTED CONTRARY TO LAW AND PRIOR RULINGS OF THIS
HONORABLE COURT AND COMMITTED REVERSIBLE ERROR WHEN IT REVERSED
THE ARBITRAL TRIBUNAL’S FINDINGS OF FACT AND LAW IN THE SECOND PARTIAL
AWARD IN PATENT CONTRAVENTION OF THE SPECIAL ADR RULES WHICH
EXPRESSLY PROHIBITS THE COURTS, IN AN APPLICATION TO VACATE AN
ARBITRAL AWARD, FROM DISTURBING THE FINDINGS OF FACT AND/OR
INTERPRE[TA]TION OF LAW OF THE ARBITRAL TRIBUNAL. 71

BDO raises the following arguments in G.R. No. 199238:

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION IN PERFUNCTORILY DENYING PETITIONER BDO’S
APPLICATION FOR STAY ORDER, AND/OR TEMPORARY RESTRAINING ORDER AND
PRELIMINARY INJUNCTION DESPITE THE EXISTENCE AND CONCURRENCE OF ALL THE
ELEMENTS FOR THE ISSUANCE OF SAID PROVISIONAL RELIEFS

A. PETITIONER BDO HAS CLEAR AND UNMISTAKABLE RIGHTS TO BE PROTECTED

BY THE ISSUANCE OF THE INJUNCTIVE RELIEF PRAYED FOR, WHICH, HOWEVER,
WERE DISREGARDED BY PUBLIC RESPONDENT WHEN IT DENIED PETITIONER
BDO’S PRAYER FOR ISSUANCE OF A STAY ORDER AND/OR TRO

B. PETITIONER BDO’S RIGHT TO DUE PROCESS AND EQUAL PROTECTION OF THE

LAW WAS GROSSLY VIOLATED BY THE RTC-MAKATI CITY BRANCH 148, THE
DEPUTIZED SHERIFFS AND RESPONDENT RCBC CAPITAL, WHICH VIOLATION WAS
AIDED BY PUBLIC RESPONDENT’S INACTION ON AND EVENTUAL DENIAL OF THE
PRAYER FOR STAY ORDER AND/OR TRO

C. DUE TO THE ACTS AND ORDERS OF RTC BRANCH 148, PETITIONER BDO
SUFFERED IRREPARABLE DAMAGE AND INJURY, AND THERE WAS DIRE AND
URGENT NECESSITY FOR THE ISSUANCE OF THE INJUNCTIVE RELIEF PRAYED FOR
WHICH PUBLIC RESPONDENT DENIED IN GRAVE ABUSE OF DISCRETION 72

Essentially, the issues to be resolved are: (1) whether there is legal ground to vacate the Second
Partial Award; and (2) whether BDO is entitled to injunctive relief in connection with the execution
proceedings in SP Proc. Case No. M-6046.

In their TOR, the parties agreed on the governing law and rules as follows:

Laws to be Applied
13 The Tribunal shall determine the issues to be resolved in accordance with the laws of the
Republic of the Philippines.

Procedure to be Applied

14 The proceedings before the Tribunal shall be governed by the ICC Rules of Arbitration (1 January
1998) and the law currently applicable to arbitration in the Republic of the Philippines.
73

As stated in the Partial Award dated September 27, 2007, although the parties provided in Section
10 of the SPA that the arbitration shall be conducted under the ICC Rules, it was nevertheless
arbitration under Philippine law since the parties are both residents of this country. The provisions of
Republic Act No. 876 (RA 876),as amended by Republic Act No. 9285 (RA 9285)principally applied
74  75 

in the arbitration between the herein parties.

76

The pertinent provisions of R.A. 9285 provide:

SEC. 40. Confirmation of Award. – The confirmation of a domestic arbitral award shall be

governed by Section 23 of R.A. 876.

A domestic arbitral award when confirmed shall be enforced in the same manner as final and
executory decisions of the Regional Trial Court.

The confirmation of a domestic award shall be made by the regional trial court in accordance with
the Rules of Procedure to be promulgated by the Supreme Court.

xxxx

SEC. 41. Vacation Award. – A party to a domestic arbitration may question the arbitral award with
the appropriate regional trial court in accordance with the rules of procedure to be promulgated by
the Supreme Court only on those grounds enumerated in Section 25 of Republic Act No. 876. Any
other ground raised against a domestic arbitral award shall be disregarded by the regional trial court.

Rule 11.4 of the Special ADR Rules sets forth the grounds for vacating an arbitral award:

Rule 11.4. Grounds.—(A) To vacate an arbitral award. – The arbitral award may be vacated on the
following grounds:

a. The arbitral award was procured through corruption, fraud or other undue means;

b. There was evident partiality or corruption in the arbitral tribunal or any of its
members;

c. The arbitral tribunal was guilty of misconduct or any form of misbehavior that has
materially prejudiced the rights of any party such as refusing to postpone a hearing upon
sufficient cause shown or to hear evidence pertinent and material to the controversy;

d. One or more of the arbitrators was disqualified to act as such under the law and willfully
refrained from disclosing such disqualification; or

e. The arbitral tribunal exceeded its powers, or so imperfectly executed them, such that a
complete, final and definite award upon the subject matter submitted to them was not made.
The award may also be vacated on any or all of the following grounds:

a. The arbitration agreement did not exist, or is invalid for any ground for the revocation of a
contract or is otherwise unenforceable; or

b. A party to arbitration is a minor or a person judicially declared to be incompetent.

xxxx

In deciding the petition to vacate the arbitral award, the court shall disregard any other ground than
those enumerated above. (Emphasis supplied)

Judicial Review

At the outset, it must be stated that a review brought to this Court under the Special ADR Rules is
not a matter of right. Rule 19.36 of said Rules specified the conditions for the exercise of this Court’s
discretionary review of the CA’s decision.

Rule 19.36.Review discretionary.—A review by the Supreme Court is not a matter of right, but of
sound judicial discretion, which will be granted only for serious and compelling reasons resulting
in grave prejudice to the aggrieved party. The following, while neither controlling nor fully
measuring the court’s discretion, indicate the serious and compelling, and necessarily, restrictive
nature of the grounds that will warrant the exercise of the Supreme Court’s discretionary
powers, when the Court of Appeals:

a. Failed to apply the applicable standard or test for judicial review prescribed in these
Special ADR Rules in arriving at its decision resulting in substantial prejudice to the
aggrieved party;

b. Erred in upholding a final order or decision despite the lack of jurisdiction of the court that
rendered such final order or decision;

c. Failed to apply any provision, principle, policy or rule contained in these Special ADR
Rules resulting in substantial prejudice to the aggrieved party; and

d. Committed an error so egregious and harmful to a party as to amount to an undeniable

excess of jurisdiction.

The mere fact that the petitioner disagrees with the Court of Appeals’ determination of questions of
fact, of law or both questions of fact and law, shall not warrant the exercise of the Supreme Court’s
discretionary power. The error imputed to the Court of Appeals must be grounded upon any of
the above prescribed grounds for review or be closely analogous thereto.

A mere general allegation that the Court of Appeals has committed serious and substantial error or
that it has acted with grave abuse of discretion resulting in substantial prejudice to the petitioner
without indicating with specificity the nature of such error or abuse of discretion and the serious
prejudice suffered by the petitioner on account thereof, shall constitute sufficient ground for the
Supreme Court to dismiss outright the petition. (Emphasis supplied)

The applicable standard for judicial review of arbitral awards in this jurisdiction is set forth in Rule
19.10 which states:
Rule 19.10. Rule on judicial review on arbitration in the Philippines.--As a general rule, the court can
only vacate or set aside the decision of an arbitral tribunal upon a clear showing that the award
suffers from any of the infirmities or grounds for vacating an arbitral award under Section 24
of Republic Act No. 876 or under Rule 34 of the Model Law in a domestic arbitration, or for
setting aside an award in an international arbitration under Article 34 of the Model Law, or for such
other grounds provided under these Special Rules.

xxxx

The court shall not set aside or vacate the award of the arbitral tribunal merelyon the ground that the
arbitral tribunal committed errors of fact, or of law, or of fact and law, as the court cannot substitute
its judgment for that of the arbitral tribunal. (Emphasis supplied)

The above rule embodied the stricter standard in deciding appeals from arbitral awards established
by jurisprudence. In the case of Asset Privatization Trust v. Court of Appeals, this Court held:
77 

As a rule, the award of an arbitrator cannot be set aside for mere errors of judgment either as to the
law or as to the facts.Courts are without power to amend or overrule merely because of
disagreement with matters of law or facts determined by the arbitrators.They will not review the
findings of law and fact contained in an award, and will not undertake to substitute their judgment for
that of the arbitrators, since any other rule would make an award the commencement, not the end, of
litigation.Errors of law and fact, or an erroneous decision of matters submitted to the judgment of the
arbitrators, are insufficient to invalidate an award fairly and honestly made. Judicial review of an
arbitration is, thus, more limited than judicial review of a trial.
78

Accordingly, we examine the merits of the petition before us solely on the statutory ground raised for
vacating the Second Partial Award: evident partiality, pursuant to Section 24 (b) of the Arbitration
Law (RA 876) and Rule 11.4 (b) of the Special ADR Rules.

Evident Partiality

Evident partiality is not defined in our arbitration laws. As one of the grounds for vacating an arbitral
award under the Federal Arbitration Act (FAA) in the United States (US), the term "encompasses
both an arbitrator’s explicit bias toward one party and an arbitrator’s inferred bias when an arbitrator
fails to disclose relevant information to the parties."
79

From a recent decision of the Court of Appeals of Oregon, we quote a brief discussion of the
80 

common meaning of evident partiality:

To determine the meaning of "evident partiality," we begin with the terms themselves. The common
meaning of "partiality" is "the inclination to favor one side."Webster’s Third New Int'l
Dictionary 1646 (unabridged ed 2002); see also id. (defining "partial" as "inclined to favor one party
in a cause or one side of a question more than the other: biased, predisposed" (formatting in
original)). "Inclination," in turn, means "a particular disposition of mind or character : propensity,
bent" or "a tendency to a particular aspect, state, character, or action."Id. at 1143 (formatting in
original); see also id. (defining "inclined" as "having inclination, disposition, or tendency").

The common meaning of "evident" is "capable of being perceived esp[ecially] by sight : distinctly
visible : being in evidence : discernable[;] * * * clear to the understanding : obvious, manifest,
apparent."Id. at 789 (formatting in original); see also id. (stating that synonyms of "evident" include
"apparent, patent, manifest, plain, clear, distinct, obvious, [and] palpable" and that, "[s]ince evident
rather naturally suggests evidence, it may imply the existence of signs and indications that
must lead to an identification or inference" (formatting in original)). (Emphasis supplied)

Evident partiality in its common definition thus implies "the existence of signs and indications that
must lead to an identification or inference" of partiality. Despite the increasing adoption of arbitration
81 

in many jurisdictions, there seems to be no established standard for determining the existence of
evident partiality. In the US, evident partiality "continues to be the subject of somewhat conflicting
and inconsistent judicial interpretation when an arbitrator’s failure to disclose prior dealings is at
issue."82

The first case to delineate the standard of evident partiality in arbitration proceedings
was Commonwealth Coatings Corp. v. Continental Casualty Co., et al. decided by the US Supreme
83 

Court in 1968. The Court therein addressed the issue of whether the requirement of impartiality
applies to an arbitration proceeding. The plurality opinion written by Justice Black laid down the rule
that the arbitrators must disclose to the parties "any dealings that might create an impression of
possible bias," and that underlying such standard is "the premise that any tribunal permitted by law
84 

to try cases and controversies not only must be unbiased but also must avoid even the appearance
of bias." In a separate concurring opinion, Justice White joined by Justice Marshall, remarked that
85 

"[t]he Court does not decide today that arbitrators are to be held to the standards of judicial decorum
of Article III judges, or indeed of any judges." He opined that arbitrators should not automatically be
86 

disqualified from an arbitration proceeding because of a business relationship where both parties are
aware of the relationship in advance, or where the parties are unaware of the circumstances but the
relationship is trivial. However, in the event that the arbitrator has a "substantial interest" in the
transaction at hand, such information must be disclosed.

Subsequent cases decided by the US Court of Appeals Circuit Courts adopted different approaches,
given the imprecise standard of evident partiality in Commonwealth Coatings.

In Morelite Construction Corp. v. New York District Council Carpenters Benefit Funds, the Second
87 

Circuit reversed the judgment of the district court and remanded with instructions to vacate the
arbitrator’s award, holding that the existence of a father-son relationship between the arbitrator and
the president of appellee union provided strong evidence of partiality and was unfair to appellant
construction contractor. After examining prior decisions in the Circuit, the court concluded that –

x x x we cannot countenance the promulgation of a standard for partiality as insurmountable as

"proof of actual bias" -- as the literal words of Section 10 might suggest. Bias is always difficult, and
indeed often impossible, to "prove." Unless an arbitrator publicly announces his partiality, or is
overheard in a moment of private admission, it is difficult to imagine how "proof" would be obtained.
Such a standard, we fear, occasionally would require that we enforce awards in situations that are
clearly repugnant to our sense of fairness, yet do not yield "proof" of anything.

If the standard of "appearance of bias" is too low for the invocation of Section 10, and "proof
of actual bias" too high, with what are we left? Profoundly aware of the competing forces that have
already been discussed, we hold that "evident partiality" within the meaning of 9 U.S.C. § 10 will
be found where a reasonable person would have to conclude that an arbitrator was partial to
one party to the arbitration.x x x (Emphasis supplied)
88 

In Apperson v. Fleet Carrier Corporation, the Sixth Circuit agreed with the Morelite court’s analysis,
89 

and accordingly held that to invalidate an arbitration award on the grounds of bias, the challenging
party must show that "a reasonable person would have to conclude that an arbitrator was partial" to
the other party to the arbitration.
This "myriad of judicial interpretations and approaches to evident partiality" resulted in a lack of a
uniform standard, leaving the courts "to examine evident partiality on a case-by-case basis." The
90 

case at bar does not present a non-disclosure issue but conduct allegedly showing an arbitrator’s
partiality to one of the parties.

EPCIB/BDO, in moving to vacate the Second Partial Award claimed that the Arbitration Tribunal
exceeded its powers in deciding the issue of advance cost not contemplated in the TOR, and that
Chairman Barker acted with evident partiality in making such award. The RTC held that BDO failed
to substantiate these allegations. On appeal, the CA likewise found that the Arbitration Tribunal did
not go beyond the submission of the parties because the phrasing of the scope of the agreed issues
in the TOR ("[t]he issues to be determined by the Tribunal are those issues arising from the said
Request for Arbitration, Answer and Reply and such other issues as may properly arise during the
arbitration")is broad enough to accommodate a finding on the liability and the repercussions of
BDO’s failure to share in the advances on costs. Section 10 of the SPA also gave the Arbitration
Tribunal authority to decide how the costs should be apportioned between them.

However, the CA found factual support in BDO’s charge of partiality, thus:

On the issue on evident partiality, the rationale in the American case of Commonwealth Coatings
Corp. v. Continental Cas. Co. appears to be very prudent. In Commonwealth, the United States
Supreme Court reasoned that courts "should…be even more scrupulous to safeguard the impartiality
of arbitrators than judges, since the former have completely free rein to decide the law as well as the
facts, and are not subject to appellate review" in general. This taken into account, the Court applies
the standard demanded of the conduct of magistrates by analogy. After all, the ICC Rules
require that an arbitral tribunal should act fairly and impartially. Hence, an arbitrator’s conduct
should be beyond reproach and suspicion. His acts should be free from the appearances of
impropriety.

An examination of the circumstances claimed to be illustrative of Chairman Barker’s partiality is

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

That there was an action to be taken beforehand is confirmed by Chairman Barker’s furnishing the
parties with a copy of the Secomb article. This article ultimately favored RCBC by advancing its
cause. Chairman Barker makes it appear that he intended good to be done in doing so but
due process dictates the cold neutrality of impartiality. This means that "it is not enough…[that]
cases [be decided] without bias and favoritism. Nor is it sufficient that…prepossessions [be rid of].
[A]ctuations should moreover inspire that belief." These put into the equation, the furnishing of the
Secomb article further marred the trust reposed in Chairman Barker. The suspicion of his partiality
on the subject matter deepened. Specifically, his act established that he had pre-formed opinions.

Chairman Barker’s providing of copies of the said text is easily interpretable that he had prejudged
the matter before him. In any case, the Secomb article tackled bases upon which the Second Partial
Award was founded. The subject article reflected in advance the disposition of the ICC arbitral
tribunal. The award can definitely be viewed as an affirmation that the bases in the Secomb article
were adopted earlier on. To the Court, actuations of arbitrators, like the language of judges, "must be
guarded and measured lest the best of intentions be misconstrued."

x x x x (Emphasis supplied)
91 
We affirm the foregoing findings and conclusion of the appellate court save for its reference to
the obiter in Commonwealth Coatings that arbitrators are held to the same standard of conduct
imposed on judges. Instead, the Court adopts the reasonable impression of partiality standard,
which requires a showing that a reasonable person would have to conclude that an arbitrator was
partial to the other party to the arbitration. Such interest or bias, moreover, "must be direct, definite
and capable of demonstration rather than remote, uncertain, or speculative." When a claim of
92 

arbitrator’s evident partiality is made, "the court must ascertain from such record as is available
whether the arbitrators’ conduct was so biased and prejudiced as to destroy fundamental fairness." 93

Applying the foregoing standard, we agree with the CA in finding that Chairman Barker’s act of
furnishing the parties with copies of Matthew Secomb’s article, considering the attendant
circumstances,is indicative of partiality such that a reasonable man would have to conclude that he
was favoring the Claimant, RCBC. Even before the issuance of the Second Partial Award for the
reimbursement of advance costs paid by RCBC, Chairman Barker exhibited strong inclination to
grant such relief to RCBC, notwithstanding his categorical ruling that the Arbitration Tribunal "has no
power under the ICC Rules to order the Respondents to pay the advance on costs sought by the
ICC or to give the Claimantany relief against the Respondents’ refusal to pay." That Chairman
94 

Barker was predisposed to grant relief to RCBC was shown by his act of interpreting RCBC’s letter,
which merely reiterated its plea to declare the Respondents in default and consider all counterclaims
withdrawn – as what the ICC Rules provide – as an application to the Arbitration Tribunal to issue a
partial award in respect of BDO’s failure to share in the advance costs. It must be noted that RCBC
in said letter did not contemplate the issuance of a partial order, despite Chairman Barker’s previous
letter which mentioned the possibility of granting relief upon the parties making submissions to the
Arbitration Tribunal. Expectedly, in compliance with Chairman Barker’s December 18, 2007 letter,
RCBC formally applied for the issuance of a partial award ordering BDO to pay its share in the
advance costs.

Mr. Secomb’s article, "Awards and Orders Dealing With the Advance on Costs in ICC Arbitration:
Theoretical Questions and Practical Problems" specifically dealt with the situation when one of the
95 

parties to international commercial arbitration refuses to pay its share on the advance on costs. After
a brief discussion of the provisions of ICC Rules dealing with advance on costs, which did not
provide for issuance of a partial award to compel payment by the defaulting party, the author stated:

4. As we can see, the Rules have certain mechanisms to deal with defaulting parties. Occasionally,
however, parties have sought to use other methods to tackle the problem of a party refusing to pay
its part of the advance on costs. These have included seeking an order or award from the arbitral
tribunal condemning the defaulting party to pay its share of the advance on costs.  Such applications
1âwphi1

are the subject of this article.

96

By furnishing the parties with a copy of this article, Chairman Barker practically armed RCBC with
supporting legal arguments under the "contractual approach" discussed by Secomb. True enough,
RCBC in its Application for Reimbursement of Advance Costs Paid utilized said approach as it
singularly focused on Article 30(3) of the ICC Rules and fiercely argued that BDO was contractually
97 

bound to share in the advance costs fixed by the ICC. But whether under the "contractual approach"
98 

or "provisional approach" (an application must be treated as an interim measure of protection under
Article 23 [1] rather than enforcement of a contractual obligation), both treated in the Secomb article,
RCBC succeeded in availing of a remedy which was not expressly allowed by the Rules but in
practice has been resorted to by parties in international commercial arbitration proceedings. It may
also be mentioned that the author, Matthew Secomb, is a member of the ICC Secretariat and the
"Counsel in charge of the file", as in fact he signed some early communications on behalf of the ICC
Secretariat pertaining to the advance costs fixed by the ICC. This bolstered the impression that
99 

Chairman Barker was predisposed to grant relief to RCBC by issuing a partial award.
Indeed, fairness dictates that Chairman Barker refrainfrom suggesting to or directing RCBC towards
a course of action to advance the latter’s cause, by providing it with legal arguments contained in an
article written by a lawyer who serves at the ICC Secretariat and was involved or had participation --
insofar as the actions or recommendations of the ICC – in the case. Though done purportedly to
assist both parties, Chairman Barker’s act clearly violated Article 15 of the ICC Rules declaring that
"[i]n all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party has a
reasonable opportunity to present its case." Having pre-judged the matter in dispute, Chairman
Barker had lost his objectivity in the issuance of the Second Partial Award.

In fine, we hold that the CA did not err in concluding that the article ultimately favored RCBC as it
reflected in advance the disposition of the Arbitral Tribunal, as well as "signalled a preconceived
course of action that the relief prayed for by RCBC will be granted." This conclusion is further
confirmed by the Arbitral Tribunal’s pronouncements in its Second Partial Award which not only
adopted the "contractual approach" but even cited Secomb’s article along with other references,
thus:

6.1 It appears to the Tribunal that the issue posed by this application is essentially a contractual one.
xxx

xxxx

6.5 Matthew Secomb, considered these points in the article in 14 ICC Bulletin No. 1 (2003) which
was sent to the parties. At Para. 19, the learned author quoted from an ICC Tribunal (Case No.
11330) as follows:

"The Arbitral Tribunal concludes that the partiesin arbitrations conducted under the ICC Rules have
a mutually binding obligation to pay the advance on costs as determined by the ICC Court, based on
Article 30-3 ICC Rules which – by reference – forms part of the parties’ agreement to arbitration
under such Rules." 100

The Court, however, must clarify that the merits of the parties’ arguments as to the propriety of the
issuance of the Second Partial Award are not in issue here. Courts are generally without power to
amend or overrule merely because of disagreement with matters of law or facts determined by the
arbitrators. They will not review the findings of law and fact contained in an award, and will not
undertake to substitute their judgment for that of the arbitrators. A contrary rule would make an
arbitration award the commencement, not the end, of litigation. It is the finding of evident partiality
101 

which constitutes legal ground for vacating the Second Partial Award and not the Arbitration
Tribunal’s application of the ICC Rules adopting the "contractual approach" tackled in Secomb’s
article.

Alternative dispute resolution methods or ADRs – like arbitration, mediation, negotiation and
conciliation – are encouraged by this Court. By enabling 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 relationship. Institutionalization of ADR was envisioned as "an
102 

important means to achieve speedy and impartial justice and declog court dockets." The most
103 

important feature of arbitration, and indeed, the key to its success, is the public’s confidence and
trust in the integrity of the process. For this reason, the law authorizes vacating an arbitral award
104 

when there is evident partiality in the arbitrators.

Injunction Against Execution Of Arbitral Award

Before an injunctive writ can be issued, it is essential that the following requisites are present: (1)
there must be a right inesse or the existence of a right to be protected; and (2) the act against which
injunction to be directed is a violation of such right. The onus probandi is on movant to show that
there exists a right to be protected, which is directly threatened by the act sought to be enjoined.
Further, there must be a showing that the invasion of the right is material and substantial and that
there is an urgent and paramount necessity for the writ to prevent a serious damage. 105

Rule 19.22 of the Special ADR Rules states:

Rule 19.22. Effect of appeal.—The appeal shall not stay the award, judgment, final order or
resolution sought to be reviewed unless the Court of Appeals directs otherwise upon such terms as it
may deem just.

We find no reversible error or grave abuse of discretion in the CA’s denial of the application for stay
order or TRO upon its finding that BDO failed to establish the existence of a clear legal right to enjoin
execution of the Final Award confirmed by the Makati City RTC, Branch 148, pending resolution of
its appeal.It would be premature to address on the merits the issues raised by BDO in the present
petition considering that the CA still has to decide on the validity of said court's orders confirming the
Final Award. But more important, since BOO had already paid ₱637,941,185.55 m manager's check,
albeit under protest, and which payment was accepted by RCBC as full and complete satisfaction of
the writ of execution, there is no more act to be enjoined.

Settled is the rule that injunctive reliefs are preservative remedies for the protection of substantive
rights and interests. Injunction is not a cause of action in itself, but merely a provisional remedy, an
adjunct to a main suit. When the act sought to be enjoined has become fait accompli, the prayer for
provisional remedy should be denied.  106

Thus, the Court ruled in Gov. Looyuko that when the events sought to be prevented by injunction or
107 

prohibition have already happened, nothing more could be enjoined or prohibited. Indeed, it is a
universal principle of law that an injunction will not issue to restrain the performance of an act
already done. This is so for the simple reason that nothing more can be done in reference thereto. A
writ of injunction becomes moot and academic after the act sought to be enjoined has already been
consummated.

WHEREFORE, premises considered, the petition m G.R. No. 199238 is DENIED. The Resolution

dated September 13,2011 ofthe Court of Appeals in CA-G.R. SP No. 120888 is AFFIRMED.

The petition in G.R. No. 196171 is DENIED. The Decision dated December 23, 2010 of the Court of
Appeals in CA-G.R. SP No. 113525 is hereby AFFIRMED.

SO ORDERED.

G.R. No. 185582               February 29, 2012

TUNA PROCESSING, INC., Petitioner,

vs.
PHILIPPINE KINGFORD, INC., Respondent.

DECISION

PEREZ, J.:
Can a foreign corporation not licensed to do business in the Philippines, but which collects royalties
from entities in the Philippines, sue here to enforce a foreign arbitral award?

In this Petition for Review on Certiorari under Rule 45, petitioner Tuna Processing, Inc. (TPI), a
1 

foreign corporation not licensed to do business in the Philippines, prays that the Resolution dated 21
2 

November 2008 of the Regional Trial Court (RTC) of Makati City be declared void and the case be
remanded to the RTC for further proceedings. In the assailed Resolution, the RTC dismissed
petitioner’s Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral
Award against respondent Philippine Kingford, Inc. (Kingford), a corporation duly organized and
3 

existing under the laws of the Philippines, on the ground that petitioner lacked legal capacity to sue.
4  5

The Antecedents

On 14 January 2003, Kanemitsu Yamaoka (hereinafter referred to as the "licensor"), co-patentee of

U.S. Patent No. 5,484,619, Philippine Letters Patent No. 31138, and Indonesian Patent No.
ID0003911 (collectively referred to as the "Yamaoka Patent"), and five (5) Philippine tuna
6 

processors, namely, Angel Seafood Corporation, East Asia Fish Co., Inc., Mommy Gina Tuna
Resources, Santa Cruz Seafoods, Inc., and respondent Kingford (collectively referred to as the
"sponsors"/"licensees") entered into a Memorandum of Agreement (MOA), pertinent provisions of
7  8 

which read:

1. Background and objectives. The Licensor, co-owner of U.S.Patent No. 5,484,619,

Philippine Patent No. 31138, and Indonesian Patent No. ID0003911 xxx wishes to form an
alliance with Sponsors for purposes of enforcing his three aforementioned patents, granting
licenses under those patents, and collecting royalties.

The Sponsors wish to be licensed under the aforementioned patents in order to practice the
processes claimed in those patents in the United States, the Philippines, and Indonesia,
enforce those patents and collect royalties in conjunction with Licensor.

xxx

4. Establishment of Tuna Processors, Inc. The parties hereto agree to the establishment

of Tuna Processors, Inc. ("TPI"), a corporation established in the State of California, in order
to implement the objectives of this Agreement.

5. Bank account. TPI shall open and maintain bank accounts in the United States, which will
be used exclusively to deposit funds that it will collect and to disburse cash it will be
obligated to spend in connection with the implementation of this Agreement.

6. Ownership of TPI. TPI shall be owned by the Sponsors and Licensor. Licensor shall be
assigned one share of TPI for the purpose of being elected as member of the board of
directors. The remaining shares of TPI shall be held by the Sponsors according to their
respective equity shares. 9

xxx

The parties likewise executed a Supplemental Memorandum of Agreement dated 15 January 2003
10 

and an Agreement to Amend Memorandum of Agreement dated 14 July 2003.

11 
Due to a series of events not mentioned in the petition, the licensees, including respondent Kingford,
withdrew from petitioner TPI and correspondingly reneged on their obligations. Petitioner submitted
12 

the dispute for arbitration before the International Centre for Dispute Resolution in the State of
California, United States and won the case against respondent. Pertinent portions of the award
13 

read:

13.1 Within thirty (30) days from the date of transmittal of this Award to the Parties, pursuant to the
terms of this award, the total sum to be paid by RESPONDENT KINGFORD to CLAIMANT TPI, is
the sum of ONE MILLION SEVEN HUNDRED FIFTY THOUSAND EIGHT HUNDRED FORTY SIX
DOLLARS AND TEN CENTS ($1,750,846.10).

(A) For breach of the MOA by not paying past due assessments, RESPONDENT

KINGFORD shall pay CLAIMANT the total sum of TWO HUNDRED TWENTY NINE
THOUSAND THREE HUNDRED AND FIFTY FIVE DOLLARS AND NINETY CENTS
($229,355.90) which is 20% of MOA assessments since September 1, 2005[;]

(B) For breach of the MOA in failing to cooperate with CLAIMANT TPI in fulfilling the

objectives of the MOA, RESPONDENT KINGFORD shall pay CLAIMANT the total sum
of TWO HUNDRED SEVENTY ONE THOUSAND FOUR HUNDRED NINETY DOLLARS
AND TWENTY CENTS ($271,490.20)[;] and 14 

(C) For violation of THE LANHAM ACT and infringement of the YAMAOKA 619 PATENT,

RESPONDENT KINGFORD shall pay CLAIMANT the total sum of ONE MILLION TWO
HUNDRED FIFTY THOUSAND DOLLARS AND NO CENTS ($1,250,000.00). xxx

xxx 15

To enforce the award, petitioner TPI filed on 10 October 2007 a Petition for Confirmation,
Recognition, and Enforcement of Foreign Arbitral Award before the RTC of Makati City. The petition
was raffled to Branch 150 presided by Judge Elmo M. Alameda.

At Branch 150, respondent Kingford filed a Motion to Dismiss. After the court denied the motion for
16 

lack of merit, respondent sought for the inhibition of Judge Alameda and moved for the
17 

reconsideration of the order denying the motion. Judge Alameda inhibited himself notwithstanding
18 

"[t]he unfounded allegations and unsubstantiated assertions in the motion." Judge Cedrick O. Ruiz
19 

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. 20

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

The core issue in this case is whether or not the court a quo was correct in so dismissing the petition
on the ground of petitioner’s lack of legal capacity to sue.

Our Ruling

The petition is impressed with merit.

The Corporation Code of the Philippines expressly provides:

Sec. 133. Doing business without a license. - No foreign corporation transacting business in the
Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene
in any action, suit or proceeding in any court or administrative agency of the Philippines; but such
corporation may be sued or proceeded against before Philippine courts or administrative tribunals on
any valid cause of action recognized under Philippine laws.

It is pursuant to the aforequoted provision that the court a quo dismissed the petition. Thus:

Herein plaintiff TPI’s "Petition, etc." acknowledges that it "is a foreign corporation established in the
State of California" and "was given the exclusive right to license or sublicense the Yamaoka Patent"
and "was assigned the exclusive right to enforce the said patent and collect corresponding royalties"
in the Philippines. TPI likewise admits that it does not have a license to do business in the
Philippines.

There is no doubt, therefore, in the mind of this Court that TPI has been doing business in the
Philippines, but sans a license to do so issued by the concerned government agency of the Republic
of the Philippines, when it collected royalties from "five (5) Philippine tuna processors[,] namely[,]
Angel Seafood Corporation, East Asia Fish Co., Inc., Mommy Gina Tuna Resources, Santa Cruz
Seafoods, Inc. and respondent Philippine Kingford, Inc." This being the real situation, TPI cannot be
permitted to maintain or intervene in any action, suit or proceedings in any court or administrative
agency of the Philippines." A priori, the "Petition, etc." extant of the plaintiff TPI should be dismissed
for it does not have the legal personality to sue in the Philippines.
21

The petitioner counters, however, that it is entitled to seek for the recognition and enforcement of the
subject foreign arbitral award in accordance with Republic Act No. 9285 (Alternative Dispute
Resolution Act of 2004), the Convention on the Recognition and Enforcement of Foreign Arbitral
22 

Awards drafted during the United Nations Conference on International Commercial Arbitration in
1958 (New York Convention), and the UNCITRAL Model Law on International Commercial
Arbitration (Model Law), as none of these specifically requires that the party seeking for the
23 

enforcement should have legal capacity to sue. It anchors its argument on the following:

In the present case, enforcement has been effectively refused on a ground not found in 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. 24

Simply put, how do we reconcile the provisions of the Corporation Code of the Philippines on one
hand, and the Alternative Dispute Resolution Act of 2004, the New York Convention and the Model
Law on the other?

In several cases, this Court had the occasion to discuss the nature and applicability of
the Corporation Code of the Philippines, a general law, viz-a-viz other special laws. Thus, in Koruga
v. Arcenas, Jr., this Court rejected the application of the Corporation Code and applied the New
25 

Central Bank Act. It ratiocinated:

Koruga’s invocation of the provisions of the Corporation Code is misplaced. In an earlier case with
similar antecedents, we ruled that:
"The Corporation Code, however, is a general law applying to all types of corporations, while the
New Central Bank Act regulates specifically banks and other financial institutions, including the
dissolution and liquidation thereof. As between a general and special law, the latter shall prevail
– generalia specialibus non derogant." (Emphasis supplied) 26

Further, in the recent case of Hacienda Luisita, Incorporated v. Presidential Agrarian Reform
Council, this Court held:
27 

Without doubt, the Corporation Code is the general law providing for the formation, organization and
regulation of private corporations. On the other hand, RA 6657 is the special law on agrarian reform.
As between a general and special law, the latter shall prevail—generalia specialibus non derogant. 28

Following the same principle, 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 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
29 

for recognition and enforcement of the arbitral award. 30

Inasmuch as the Alternative Dispute Resolution Act of 2004, a municipal law, applies in the instant
petition, we do not see the need to discuss compliance with international obligations under the New
York Convention and the Model Law. After all, both already form part of the law.

In particular, the Alternative Dispute Resolution Act of 2004 incorporated the New York

Convention in the Act by specifically providing:

SEC. 42. Application of the New York Convention. - The New York Convention shall govern the
recognition and enforcement of arbitral awards covered by the said Convention.

xxx

SEC. 45. Rejection of a Foreign Arbitral Award. - A party to a foreign arbitration proceeding may
oppose an application for recognition and enforcement of the arbitral award in accordance with the
procedural rules to be promulgated by the Supreme Court only on those grounds enumerated under
Article V of the New York Convention. Any other ground raised shall be disregarded by the regional
trial court.

It also expressly adopted the Model Law, to wit:

Sec. 19. Adoption of the Model Law on International Commercial Arbitration. International

commercial arbitration shall be governed by the Model Law on International Commercial Arbitration
(the "Model Law") adopted by the United Nations Commission on International Trade Law on June
21, 1985 xxx."

Now, does a foreign corporation not licensed to do business in the Philippines have legal capacity to
sue under the provisions of the Alternative Dispute Resolution Act of 2004? We answer in the
affirmative.
Sec. 45 of the Alternative Dispute Resolution Act of 2004 provides that the opposing party in an
application for recognition and enforcement of the arbitral award may raise only those grounds that
were enumerated under Article V of the New York Convention, to wit:

Article V

1. Recognition and enforcement of the award may be refused, at the request of the party
against whom it is invoked, only if that party furnishes to the competent authority where the
recognition and enforcement is sought, proof that:

(a) The parties to the agreement referred to in article II were, under the law
applicable to them, under some incapacity, or the said agreement is not valid under
the law to which the parties have subjected it or, failing any indication thereon, under
the law of the country where the award was made; or

(b) The party against whom the award is invoked was not given proper notice of the
appointment of the arbitrator or of the arbitration proceedings or was otherwise
unable to present his case; or

(c) The award deals with a difference not contemplated by or not falling within the
terms of the submission to arbitration, or it contains decisions on matters beyond the
scope of the submission to arbitration, provided that, if the decisions on matters
submitted to arbitration can be separated from those not so submitted, that part of
the award which contains decisions on matters submitted to arbitration may be
recognized and enforced; or

(d) The composition of the arbitral authority or the arbitral procedure was not in
accordance with the agreement of the parties, or, failing such agreement, was not in
accordance with the law of the country where the arbitration took place; or

(e) The award has not yet become binding on the parties, or has been set aside or
suspended by a competent authority of the country in which, or under the law of
which, that award was made.

2. Recognition and enforcement of an arbitral award may also be refused if the competent
authority in the country where recognition and enforcement is sought finds that:

(a) The subject matter of the difference is not capable of settlement by arbitration
under the law of that country; or

(b) The recognition or enforcement of the award would be contrary to the public
policy of that country.

Clearly, not one of these exclusive grounds touched on the capacity to sue of the party seeking the
recognition and enforcement of the award.

Pertinent provisions of the Special Rules of Court on Alternative Dispute Resolution, which was
31 

promulgated by the Supreme Court, likewise support this position.

Rule 13.1 of the Special Rules provides that "[a]ny party to a foreign arbitration may petition the
court to recognize and enforce a foreign arbitral award." The contents of such petition are
enumerated in Rule 13.5. Capacity to sue is not included. Oppositely, in the Rule on local arbitral
32 

awards or arbitrations in instances where "the place of arbitration is in the Philippines," it is

33 

specifically required that a petition "to determine any question concerning the existence, validity and
enforceability of such arbitration agreement" available to the parties before the commencement of
34 

arbitration and/or a petition for "judicial relief from the ruling of the arbitral tribunal on a preliminary
question upholding or declining its jurisdiction" after arbitration has already commenced should state
35 

"[t]he facts showing that the persons named as petitioner or respondent have legal capacity to sue or
be sued." 36

Indeed, it is in the best interest of justice that in the enforecement of a foreign arbitral award, we
deny availment by the losing party of the rule that bars foreign corporations not licensed to do
business in the Philippines from maintaining a suit in our courts. When a party enters into a contract
containing a foreign arbitration clause and, as in this case, in fact submits itself to arbitration, it
becomes bound by the contract, by the arbitration and by the result of arbitration, conceding thereby
the capacity of the other party to enter into the contract, participate in the arbitration and cause the
implementation of the result. Although not on all fours with the instant case, also worthy to consider
is the

wisdom of then Associate Justice Flerida Ruth P. Romero in her Dissenting Opinion in Asset
Privatization Trust v. Court of Appeals, to wit:
37 

xxx Arbitration, as an alternative mode of settlement, is gaining adherents in legal and judicial circles
here and abroad. If its tested mechanism can simply be ignored by an aggrieved party, one who, it
must be stressed, voluntarily and actively participated in the arbitration proceedings from the very
beginning, it will destroy the very essence of mutuality inherent in consensual contracts. 38

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
39 

seek recognition and enforcement of the award in Philippine court, since the Model Law prescribes
substantially identical exclusive grounds for refusing recognition or enforcement. 40

Premises considered, 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.

II

The remaining arguments of respondent Kingford are likewise unmeritorious.

First. There is no need to consider respondent’s contention that petitioner TPI improperly raised a
question of fact when it posited that its act of entering into a MOA should not be considered "doing
business" in the Philippines for the purpose of determining capacity to sue. We reiterate that the
foreign corporation’s capacity to sue in the Philippines is not material insofar as the recognition and
enforcement of a foreign arbitral award is concerned.
Second. Respondent cannot fault petitioner for not filing a motion for reconsideration of the assailed
Resolution dated 21 November 2008 dismissing the case. We have, time and again, ruled that the
prior filing of a motion for reconsideration is not required in certiorari under Rule 45.
41

Third. While we agree that petitioner failed to observe the principle of hierarchy of courts, which,
under ordinary circumstances, warrants the outright dismissal of the case, we opt to relax the rules
42 

following the pronouncement in Chua v. Ang, to wit: 43 

[I]t must be remembered that [the principle of hierarchy of courts] generally applies to cases
involving conflicting factual allegations. Cases which depend on disputed facts for decision cannot
be brought immediately before us as we are not triers of facts. A strict application of this rule may
44 

be excused when the reason behind the rule is not present in a case, as in the present case, where
the issues are not factual but purely legal.  In these types of questions, this Court has the ultimate
1âwphi1

say so that we merely abbreviate the review process if we, because of the unique circumstances of
a case, choose to hear and decide the legal issues outright. 45

Moreover, the novelty and the paramount importance of the issue herein raised should be seriously
considered. Surely, there is a need to take cognizance of the case not only to guide the bench and
46 

the bar, but if only to strengthen arbitration as a means of dispute resolution, and uphold the policy
of the State embodied in the Alternative Dispute Resolution Act of 2004, to wit:

Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State 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. Towards this end, the State shall encourage and actively promote the use
of Alternative Dispute Resolution (ADR) as an important means to achieve speedy and impartial
justice and declog court dockets. xxx

Fourth. As regards the issue on the validity and enforceability of the foreign arbitral award, we leave
its determination to the court a quo where its recognition and enforcement is being sought.

Fifth. Respondent claims that petitioner failed to furnish the court of origin a copy of the motion for
time to file petition for review on certiorari before the petition was filed with this Court. We, however,
47 

find petitioner’s reply in order. Thus:

26. Admittedly, reference to "Branch 67" in petitioner TPI’s "Motion for Time to File a Petition for
Review on Certiorari under Rule 45" is a typographical error. As correctly pointed out by respondent
Kingford, the order sought to be assailed originated from Regional Trial Court, Makati City, Branch
61.

27. xxx Upon confirmation with the Regional Trial Court, Makati City, Branch 61, a copy of petitioner
TPI’s motion was received by the Metropolitan Trial Court, Makati City, Branch 67. On 8 January
2009, the motion was forwarded to the Regional Trial Court, Makati City, Branch 61. 48

All considered, petitioner TPI, although a foreign corporation not licensed to do business in the
Philippines, is not, for that reason alone, precluded from filing the Petition for Confirmation,
Recognition, and Enforcement of Foreign Arbitral Award before a Philippine court.

WHEREFORE, the Resolution dated 21 November 2008 of the Regional Trial Court, Branch 61,
Makati City in Special Proceedings No. M-6533 is hereby REVERSED and SET ASIDE. The case
is REMANDED to Branch 61 for further proceedings.
SO ORDERED.

G.R. No. 169332             February 11, 2008

ABS-CBN BROADCASTING CORPORATION, petitioner,

vs.
WORLD INTERACTIVE NETWORK SYSTEMS (WINS) JAPAN CO., LTD., respondent.

DECISION

CORONA, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to set aside the
February 16, 2005 decision1 and August 16, 2005 resolution2 of the Court of Appeals (CA) in CA-
G.R. SP No. 81940.

On September 27, 1999, petitioner 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
Filipino Channel" (TFC) in Japan. By virtue thereof, petitioner undertook to transmit the TFC
programming signals to respondent which the latter received through its decoders and distributed to
its subscribers.

A 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 2002.3 Petitioner claimed that these were "unauthorized
insertions" constituting a material breach of their agreement. Consequently, on May 9,
2002,4 petitioner notified respondent of its intention to terminate the agreement effective June 10,
2002.

Thereafter, respondent filed an arbitration suit pursuant to the arbitration clause of its agreement
with petitioner. It contended that the airing of WINS WEEKLY was made with petitioner's prior
approval. It also alleged that petitioner only threatened to terminate their agreement because it
wanted to renegotiate the terms thereof to allow it to demand higher fees. Respondent also prayed
for damages for petitioner's alleged grant of an exclusive distribution license to another entity, NHK
(Japan Broadcasting Corporation).5

The parties appointed Professor Alfredo F. Tadiar to act as sole arbitrator. They stipulated on the
following issues in their terms of reference (TOR)6:

1. Was the broadcast of WINS WEEKLY by the claimant duly authorized by the respondent
[herein petitioner]?

2. Did such broadcast constitute a material breach of the agreement that is a ground for
termination of the agreement in accordance with Section 13 (a) thereof?

3. If so, was the breach seasonably cured under the same contractual provision of Section
13 (a)?
 4. Which party is entitled to the payment of damages they claim and to the other reliefs
prayed for?

xxx       xxx       xxx

The arbitrator found in favor of respondent.7 He held that petitioner gave its approval to respondent
for the airing of WINS WEEKLY as shown by a series of written exchanges between the parties. He
also ruled that, had there really been a material breach of the agreement, petitioner should have
terminated the same instead of sending a mere notice to terminate said agreement. The arbitrator
found that petitioner threatened to terminate the agreement due to its desire to compel respondent to
re-negotiate the terms thereof for higher fees. He further stated that even if respondent committed a
breach of the agreement, the same was seasonably cured. He then allowed respondent to recover
temperate damages, attorney's fees and one-half of the amount it paid as arbitrator's fee.

Petitioner filed in the CA a petition for review under Rule 43 of the Rules of Court or, in the
alternative, a petition for certiorari under Rule 65 of the same Rules, with application for temporary
restraining order and writ of preliminary injunction. It was docketed as CA-G.R. SP No. 81940. It
alleged serious errors of fact and law and/or grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of the arbitrator.

Respondent, on the other hand, filed a petition for confirmation of arbitral award before the Regional
Trial Court (RTC) of Quezon City, Branch 93, docketed as Civil Case No. Q-04-51822.

Consequently, petitioner filed a supplemental petition in the CA seeking to enjoin the RTC of Quezon
City from further proceeding with the hearing of respondent's petition for confirmation of arbitral
award. After the petition was admitted by the appellate court, the RTC of Quezon City issued an
order holding in abeyance any further action on respondent's petition as the assailed decision of the
arbitrator had already become the subject of an appeal in the CA. Respondent filed a motion for
reconsideration but no resolution has been issued by the lower court to date.8

On February 16, 2005, the CA rendered the assailed decision dismissing ABS-CBN’s petition for
lack of jurisdiction. It stated that as the TOR itself provided that the arbitrator's decision shall be final
and unappealable and that no motion for reconsideration shall be filed, then the petition for review
must fail. It ruled that it is the RTC which has jurisdiction over questions relating to arbitration. It held
that the only instance it can exercise jurisdiction over an arbitral award is an appeal from the trial
court's decision confirming, vacating or modifying the arbitral award. It further stated that a petition
for certiorari under Rule 65 of the Rules of Court is proper in arbitration cases only if the courts
refuse or neglect to inquire into the facts of an arbitrator's award. The dispositive portion of the CA
decision read:

WHEREFORE, the instant petition is hereby DISMISSED for lack of jurisdiction. The

application for a writ of injunction and temporary restraining order is likewise DENIED. The
Regional Trial Court of Quezon City Branch 93 is directed to proceed with the trial for the
Petition for Confirmation of Arbitral Award.

SO ORDERED.

Petitioner moved for reconsideration. The same was denied. Hence, this petition.

Petitioner contends that the CA, in effect, ruled that: (a) it should have first filed a petition to vacate
the award in the RTC and only in case of denial could it elevate the matter to the CA via a petition for
review under Rule 43 and (b) the assailed decision implied that an aggrieved party to an arbitral
award does not have the option of directly filing a petition for review under Rule 43 or a petition for
certiorari under Rule 65 with the CA even if the issues raised pertain to errors of fact and law or
grave abuse of discretion, as the case may be, and not dependent upon such grounds as
enumerated under Section 24 (petition to vacate an arbitral award) of RA 876 (the Arbitration Law).
Petitioner alleged serious error on the part of the CA.

The issue before us is whether or not an 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 an arbitral
award enumerated under RA 876.

RA 876 itself mandates that it is the Court of First Instance, now the RTC, which has jurisdiction over
questions relating to arbitration,9 such as a petition to vacate an arbitral award.

Section 24 of RA 876 provides for the specific grounds for a petition to vacate an award made by an
arbitrator:

Sec. 24. Grounds for vacating award. - In any one of the following cases, the court must
make an order vacating the award upon the petition of any party to the controversy when
such party proves affirmatively that in the arbitration proceedings:

(a) The award was procured by corruption, fraud, or other undue means; or

(b) That there was evident partiality or corruption in the arbitrators or any of them; or

(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon
sufficient cause shown, or in refusing to hear evidence pertinent and material to the
controversy; that one or more of the arbitrators was disqualified to act as such under section
nine hereof, and willfully refrained from disclosing such disqualifications or of any other
misbehavior by which the rights of any party have been materially prejudiced; or

(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a
mutual, final and definite award upon the subject matter submitted to them was not made.

Based on the foregoing provisions, the law itself clearly provides that the RTC must issue an order
vacating an arbitral award only "in any one of the . . . cases" enumerated therein. Under the legal
maxim in statutory construction expressio unius est exclusio alterius, the explicit mention of one
thing in a statute means the elimination of others not specifically mentioned. As RA 876 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
for 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.

Adamson v. Court of Appeals10 gave ample warning that a petition to vacate filed in the RTC which is
not based on the grounds enumerated in Section 24 of RA 876 should be dismissed. In that case,
the trial court vacated the arbitral award seemingly based on grounds included in Section 24 of RA
876 but a closer reading thereof revealed otherwise. On appeal, the CA reversed the decision of the
trial court and affirmed the arbitral award. In affirming the CA, we held:
 The Court of Appeals, in reversing the trial court's decision held that the nullification of the
decision of the Arbitration Committee was not based on the grounds provided by the
Arbitration Law and that xxx private respondents (petitioners herein) have failed to
substantiate with any evidence their claim of partiality. Significantly, even as respondent
judge ruled against the arbitrator's award, he could not find fault with their impartiality and
integrity. Evidently, the nullification of the award rendered at the case at bar was not
made on the basis of any of the grounds provided by law.

xxx       xxx       xxx

It is clear, therefore, that the award was vacated not because of evident partiality of
the arbitrators but because the latter interpreted the contract in a way which was not
favorable to herein petitioners and because it considered that herein private respondents, by
submitting the controversy to arbitration, was seeking to renege on its obligations under the
contract.

xxx       xxx       xxx

It is clear then that the Court of Appeals reversed the trial court not because the latter
reviewed the arbitration award involved herein, but because the respondent appellate
court found that the trial court had no legal basis for vacating the award. (Emphasis
supplied).

In cases not falling under any of the aforementioned grounds to vacate an award, the Court has
already made several pronouncements that a petition for review under Rule 43 or a petition for
certiorari under Rule 65 may be availed of in the CA. Which one would depend on the grounds relied
upon by petitioner.

In Luzon Development Bank v. Association of Luzon Development Bank Employees,11 the Court held
that a voluntary arbitrator is properly classified as a "quasi-judicial instrumentality" and is, thus,
within the ambit of Section 9 (3) of the Judiciary Reorganization Act, as amended. Under this
section, the Court of Appeals shall exercise:

xxx       xxx       xxx

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or
commissions, including the Securities and Exchange Commission, the Employees’
Compensation Commission and the Civil Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor
Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of
this Act and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948. (Emphasis supplied)

As such, decisions handed down by voluntary arbitrators fall within the exclusive appellate
jurisdiction of the CA. This decision was taken into consideration in approving Section 1 of Rule 43
of the Rules of Court.12 Thus:

SECTION 1. Scope. - This Rule shall apply to appeals from judgments or final orders of the
Court of Tax Appeals and from awards, judgments, final orders or resolutions of or
authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among
 these agencies are the Civil Service Commission, Central Board of Assessment Appeals,
Securities and Exchange Commission, Office of the President, Land Registration Authority,
Social Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and
Technology Transfer, National Electrification Administration, Energy Regulatory Board,
National Telecommunications Commission, Department of Agrarian Reform under Republic
Act Number 6657, Government Service Insurance System, Employees Compensation
Commission, Agricultural Inventions Board, Insurance Commission, Philippine Atomic
Energy Commission, Board of Investments, Construction Industry Arbitration Commission,
and voluntary arbitrators authorized by law. (Emphasis supplied)

This rule was cited in Sevilla Trading Company v. Semana,13 Manila Midtown Hotel v.
Borromeo,14 and Nippon Paint Employees Union-Olalia v. Court of Appeals. 15 These cases held that
the proper remedy from the adverse decision of a voluntary arbitrator, if errors of fact and/or law are
raised, is a petition for review under Rule 43 of the Rules of Court. Thus, petitioner's contention that
it may avail of a petition for review under Rule 43 under the circumstances of this case is correct.

As to petitioner's arguments that a petition for certiorari under Rule 65 may also be resorted to, we
hold the same to be in accordance with the Constitution and jurisprudence.

Section 1 of Article VIII of the 1987 Constitution provides that:

SECTION 1. The judicial power shall be vested in one Supreme Court and in such lower
courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine whether
or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government. (Emphasis
supplied)

As may be gleaned from the above stated provision, it is well within the power and jurisdiction of the
Court to inquire whether any instrumentality of the Government, such as a voluntary arbitrator, has
gravely abused its discretion in the exercise of its functions and prerogatives. Any agreement
stipulating that "the decision of the arbitrator shall be final and unappealable" and "that no further
judicial recourse if either party disagrees with the whole or any part of the arbitrator's award may be
availed of" cannot be held to preclude in proper cases the power of judicial review which is inherent
in courts.16 We will not hesitate to review a voluntary arbitrator's award where there is a showing of
grave abuse of authority or discretion and such is properly raised in a petition for certiorari17 and
there is no appeal, nor any plain, speedy remedy in the course of law.18

Significantly, Insular Savings Bank v. Far East Bank and Trust Company 19 definitively outlined
several judicial remedies an aggrieved party to an arbitral award may undertake:

(1) a petition in the proper RTC to issue an order to vacate the award on the grounds
provided for in Section 24 of RA 876;

(2) a petition for review in the CA under Rule 43 of the Rules of Court on questions of fact, of
law, or mixed questions of fact and law; and
 (3) a petition for certiorari under Rule 65 of the Rules of Court should the arbitrator have
acted without or in excess of his jurisdiction or with grave abuse of discretion amounting to
lack or excess of jurisdiction.

Nevertheless, although petitioner’s position on the judicial remedies available to it was correct, we
sustain the dismissal of its petition by the CA. The remedy petitioner availed of, entitled
"alternative petition for review under Rule 43 or petition for certiorari under Rule 65," was wrong.

Time and again, we have ruled that the remedies of appeal and certiorari are mutually exclusive and
not alternative or successive.20

Proper issues that may be raised in a petition for review under Rule 43 pertain to errors of fact, law
or mixed questions of fact and law.21 While a petition for certiorari under Rule 65 should only limit
itself to errors of jurisdiction, that is, grave abuse of discretion amounting to a lack or excess of
jurisdiction.22 Moreover, it cannot be availed of where appeal is the proper remedy or as a substitute
for a lapsed appeal.23

In the case at bar, the questions raised by petitioner in its alternative petition before the CA were the
following:

A. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY

ABUSED HIS DISCRETION IN RULING THAT THE BROADCAST OF "WINS WEEKLY"
WAS DULY AUTHORIZED BY ABS-CBN.

B. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY

ABUSED HIS DISCRETION IN RULING THAT THE UNAUTHORIZED BROADCAST DID
NOT CONSTITUTE MATERIAL BREACH OF THE AGREEMENT.

C. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY

ABUSED HIS DISCRETION IN RULING THAT WINS SEASONABLY CURED THE
BREACH.

D. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY

ABUSED HIS DISCRETION IN RULING THAT TEMPERATE DAMAGES IN THE AMOUNT
OF P1,166,955.00 MAY BE AWARDED TO WINS.

E. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY

ABUSED HIS DISCRETION IN AWARDING ATTORNEY'S FEES IN THE UNREASONABLE
AMOUNT AND UNCONSCIONABLE AMOUNT OF P850,000.00.

F. THE ERROR COMMITTED BY THE SOLE ARBITRATOR IS NOT A SIMPLE ERROR OF

JUDGMENT OR ABUSE OF DISCRETION. IT IS GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION.

A careful reading of the assigned errors reveals that the real issues calling for the CA's resolution
were less the alleged grave abuse of discretion exercised by the arbitrator and more about the
arbitrator’s appreciation of the issues and evidence presented by the parties. Therefore, the issues
clearly fall under the classification of errors of fact and law — questions which may be passed upon
by the CA via a petition for review under Rule 43. Petitioner cleverly crafted its assignment of errors
in such a way as to straddle both judicial remedies, that is, by alleging serious errors of fact and law
(in which case a petition for review under Rule 43 would be proper) and grave abuse of discretion
(because of which a petition for certiorari under Rule 65 would be permissible).

It must be emphasized that every lawyer should be familiar with the distinctions between the two
remedies for it is not the duty of the courts to determine under which rule the petition should
fall.24 Petitioner's ploy was fatal to its cause. An appeal taken either to this Court or the CA by the
wrong or inappropriate mode shall be dismissed.25 Thus, the alternative petition filed in the CA,
being an inappropriate mode of appeal, should have been dismissed outright by the CA.

WHEREFORE, the petition is hereby DENIED. The February 16, 2005 decision and August 16, 2005
resolution of the Court of Appeals in CA-G.R. SP No. 81940 directing the Regional Trial Court of
Quezon City, Branch 93 to proceed with the trial of the petition for confirmation of arbitral award
is AFFIRMED.

Costs against petitioner.

SO ORDERED.

[ G.R. No. 235878, February 26, 2020 ]

BUSAN UNIVERSAL RAIL, INC., PETITIONER, VS. DEPARTMENT OF TRANSPORTATION-

METRO RAIL TRANSIT 3, RESPONDENT.

DECISION

INTING, J.:

This is a Petition for Review on Certiorari under Rule 45 with Application for the Issuance of a Status
Quo Order and/or Preliminary Mandatory Injunction1 assailing the Orders dated October 13,
20172 and December 11, 2017,3 respectively, of Branch 105, Regional Trial Court (RTC), Quezon
City in R-QZN-17-12023-CV. The assailed Orders denied the petition for the issuance of interim
measures of protection with prayer for the issuance of a temporary restraining order filed by Busan
Universal Rail, Inc. (petitioner) against Department of Transportation (DOTr)-Metro Rail Transit
(MRT) 3 (respondent).

The Antecedents

As a result of a negotiated procurement under Republic Act No. (RA) 9184,4 respondent and the
Joint Venture composed of Busan Transportation Corporation, Edison Development and
Construction, Tramat Mercantile, Inc., TMICorp, Inc., and Castan Corporation entered into a
contract5 for the Department of Transportation and Communications (DOTC)-MRT3 System
Maintenance Provider, 43 light rail vehicles (LRVs) General Overhaul and Total Replacement of the
Signaling System (MRT3 Contract). The Joint Venture was incorporated as a special purpose
company known as BURI.

The total amount of the MRT3 Contract is P3,809,128,888.00 broken down into four packages:

1.) Package 1 is for the maintenance of the MRT3 system with a cost of P1,962,000,000.00
to be paid in fixed monthly sums. Under this package, petitioner is to deliver a certain
number of available trains for the use of MRT3's passengers during specific periods;
 2.) Package 2 is for the general overhauling of 43 units of LRVs with a cost of
P907,369,561.81. Under Package 2, petitioner is to perform and complete all works required
within 36 months from the date of issuance of Notice to Proceed;

3.) Package 3 is for the total replacement of the MRT3 signaling system with a cost of
P888,000,000.00; and

4.) Package 4 is for additional maintenance works with a cost of P51,759,326.19.

After commencing with the performance of its obligations under Package 1, petitioner sent to
respondent Billing Nos. 1 to 8.6 Respondent paid petitioner the corresponding monthly payments.
On October 26, 2016, petitioner sent to respondent Billing No. 9.7 However, in a
Memorandum8 dated November 17, 2016, DOTr Undersecretary for Railways Cesar B. Chavez
(Usec. Chavez) required petitioner to submit additional supporting documents and directed the
withholding of certain amounts. Petitioner replied through a letter and gave its explanation, but Billing
No. 9 was still not settled.

In a letter9 dated April 19, 2017, Usec. Chavez directed petitioner to explain why the MRT3 Contract
should not be terminated with the happening of a series of serious incidents.

As of the date of the petition, Billing Nos. 9 to 18 remained unpaid.

On the part of petitioner, it responded through a letter10 dated April 27, 2017, and, among other
things, it invoked Subsection No. 20 on Settlement of Disputes under Section III, General Conditions
of the Contract (GCC) and requested for a meeting for a mutual consultation.

In another letter11 dated April 19, 2017, Usec. Chavez again directed petitioner to explain why the
MRT3 Contract should not be terminated saying that petitioner was bound to have delivered 17
overhauled LRVs to MRT3, however, not a single one was turned over. Petitioner responded, and
again invoked Subsection No. 20 under Section III of the GCC, requesting for a mutual consultation.
Through another letter12 dated August 10, 2017, petitioner requested for a meeting with respondent.
As none of the request for mutual consultation was acceded to, petitioner notified respondent of its
intention to commence arbitration proceedings.13 Petitioner thereafter sent respondent a Notice of
Arbitration14 formally demanding arbitration.

On October 6, 2017, petitioner instituted before the RTC a Petition for the Issuance of Interim
Measures of Protection, with Prayer for the Issuance of a Temporary Order of Protection under the
Special ADR Rules,15 essentially seeking to maintain the status quo and enjoin respondent from
terminating the MRT3 Contract.

In an Order16 dated October 13, 2017, the RTC denied the petition. It noted the manifestation of
petitioner's lawyer that the case had already been referred to the Philippine Dispute Resolution
Center, Inc. for arbitration.

Subsequently, respondent issued a Notice to Terminate17 the MRT3 Contract dated October 16,
2017.

Petitioner moved for a partial reconsideration (omnibus motion)18 of the RTC Order dated October
13, 2017.
Meanwhile, respondent issued a Decision19 dated November 3, 2017 terminating the MRT3
Contract between respondent and petitioner.

On December 11, 2017, the RTC denied petitioner's omnibus motion.20 Citing RA 8975, entitled "An
Act to Ensure the Expeditious Implementation and Completion of Government Infrastructure Projects
by Prohibiting Lower Courts from Issuing Temporary Restraining Orders, Preliminary Injunctions or
Preliminary Mandatory Injunctions, Providing Penalties for Violations Thereof, and for Other
Purposes," the RTC held that it has no jurisdiction over the petition. It ruled that the issues raised in
the petition are arbitrable.

Hence, this petition with the following assignment of errors:

THE TRIAL COURT GRAVELY ERRED IN DISMISSING THE PETITION FOR THE ISSUANCE OF
INTERIM MEASURES OF PROTEC[T]ION AGAINST RESPONDENT IN LIGHT OF THE
ARBITRATION CLAUSE IN THE MRT3 CONTRACT.21

THE TRIAL COURT GRAVELY ERRED IN RULING THAT THE ACTS SOUGHT TO BE
COMPELLED AND/OR ENJOINED ARE FAIT ACCOMPLI.22

THE VALID AND BINDING ARBITRATION CLAUSE LEGALLY PREVENTS THE RESPONDENT
FROM UNILATERALLY TERMINATING, RESCINDING AND/OR CANCELLING THE MRT3
CONTRACT.23

The Courts Ruling

The petition is bereft of merit.

Essentially, the only issue that is proper for resolution is whether or not the RTC has jurisdiction to
issue the protection and restraining order sought by petitioner against respondent.

Petitioner argues that the RTC has authority to issue interim measures of protection in cases
involving disputes that are proper for arbitration by virtue of RA 9184. The prohibitory provision
under Section 3(d) of RA 8975 is not applicable inasmuch as the arbitration clause contained in the
GCC, which is an integral part of the MRT3 Contract, is anchored on RA 9184.

Petitioner theorizes in this wise:

10.8 RA 9184. its IRR, and the MRT3 Contract explicitly mandate that any and all disputes arising
therefrom shall be settled through arbitration proceedings governed by RA 9285. RA 9285, on the
other hand, provides for the remedy of interim protection that may be obtained by a party either from
the courts or the arbitral tribunal upon the latter's constitution.

10.9 The law, therefore, expressly grants the petitioner, and allows the respondent to be subjected
to, Interim Measures of Protection as an incident of the binding Arbitration Clause in the MRT3
Contract. Otherwise stated, the Interim Measures of Protection prayed for is but an implement of the
arbitration proceedings; which, by law and by contract, is the mandatory mode of dispute settlement
between the parties.24

Countering petitioner's argument, respondent contends that RA 8975 prohibits lower courts from
issuing temporary restraining orders, preliminary injunctions or preliminary mandatory injunctions
against government infrastructure projects, such as the MRT3 Contract. Respondent cites OCA
Circular No. 38-1425 and the case of Department of Foreign Affairs, et al. v. Hon. Judge. Falcon, et
al.26 (Falcon), and asserts that the petition should be dismissed to avoid prejudgment on the merits
as the issues raised by petitioner are the same matters that the latter seeks to discuss in an
arbitration proceeding.

The parties actually agree that the dispute between them arising from the MRT3 Contract should be
referred to arbitration. Petitioner cites Subsection No. 20 of the GCC27 which reads:

20. Settlement of Disputes

20.1 If any dispute or difference of any kind whatsoever shall arise between the Procuring Entity and
the Supplier in connection with or arising out of this Contract, the parties shall make every effort to
resolve amicably such dispute or difference by mutual consultation.

20.2 If after thirty (30) days, the parties have failed to resolve their dispute or difference by such
mutual consultation, then either the Procuring Entity or the Supplier may give notice to the other
party of its intention to commence arbitration, as hereinafter provided, as to the matter in dispute,
and no arbitration in respect of this matter may be commenced unless such notice is given.

20.3 Any dispute or difference in respect of which a notice of intention to commence arbitration has
been given in accordance with this Clause shall be settled by arbitration. Arbitration may be
commenced prior to or after delivery of the Goods under this Contract.

20.4 In the case of a dispute between the Procuring Entity and the Supplier, the dispute shall be
resolved in accordance with Republic Act 9285 ("R.A. 9285"), otherwise known as the "Alternative
Dispute Resolution Act of 2004."28

The MRT3 Contract was entered into as a result of a negotiated procurement under RA 9184, or the
Government Procurement Reform Act. Under Section 59, Rule XVIII of the Revised Implementing
Rules and Regulations of RA 9184:

SECTION 59. Arbitration. —

59.1. If any dispute or difference of any kind whatsoever shall arise between the parties in
connection with the implementation of the contract covered by the Act and this IRR, the parties shall
make every effort to resolve amicably such dispute or difference by mutual consultation.

59.2. Any and all disputes arising from the implementation of a contract covered by the Act and this
IRR shall be submitted to arbitration in the Philippines according to the provisions of R.A. 876,
otherwise known as the "Arbitration Law" and R.A. 9285, otherwise known as the "Alternative
Dispute Resolution Act of 2004": Provided, however, That disputes that are within the competence of
the Construction Industry Arbitration Commission to resolve shall be referred thereto. The process of
arbitration shall be incorporated as a provision in the contract that will be executed pursuant to the
provisions of the Act and this IRR: Provided, further, That by mutual agreement, the parties may
agree in writing to resort to other alternative modes of dispute resolution.

Under Section 28 of RA 9285 or the Alternative Dispute Resolution Act of 2004, as referred to in the
above Section 59, the grant of an interim measure of protection by the proper court before the
constitution of an arbitral tribunal is allowed:
Sec. 28. Grant of Interim Measure of Protection. — (a)It is not incompatible with an arbitration
agreement for a party to request, before constitution of the tribunal, from a Court29 an interim
measure of protection and for the Court to grant such measure. After constitution of the arbitral
tribunal and during arbitral proceedings, a request for an interim measure of protection, or
modification thereof, may be made with the arbitral tribunal or to the extent that the arbitral tribunal
has no power to act or is unable to act effectively, the request may be made with the Court. The
arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator, who has been
nominated, has accepted the nomination and written communication of said nomination and
acceptance has been received by the party making the request.

(b) The following rules on interim or provisional relief shall be observed:

-1 Any party may request that provisional relief be granted against the adverse party.

-2 Such relief may be granted:

(i) to prevent irreparable loss or injury;

(ii) to provide security for the performance of any obligation;

(iii) to produce or preserve any evidence; or

(iv) to compel any other appropriate act or omission.

-3 The order granting provisional relief may be conditioned upon the provision of security or
any act or omission specified in the order.

-4 Interim or provisional relief is requested by written application transmitted by reasonable

means to the Court or arbitral tribunal as the case may be and the party against whom the
relief is sought, describing in appropriate detail the precise relief, the party against whom the
relief is requested, the grounds for the relief, and the evidence supporting the request.

-5 The order shall be binding upon the parties.

-6 Either party may apply with the Court for assistance in implementing or enforcing an
interim measure ordered by an arbitral tribunal.

-7 A party who does not comply with the order shall be liable for all damages resulting from
noncompliance, including all expenses and reasonable attorney's fees, paid in obtaining the
order's judicial enforcement.

However, RA 8975 prohibits the issuance of temporary restraining orders and preliminary injunctions
against national government projects. Section 3 thereof reads:

Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and
Preliminary Mandatory Injunctions. — No court, except the Supreme Court, shall issue any
temporary restraining order, preliminary injunction or preliminary mandatory injunction against the
government, or any of its subdivisions, officials or any person or entity, whether public or private,
acting under the government's direction, to restrain, prohibit or compel the following acts:
 (a) Acquisition, clearance and development of the right-of way and/or site or location of any
national government project;

(b) Bidding or awarding of contract/project of the national government as defined under

Section 2 hereof;

(c) Commencement, prosecution, execution, implementation, operation of any such contract

or project;

(d) Termination or rescission of any such contract/project; and

(e) The undertaking or authorization of any other lawful activity necessary for such
contract/project.

This prohibition shall apply in all cases, disputes or controversies instituted by a private party,
including but not limited to cases filed by bidders or those claiming to have rights through such
bidders involving such contract/project. This prohibition shall not apply when the matter is of extreme
urgency involving a constitutional issue, such that unless a temporary restraining order is issued,
grave injustice and irreparable injury will arise. The applicant shall file a bond, in an amount to be
fixed by the court, which bond shall accrue in favor of the government if the court should finally
decide that the applicant was not entitled to the relief sought.

If after due hearing the court finds that the award of the contract is null and void, the court may, if
appropriate under the circumstances, award the contract to the qualified and winning bidder or order
a rebidding of the same, without prejudice to any liability that the guilty party may incur under
existing laws.

On the application of RA 9285 vis-a-vis RA 8975, the case of Falcon is instructive:

Republic Act No. 9285 is a general law applicable to all matters and controversies to be resolved
through alternative dispute resolution methods. This law allows a Regional Trial Court to grant
interim or provisional relief, including preliminary injunction, to parties in an arbitration case prior to
the constitution of the arbitral tribunal. This general statute, however, must give way to a special law
governing national government projects, Republic Act No. 8975 which prohibits courts, except the
Supreme Court. from issuing TROs and writs of preliminary injunction in cases involving national
government projects.30

For further elucidation on the prohibition under RA 8975, the following pronouncements in that case
are quoted hereunder:

x x x In seeking to enjoin the government from awarding or implementing a machine readable

passport project or any similar electronic passport or visa project and praying for the maintenance of
the status quo ante pending the resolution on the merits of BCA's Request for Arbitration, BCA
effectively seeks to enjoin the termination of the Amended BOT Agreement for the MRP/V Project.

x x x Under Section 3(d) of that statute, trial courts are prohibited from issuing a TRO or writ of
preliminary injunction against the government to restrain or prohibit the termination or rescission of
any such national government project/contract.

The rationale for this provision is easy to understand. For if a project proponent — that the
government believes to be in default — is allowed to enjoin the termination of its contract on the
ground that it is contesting the validity of said termination, then the government will be unable to
enter into a new contract with any other party while the controversy is pending litigation. Obviously, a
court's grant of injunctive relief in such an instance is prejudicial to public interest since government
would be indefinitely hampered in its duty to provide vital public goods and services in order to
preserve the private proprietary rights of the project proponent. On the other hand, should it turn out
that the project proponent was not at fault, the BOT Law itself presupposes that the project
proponent can be adequately compensated for the termination of the contract. Although BCA did not
specifically pray for the trial court to enjoin the termination of the Amended BOT Agreement and
thus, there is no direct violation of Republic Act No. 8795, a grant of injunctive relief as prayed for by
BCA will indirectly contravene the same statute.

Verily, there is valid reason for the law to deny preliminary injunctive relief to those who seek to
contest the government's termination of a national government contract. The only circumstance
under which a court may grant injunctive relief is the existence of a matter of extreme urgency
involving a constitutional issue, such that unless a TRO or injunctive writ is issued, grave injustice
and irreparable injury will result.31

In the case at bar, petitioner, in its petition before the RTC, prayed for the following:

(i) Upon filing of the instant Petition, this Honorable Court ISSUE, ex parte, a Temporary Protection
Order, enjoining the respondent DOTR-MRT3, or any of its officers, agents, or representatives, from
doing any act, or causing to do any act, that would result in the termination of the MRT3 Contract,
and any of its components or would have the effect of implementing any termination that
have (sic) been previously made, that will render any judgment in the instant Petition illusory; and

After due proceedings, this Honorable Court ISSUE an INTERIM PROTECTION ORDER, and enjoin
respondent DOTr-MRT3, and any of its officers, agents, or representatives, to:

(i) MAINTAIN the status quo ante litem motam and pay BURI the fixed Monthly Maintenance
Fee in the amount of Php 54,500,000.00, subject only to duly assessed penalties based on
Train Availability Certifications, in accordance with the Contract Documents;

(ii) CEASE and DESIST from committing any act that would have the effect of terminating
the MRT3 Contract and any of its components, or would have the effect of implementing any
termination that may have been previously made; and

(iii) COMPLY with the arbitration agreement under Clause 20, Section III of the MRT3
Contract and proceed with arbitration proceedings in accordance with RA
9285.32 (Emphasis omitted.)

Inasmuch as petitioner was seeking to restrain respondent from terminating the MRT3 Contract, the
cited pronouncements in Falcon find application. Thus, the RTC properly dismissed petitioner's
petition.

Petitioner adds that there is an extreme urgency involving a constitutional issue making the
prohibition under RA 8975 inapplicable. Petitioner invokes the third paragraph of Section 3 of RA
8975 as quoted above. But We do not agree. The issue between the parties are purely contractual.
We again direct petitioner's attention to Falcon where it was sharply ruled that, and as applicable
herein:
Article III Section 1 of the Constitution provides "[n]o person shall be deprived of life, liberty, or
property without due process of law, nor shall any person be denied the equal protection of the
laws." Ordinarily, this constitutional provision has been applied to the exercise by the State of its
sovereign powers such as, its legislative power, police power, or its power of eminent domain.

In the instant case, the State action being assailed is the DFA's termination of the Amended BOT
Agreement with BCA. Although the said agreement involves a public service that the DFA is
mandated to provide and, therefore, is imbued with public interest, the relationship of DFA to BCA is
primarily contractual and their dispute involves the adjudication of contractual rights. The propriety of
the DFA's acts, in relation to the termination of the Amended BOT Agreement, should be gauged
against the provisions of the contract itself and the applicable statutes to such contract. These
contractual and statutory provisions outline what constitutes due process in the present case. In all,
BCA failed to demonstrate that there is a constitutional issue involved in this case, much less a
constitutional issue of extreme urgency.33

With respect to the other matters raised, We note that most of the parties' factual allegations and
counter-allegations already touch upon the merits of the main controversy, i.e., the propriety of
respondent's termination of the MRT3 Contract. We deem it best to refrain from ruling on this issue
and the matters surrounding it since they should be threshed out and litigated in the appropriate
arbitration proceedings between the parties.

WHEREFORE, the petition is DENIED. As a consequence, the prayer for the issuance of a Status
Quo Order and/or Preliminary Mandatory Injunction is also denied as it is merely ancillary to the
petition.

The Orders respectively dated October 13, 2017 and December 11, 2017 of Branch 105, Regional
Trial Court, Quezon City in RQZN-17-12023-CV are AFFIRMED.

SO ORDERED.