CASE DIGESTS

on
APPROPRIATE DISPUTE RESOLUTION

Submitted to:
ATTY. RANJAN WANGET
Professor of Law
University of the Cordilleras
Baguio City

Submitted by:
De Guzman, Justine

Juris Doctor- 2 SS
 1

FRUEHAUF ELECTRONICS PHILIPPINES CORPORATION VS. TECHNOLOGY ELECTRONICS

ASSEMBLY AND MANAGEMENT PACIFIC CORPORATION

G.R. NO. 204197, NOVEMBER 23, 2016

FACTS:

Fruehauf Electronics Philippines Corp. (Fruehauf) leased several parcels of land in Pasig City to
Signetics Filipinas Corporation (Signetics) for a period of 25 years (until May 28, 2003). After Signetics ceased
its operations,Team Holdings Limited (THL) bought Signetics and changed its name to Technology Electronics
Assembly and Management Pacific Corp. (TEAM).

Later, Fruehauf filed an unlawful detainer case against TEAM. In an effort to amicably settle the
dispute, both parties executed a Memorandum of Agreement (MOA) on June 9, 1988 whereby TEAM
undertook to pay Fruehauf 14.7 million pesos as unpaid rent for the period of December 1986 to June 1988.
They also entered a 15-year lease contract expiring on June 9, 2003 that was renewable for another 25 years
upon mutual agreement. The contract included an arbitration agreement, and also authorized TEAM to sublease
the property. Hence, TEAM subleased the property to Capitol Publishing House (Capitol) on December 2, 1996
after notifying Fruehauf.

On May 31, 2003, the sublease between TEAM and Capitol expired. However, Capitol only vacated
the premises on March 5, 2005. In the meantime, the master lease between TEAM and Fruehauf expired on
June 9, 2003.

Fruehauf then instituted SP Proc. No. 11449 before the Regional Trial Court (RTC) for "Submission
of an Existing Controversy for Arbitration. The RTC granted the petition and directed the parties to comply
with the arbitration clause of the contract. On December 3, 2008, the arbitral tribunal awarded Fruehauf: (1) 8.2
million pesos as (the balance of) unpaid rent from June 9, 2003 until March 5, 2005; and (2) 46.8 million pesos
as damages.

TEAM moved for reconsideration which the tribunal denied. Thus, TEAM petitioned the RTC to
partially vacate or modify the arbitral award. It argued that the tribunal failed to properly appreciate the facts
and the terms of the lease contract. On April 29, 2009, the RTC found insufficient legal grounds under Sections
24 and 25 of the Arbitration Law to modify or vacate the award. It denied the petition and CONFIRMED, the
arbitral award. TEAM filed a Notice of Appeal. The CA reversed and set aside the arbitral award and dismissed
the arbitral complaint for lack of merit.

ISSUES:

A. Whether courts have the power to substitute their judgment for that of the arbitrators.

B. Is an ordinary appeal a remedy from an RTC decision confirming, vacating, modifying, or correcting an
arbitral award?

HELD:

A. No, the Court cannot substitute its judgement for that of the arbitral tribunal.

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.

B. No, there is no legal basis that an ordinary appeal (via notice of appeal) is the correct remedy from an order
confirming, vacating, or correcting an arbitral award.
 The right to an appeal is neither a natural right nor an indispensable component of due process; it is a
mere statutory privilege that cannot be invoked in the absence of an enabling statute. Neither the Arbitration
Law nor the ADR Law allows a losing party to appeal from the arbitral award. The statutory absence of an
appeal mechanism reflects the State's policy of upholding the autonomy of arbitration proceedings and their
corresponding arbitral awards.

An agreement to refer a dispute to arbitration shall mean that the arbitral award shall be final and
binding. Consequently, a party to an arbitration is precluded from filing an appeal or a petition for certiorari
questioning the merits of an arbitral award.

Nonetheless, an arbitral award is not absolute. Rule 19.10 of the Special ADR Rules - by referring to
Section 24 of the Arbitration Law and Article 34 of the 1985 United Nations Commission on International
Trade Law (UNCITRAL) Model Law - recognizes the very limited exceptions to the autonomy of arbitral
awards:

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.

If the Regional Trial Court is asked to set aside an arbitral award in a domestic or international
arbitration on any ground other than those provided in the Special ADR Rules, the court shall entertain such
ground for the setting aside or non-recognition of the arbitral award only if the same amounts to a violation of
public policy.

The court shall not set aside or vacate the award of the arbitral tribunal merely on 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.

TEAM agreed to submit their disputes to an arbitral tribunal. It understood all the risks - including the
absence of an appeal mechanism and found that its benefits (both legal and economic) outweighed the
disadvantages. Without a showing that any of the grounds to vacate the award exists or that the same amounts
to a violation of an overriding public policy, the award is subject to confirmation as a matter of course.

MABUHAY HOLDINGS CORPORATION VS. SEMBCORP LOGISTICS LIMITED

G. R. NO. 212734, DECEMBER 05, 2018

FACTS:

On January 23, 1996, Mabuhay Holdings Corporation (Mabuhay) and Infrastructure

Development & Holdings, Inc. (IDHI) incorporated Water Jet Shipping Corporation (WJSC) in the
Philippines to engage in the venture of carrying passengers on a common carriage by inter-island fast ferry. On
February 5, 1996, they also incorporated Water Jet Netherlands Antilles, N.Y. (WJNA) in Curasao,
Netherlands.

Mabuhay, IDHI, and Sembcorp entered into a Shareholders' Agreement with an arbitration clause
setting out the terms and conditions governing their relationship in connection with a planned business
expansion of WJSC and WJNA. Pursuant to the Agreement, Mabuhay and IDHI voluntarily agreed to jointly
guarantee that Sembcorp would receive a minimum accounting return of US$929,875.50 at the end of the
24th month following the full disbursement of the Sembcorp's equity investment in WJNA and WJSC. They
further agreed that the Guaranteed Return shall be paid three (3) months from the completion of the special
audits of WJSC and WJNA.

Sembcorp effected full payment of its equity investment and special audits of WJNA and WJSC were
then carried revealing losses thereof. On December 4, 2000, Sembcorp filed a Request for Arbitration before
the International Court of Arbitration of the International Chamber of Commerce (ICC) in accordance with the
Agreement because of Mabuhay’s failure to pay Sembcorp’s guaranteed return despite several demands.

The ICC rendered an award in favor of Sembcorp ordering Mabuhay to pay 50% of the guaranteed
return plus 12% interest from the date of the final award. However the Regional trial Court dismissed the
petition and ruled that the Final Award could not be enforced for the "simple contractual payment obligation"
of Mabuhay and IDHI to Sembcorp had been rescinded and modified by the merger or confusion of the person
of IDHI into the person of Sembcorp. The CA reversed and set aside the RTC decision and held that the court
shall not disturb the arbitral tribunal's determination of facts and/or interpretation of the law.

ISSUE:

whether there is a ground for the RTC to refuse recognition and enforcement of the Final Award in
favor of Sembcorp.

HELD:

None. We find that Mabuhay failed to establish any of the grounds for refusing enforcement and
recognition of a foreign arbitral award.

Under Article V of the New York Convention, the grounds for refusing enforcement and recognition
of a foreign arbitral award are:

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.

The aforecited grounds are essentially the same grounds enumerated under the Model Law. The list is
exclusive.

Moreover, Section 45 of the ADR Act provides:

 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.

In this case, The arbitral authority, composed of Dr. Chatara-Opakorn as the sole arbitrator, was
constituted in accordance with the arbitration agreement which provided that The sole arbitrator or the
chairman of the Arbitral Tribunal shall be of a nationality other than those of the partiesIn accordance with
the aforecited rules, Dr. Chantara-Opakom was appointed upon the proposal of the Thai National
Committee.

Rule 2.3 of the Special ADR Rules provides that "the parties are free to agree on the procedure to be
followed in the conduct of arbitral proceedings." The procedure to be followed on the appointment of arbitrator
are among the procedural rules that may be agreed upon by the parties. Moreover, under Rule 7.2 of the Special
ADR Rules, a challenge to the appointment of an arbitrator may be raised in court only when the appointing
authority fails or refuses to act on the challenge within such period as may be allowed under the
applicable rule or in the absence thereof, within thirty (30) days from receipt of the request, that the
aggrieved party may renew the challenge in court. This is clearly not the case for Mabuhay as it was able to
challenge the appointment of Dr. Chantara-Opakom in accordance with Article 11 of the ICC Rules, but the
ICC Court rejected the same.

At any rate, Mabuhay's contention that the sole arbitrator must have the expertise on Philippine law
fails to persuade. If the intent of the parties is to exclude foreign arbitrators due to the substantive law of the
contract, they could have specified the same considering that the ICC Rules provide for appointment of a sole
arbitrator whose nationality is other than those of the parties.

Furthermore, Enforcement of the award would not be contrary to public policy of the Philippines.

Under Article V(2)(b) of the New York Convention, a court may refuse to enforce an award if doing
so would be contrary to the public policy of the State in which enforcement is sought. Neither the New York
Convention nor the mirroring provisions on public policy in the Model Law and Our arbitration laws provide a
definition of "public policy" or a standard for determining what is contrary to public policy. Due to divergent
approaches in defining public policy in the realm of international arbitration, public policy has become one of
the most controversial bases for refusing enforcement of foreign arbitral awards.

In Our jurisdiction, the Court has yet to define public policy and what is deemed contrary to public
policy in an arbitration case. However, in an old case, the Court, through Justice Laurel, elucidated on the term
"public policy" for purposes of declaring a contract void:

x x x At any rate, courts should not rashly extend the rule which holds that a contract is void as against public
policy. The term "public policy" is vague and uncertain in meaning, floating and changeable in
connotation. It may be said, however, that, in general, a contract which is neither prohibited by law nor
condemned by judicial decision, nor contrary to public morals, contravenes no public policy. In the absence of
express legislation or constitutional prohibition, a court, in order to declare a contract void as against public
policy, must find that the contract as to the consideration or thing to be done, has a tendency to injure the
public, is against the public good, or contravenes some established interests of society, or is inconsistent with
sound policy and good morals, or tends clearly to undermine the security of individual rights, whether of
personal liability or of private property.

Mere errors in the interpretation of the law or factual findings would not suffice to warrant
refusal of enforcement under the public policy ground. The illegality or immorality of the award must
reach a certain threshold such that, enforcement of the same would be against Our State's fundamental
tenets of justice and morality, or would blatantly be injurious to the public, or the interests of the society.
Imposition of interest and violation of partnership laws raised by Mabuhay are not under the guise of injury to
the public at a certain threshold.

Arbitration, as a mode of alternative dispute resolution, is undeniably one of the viable solutions to the
longstanding problem of clogged court dockets. International arbitration, as the preferred mode of dispute
resolution for foreign companies, would also attract foreign investors to do business in the country that would
ultimately boost Our economy. In this light, We uphold the policies of the State favoring arbitration and
enforcement of arbitral awards, and have due regard to the said policies in the interpretation of Our arbitration
laws.

LINDA M. CHAN KENT, represented by ROSITA MANALANG vs. DIONESIO C. MICAREZ,

SPOUSES ALVARO E. MICAREZ & PAZ MICAREZ, and THE REGISTRY OF DEEDS, DAVAO DEL
NORTE

G.R. No. 185758, March 9, 2011

FACTS:

Rosita Micarez-Manalang (Manalang) is of Filipino descent who became a naturalized American

citizen after marrying an American national in 1981.Aware that there would be a difficulty in registering the
property in her name, She purchased a lot in Panabo City registering it under the names of her parents by virtue
of an implied trust. The lot however, was fraudulently sold by her parents in favor of her brother, hence
Manalang fiiled before the Regional Trial Court of Panabo City, a complaint for recovery of property.

Summons was served upon the respondents, who then executed two special powers of attorney
authorizing Atty. Richard Miguel to file their answer and to represent them during the pre-trial conference and
all subsequent hearings with power to enter into a compromise agreement. By virtue thereof, Atty. Miguel
timely filed his principals’ answer denying the material allegations in the complaint.

After the parties had filed their respective pre-trial briefs, and the issues in the case had been joined,
the RTC explored the possibility of an amicable settlement among the parties by ordering the referral of the
case to the Philippine Mediation Center (PMC). The case was dismissed for plaintiff’s and her counsel’s failure
to appear during the mediation proceeding. A motion for reconsideration was filed by Manalang’s counsel but
was denied.

ISSUE::

Whether the dismissal of the case on the ground of the non-appearance of the counsel of the petitioner
during the mediation proceedings proper.

HELD:

No, A.M. No. 01-10-5-SC-PHILJA regards mediation as part of pre-trial where parties are encouraged
to personally attend the proceedings. The personal non-appearance, however, of a party may be excused only
when the representative, who appears in his behalf, has been duly authorized to enter into possible amicable
settlement or to submit to alternative modes of dispute resolution. To ensure the attendance of the parties, A.M.
No. 01-10-5-SC-PHILJA specifically enumerates the sanctions that the court can impose upon a party who fails
to appear in the proceedings which includes censure, reprimand, contempt, and even dismissal of the action in
relation to Section 5, Rule 18 of the Rules of Court.

Although the RTC has legal basis to order the dismissal of Civil Case No. 13-2007, the Court finds
this sanction too severe to be imposed on the petitioner where the records of the case is devoid of evidence of
willful or flagrant disregard of the rules on mediation proceedings. There is no clear demonstration that the
absence of petitioner’s representative during mediation proceedings on March 1, 2008 was intended to
perpetuate delay in the litigation of the case. Neither is it indicative of lack of interest on the part of petitioner
to enter into a possible amicable settlement of the case.

Assuming arguendo that the trial court correctly construed the absence of Manalang on March 1, 2008
as a deliberate refusal to comply with its Order or to be dilatory, it cannot be said that the court was powerless
and virtually without recourse. Indeed, there are other available remedies to the court a quo under A.M. No. 01-
10-5-SC-PHILJA, apart from immediately ordering the dismissal of the case. If Manalang’s absence upset the
intention of the court a quo to promptly dispose the case, a mere censure or reprimand would have been
sufficient for petitioner’s representative and her counsel so as to be informed of the court’s intolerance of
tardiness and laxity in the observation of its order. By failing to do so and refusing to resuscitate the case, the
RTC impetuously deprived petitioner of the opportunity to recover the land which she allegedly paid for.

Unless the conduct of the party is so negligent, irresponsible, contumacious, or dilatory as for non-
appearance to provide substantial grounds for dismissal, the courts should consider lesser sanctions which
would still achieve the desired end. The Court has written "inconsiderate dismissals, even if without
prejudice, do not constitute a panacea nor a solution to the congestion of court dockets, while they lend a
deceptive aura of efficiency to records of the individual judges, they merely postpone the ultimate
reckoning between the parties. In the absence of clear lack of merit or intention to delay, justice is better
served by a brief continuance, trial on the merits, and final disposition of the cases before the court.

Verily, the better and more prudent course of action in a judicial proceeding is to hear both sides and
decide the case on the merits instead of disposing the case by technicalities. The ends of justice and fairness
would best be served if the issues involved in the case are threshed out in a full-blown trial. Trial courts are
reminded to exert efforts to resolve the matters before them on the merits and to adjudge them accordingly to
the satisfaction of the parties, lest in hastening the proceedings, they further delay the resolution of the cases.

BBB vs. AAA

GR. No. 193225, February 9, 2015

FACTS:

BBB and AAA are husband and wife respectively. AAA bore 3 children namely CCC, DDD and EEE
before being legally married. Later, BBB left the family home allegedly because AAA always quarreled him of
his alleged mistress FFF. AAA then, left the family home bringing with her the children.

AAA then filed an application for the issuance of a Temporary Protection Order(TPO) based on the
provisions of RA 9262 before the RTC of Pasig claiming that she and her children suffered a) Economic abuse
when BBB failed in his financial obligations to them, b) psychological abuse whenever BBB stalks them
through GGG, BBB’s friend who looks into the condominium’s logbook where they currently reside, and c)
mental and emotional abuse when BBB publicly displayed his extramarital relations with his mistress, FFF.

The decisoin was rendered in favor of AAA and the TPO later became permanent. BBB appealed to
the Court of Appeals against the issuance of Permanent Protection Order(PPO) against him, however it was
denied. BBB contends that pending the Court’s deliberation of the case, he filed a manifestation and motion to
render judgement based on a memorandum of agreement and that they entered into a compromise anent the
custody and exercise of parental authority.

ISSUE:
Whether cases filed under the provisions of RA 9262 can be subjects of compromise agreements.

HELD:

No, Cases filed under the provisions of RA 9262 cannot be subjects of compromise agreement.

Section 23(d) of A.M. No. 04-10-11-SC20 explicitly prohibits compromise on any act constituting the
crime of violence against women. Violence, however, is not a subject for compromise. A process which
involves parties mediating the issue of violence implies that the victim is somehow at fault.(Garcia v. Drilon)

AM No. 10-4-16-SC provides that All issues under the Family Code and other laws in relation to
support, custody, visitation, property relations and guardianship of minor children are referred to mediation
except those covered by RA 9262.

While AAA filed her application for a TPO and a PPO as an independent action and not as an
incidental relief prayed for in a criminal suit, the instant petition cannot be taken outside the ambit of cases
falling under the provisions of R.A. No. 9262. Perforce, the prohibition against subjecting the instant petition to
compromise applies.
 Hence, the parties are precluded from entering a compromise agreement when it comes to cases
covered by RA 9262 but as regards the exercise of parental authority, support and custody over the children,
they are not precluded to compromise.

JESUS C. GARCIA vs. THE HONORABLE RAY ALAN T. DRILON

G.R. No. 179267, June 25, 2013

FACTS:

Rosalie Garcia (34 years old) and Jesus Garcia (45 years old) are married. They have 3 children
namely: Jo-Ann (Jesus’ biological child adopted by Rosalie, 17 yrs. old), Jessie(6 yrs old) and Joseph(3 yrs.
Old). Rosalie holds office at one of Jesus’ corporation.

Rosalie filed, for herself and in behalf of her minor children a petition for issuance of a Temporary
Protection Order(TPO) against her husband, Jesus Garcia before the Regional Trial Court of Bacolod pursuant
to RA 9262. She claims that she and her children suffered psychological, physical and economic abuse from the
latter because of his dominant character. That Jesus was over possessive and tends to beat or slap her and Jo-
ann to the point that Rosalie would attempt to suicide and leave him. That Jesus had extramarital affair and
threatened her of taking his children and depriving his financial support to her in the instance that she goes on a
legal battle with him.

The RTC issued the TPO for 30 days and was continuously renewed and extended after each
expiration. Despite the TPO, Jesus attempted to kidnap Joseph while the latter was being driven to school, as
well as threatening Jo-Ann to stay with him.

ISSUE:
Whether the non-referral of a Violation Against Women and Children (VAWC) case to a mediator is
justified.

HELD:

Yes, Under Section 23(c) of A.M. No. 04-10-11-SC, the court shall not refer the case or any issue
thereof to a mediator.

Section 311 of the Model Code on Domestic and Family Violence prohibits a court from ordering or
referring parties to mediation in a proceeding for an order for protection. Mediation is a process by which
parties in equivalent bargaining positions voluntarily reach consensual agreement about the issue at hand.
Violence, however, is not a subject for compromise. A process which involves parties mediating the issue of
violence implies that the victim is somehow at fault.

In addition, mediation of issues in a proceeding for an order of protection is problematic because the
petitioner is frequently unable to participate equally with the person against whom the protection order has been
sought.

ANTONIO A. ARROYO vs. SANCHO L. ALCANTARA,

A.M. No. P-01-1518. November 14, 2001

FACTS:

Alcantara was requested by one Olayres, a barangay chairman who had a previous altercation with
Opiana Sr., To convince the heirs of the late Isaac Opiana to settle their differences regarding the land left by
their deceased father. Alcantara then complied and issued a subpoena to summon Opiana Sr. For mediation
which purportedly came from the Municipal Trial Court of Guinobatan, Albay.
 An administrative case was then filed against Alcantara for giving the impression that such meeting
was part of the proceedings of the Court. That as a result thereof, Joaquin Opiana Jr. Felt compelled to attend
the same to represent his sick father who later died.

In his defense, Alcantara claims that he mediated in his personal capacity not as clerk of court.

ISSUE:

Whether Alcantara, a clerk of court, has authority to mediate.

HELD:

No, the Clerk of Court is not allowed to conduct a mediation. He has no authority to mediate among
the constituents of Olayres.

The parties have the freedom to select a mediator, by requesting to the Office of Alternative Dispute
Resolution(OADR) to provide them with a list or roster or the resumes of its certified mediators.

Alcantara, clerk of court is not within the list of certified mediators in this case.

KOPPEL, INC. V. MAKATI ROTARY CLUB FOUNDATION, INC.

G.R. NO. 198075, SEPTEMBER 4, 2013

FACTS:

Fedders Koppel, Incorporated (FKI) owned a land in Paranaque City. In 1975, the land was
conditionally donated to Makati Rotary Club Foundation(MRCF). Under the conditions of the deed of
donation, MRCF would lease the land for the period of 25 years or until May 25, 2000, renewable for another
25 years upon mutual agreement. It also included the payment of rent for the 1 st 25 years of the lease in the
amount of Php 40,126 per annum and for the 2 nd 25 years in the amount they mutually agreed upon, that if no
agreement can be made, the determination will be submitted to the arbitral tribunal. To reiterate the provisions
of the donation, FKI and MRCF executed an amended deed of donation.

Later, MRCF renewed for another 5 years the May 25, 2000 lease contract agreeing with FKI the
payment of rents of Php 4,000,000 for the 1 st year to Php 4,900,000 for the 5 th year subject to arbitration clause
in case of disagreement about the interpretation, application and execution of the lease.

After the expiration of the renewed May 25, 2000 lease contract, another lease contract was created
beginning on 2005 by which MRCF and FKI agreed the payment of rent for Php4,200,000 annually for 5 years
subject to the same arbitration clause that in case of disagreement about the interpretation, application and
execution of the lease. It added however that FKI must make an annual donation of Php 3,000,000 to MRCF for
the 1st year to Php 3,900,000 for the 5th year.

FKI failed to make the last 2year annual donation after it assigned its rights to Koppel, Inc. (Koppel).
Despite several demand letters by MRCF to Koppel the latter refused to heed the rent and donation. Instead,
Koppel filed a complaint for rescission and cancellation of the deed of donation and amended donation against
MRCF before the RTC of Paranaque. MRCF then filed an unlawful detainer case against Koppel in the MeTC.
The MeTC ruled in favor of Koppel however, the RTC and CA ruled in favor of MRCF.

ISSUE:

Whether the 2005 lease agreement contract is arbitrable.

HELD:

Yes, The arbitration clause of the 2005 Lease Contract stipulates that "any disagreement" as to the "
interpretation, application or execution " of the 2005 Lease Contract ought to be submitted to arbitration. To the
mind of this Court, such stipulation is clear and is comprehensive enough so as to include virtually any kind of
conflict or dispute that may arise from the 2005 Lease Contract including the one that presently besets
petitioner and respondent.

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

Under the doctrine of separability, an arbitration agreement is considered as independent of the main
contract. Being a separate contract in itself, the arbitration agreement may thus be invoked regardless of the
possible nullity or invalidity of the main contract.

the mere submission of a dispute to JDR proceedings would not necessarily render the subsequent
conduct of arbitration a mere surplusage. The failure of the parties in conflict to reach an amicable settlement
before the JDR may, in fact, be supplemented by their resort to arbitration where a binding resolution to the
dispute could finally be achieved. This situation precisely finds application to the case at bench.

Neither would the summary nature of ejectment cases be a valid reason to disregard the enforcement
of the arbitration clause of the 2005 Lease Contract . Notwithstanding the summary nature of ejectment cases,
arbitration still remains relevant as it aims not only to afford the parties an expeditious method of resolving
their dispute.

Hence, It is clear that under the law, the instant unlawful detainer action should have been stayed; the
petitioner and the respondent should have been referred to arbitration pursuant to the arbitration clause of the
2005 Lease Contract. The violation by the MeTC of the clear directives under R.A. Nos.876 and 9285 renders
invalid all proceedings it undertook in the ejectment case after the filing by petitioner of its Answer with
Counterclaim —the point when the petitioner and the respondent should have been referred to arbitration. This
case must, therefore, be remanded to the MeTC and be suspended at said point. Inevitably, the decisions of the
MeTC, RTC and the Court of Appeals must all be vacated and set aside.

J PLUS ASIA DEVELOPMENT CORPORATION V. UTILITY ASSURANCE CORPORATION

G.R. NO. 199650, JUNE 26, 2013

FACTS:

J PLUS ASIA DEVELOPMENT CORPORATION through Joo Han Lee entered into a Construction
Agreement with Mabunay, doing business under the name of Seven Shades of Blue Trading and Services for
the latter to build J plus’ Condotel building to be completed within one year reckoned from the first calendar
day after signing of the Notice of Award and Notice to Proceed and receipt of down payment. Mabuhay also
submitted the required Performance Bond6 issued by respondent Utility Assurance Corporation (UTASSCO) in
the amount equivalent to 20% down payment or ₱8.4 million. The downpayment was fully paid and the project
commenced. However, J Plus terminated the contract after conducting a joint inspection of the project finding
that as of November 14, 2008, only 31.39% of the project was completed leaving an uncompleted portion of
68.61% with an estimated value of Php 27, 880,419.52. J Plus then sent demand letters to Mabunay but such
demands went unheeded, hence, J plus filed a request for arbitration before the Construction Industry
Arbitration Commission(CIAC).

UTASSCO filed a motion to dismiss on the ground that petitioner has no cause of action and the
complaint states no cause of action against it. The CIAC denied the motion to dismiss. The motion for
reconsideration was likewise denied.

ISSUE:
 Whether the CIAC arbitral award need not be confirmed by the RTC to be executory.

HELD:

Yes, A CIAC arbitral award need not be confirmed by the regional trial court to be executory as
provided under E.O. No. 1008.

Executive Order (EO) No. 1008 vests upon the CIAC original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered into by parties involved in construction in the Philippines,
whether the dispute arises before or after the completion of the contract, or after the abandonment or breach
thereof. By express provision of Section 19 thereof, the arbitral award of the CIAC is final and unappealable,
except on questions of law, which are appealable to the Supreme Court. With the amendments introduced by
R.A. No. 7902 and promulgation of the 1997 Rules of Civil Procedure, as amended, the CIAC was included in
the enumeration of quasijudicial agencies whose decisions or awards may be appealed to the CA in a petition
for review under Rule 43. Such review of the CIAC award may involve either questions of fact, of law, or of
fact and law.

Since R.A. No. 9285 explicitly excluded CIAC awards from domestic arbitration awards that need to
be confirmed to be executory, said awards are therefore not covered by Rule 11 of the Special ADR Rules, as
they continue to be governed by EO No. 1008, as amended and the rules of procedure of the CIAC.

PUROMINES, INC. V. COURT OF APPEALS

G.R. NO. 91298 MARCH 22, 1993

FACTS:

Puromines, Inc. (Puromines) and Makati Agro Trading, Inc.(MATI) entered into a contract with
Philipp Brothers Oceanic, Inc.(PBOI) for the sale of prilled Urea in bulk. The Sales Contract provided an
arbitration clause that "Any disputes arising under this contract shall be settled by arbitration in London in
accordance with the Arbitration Act 1950 and any statutory amendment or modification thereof. Each party is
to appoint an Arbitrator, and should they be unable to agree, the decision of an Umpire appointed by them to be
final. The Arbitrators and Umpire are all to be commercial men and resident in London. This submission may
be made a rule of the High Court of Justice in England by either party."

On or about May 12, 1988, the vessel M/V "Liliana Dimitrova" loaded on board at Yuzhny, USSR a
shipment of 15,500 metric tons prilled Urea in bulk complete and in good order and condition for transport to
Iloilo and Manila, to be delivered to Puromines. Three bills of lading were issued by the ship-agent in the
Philippines, Maritime Factors Inc., namely: Bill of Lading No. 1 covering 10,000 metric tons for discharge in
Manila; Bill of Lading No. 2 covering 4,000 metric tons for unloading in Iloilo City; and Bill of Lading No. 3,
covering 1,500 metric tons likewise for discharge in Manila.

However, the shipments covered by Bill of Lading Nos. 1 and 3 were discharged in Manila in bad
order and condition with damages valued at P683,056.29 including additional discharging expenses. Thus,
Puromines filed a complaint with the trial court for breach of contract of carriage against Maritime Factors, Inc.
as owners of the vessel while PBOI, was impleaded as charterer of the said vessel and proper party to accord
petitioner complete relief. Maritime Factors, Inc. filed its Answers to the complaint, while PBOI filed a motion
to dismiss on the ground that petitioner should comply with the arbitration clause in the sales contract.

ISSUE:

Whether the phrase "any dispute arising under this contract" in the arbitration clause of the
sales contract covers a cargo claim against the vessel (owners and/or charterers) for breach of contract
of carriage.

HELD:
 Yes, the sales contract is comprehensive enough to include claims for damages arising from
carriage and delivery of the goods. As a general rule, the seller has the obligation to transmit the goods
to the buyer, and concomitant thereto, the contracting of a carrier to deliver the same.

Responsibility to third persons for goods shipped on board a vessel follows the vessel’s
possession and employment; and if possession is transferred to the charterer by virtue of a demise, the
charterer, and not the owner, is liable as carrier on the contract of affreightment made by himself or by
the master with third persons, and is answerable for loss, damage or non-delivery of goods received
for transportation. An owner who retains possession of the ship, though the hold is the property of the
charterer, remains liable as carrier and must answer for any breach of duty as to the care, loading or
unloading of the cargo.

Whether the liability of respondent should be based on the same contract or that of the bill of
lading, the parties are nevertheless obligated to respect the arbitration provisions on the sales contract
and/or the bill of lading. Petitioner being a signatory and party to the sales contract cannot escape from
his obligation under the arbitration clause as stated therein. Arbitration has been held valid and
constitutional. Even before the enactment of Republic Act No. 876, this Court has countenanced the
settlement of disputes through arbitration. The rule now is that unless the agreement is such as
absolutely to close the doors of the courts against the parties, which agreement would be void, the
courts will look with favor upon such amicable arrangements and will only interfere with great
reluctance to anticipate or nullify the action of the arbitrator.

10

CHUNG FU INDUSTRIES (PHILIPPINES), INC. V. COURT OF APPEALS

G.R. NO. 96283, FEBRUARY 25, 1992

FACTS:

Chung Fu Industries and Roblecor Philippines forged a construction agreement wherein Roblecor
committed to construct and finish on Dec. 31, 1989, ChungFu’s industrial/factory complex in Cavite in
consideration of Php 42,000,000.00. It was also stipulated that in the event of disputes, the parties will be
subjected to an arbitration resolution, wherein the arbitrator will be chosen by both parties. Apart from the
construction agreement, the parties also entered into ancillary contracts for the construction of a dormitory and
support facilities to be completed on or before October 31,1989 and for the installation of electrical, water and
hydrant systems at the plant site, requiring completion thereof one month after civil works have been finished.

However, Roblecor failed to complete the work despite the extension allowed by Chung Fu. Later,
Chung Fu had to take over the construction when it had become evident that Roblecor was not in a position to
fulfill the obligation. Claiming an unsatisfied account of P10, 500, 000 and unpaid progress billings of P 2, 370,
179.23, Roblecor filed a petition for Compulsory Arbitration with prayer for TRO before respondent RTC,
pursuant to the arbitration clause in the construction agreement.

Chung Fu moved to dismiss the petition and further prayed for the quashing of the restraining order.
Eventually, their negotiations led to the formulation of an arbitration agreement which includes that the
decision of the arbitrator shall be final and unappealable, and there shall be no further judicial recourse if either
party disagrees with the whole or any part of the arbitrator’s award.

The RTC approved the arbitration agreement and the Arbitrator rendered a decision against Chung Fu.
The latter moved to remand the case for further hearing but was denied. Likewise he elevated the case to the
CA but was also denied.

ISSUE:
 Whether the decision of the arbitrator is final and unappealable, beyond the ambit of the court’s power
to judicial review.

HELD:

No, It is stated explicitly under Art. 2044 of the Civil Code that the finality of the arbitrators' award is
not absolute and without exceptions. Where the conditions described in Articles 2038, 2039 and 2040
applicable to both compromises and arbitrations are obtaining, the arbitrators' award may be annulled or
rescinded. Additionally, under Section66ys 24 and 25 of the Arbitration Law, there are grounds for vacating,
modifying or rescinding an arbitrator's award. Thus, if there are factual circumstances which are referred to in
the said provisions be present, judicial review of the award is properly warranted.

Also, even decisions of an administrative agency which are declared as “final” are not exempt from
judicial review when so warranted. That is why a voluntary arbitrator, by the very nature of their function, acts
in a quasi-judicial capacity in deciding such cases, is not to be construed as beyond the scope of the power of
judicial review.

The Court then provided that the lower court committed grave abuse of discretion by not looking into
the merits of the case despite a prima facie showing of the existence of grounds warranting judicial review.
Finally, the case was remanded back to the court of origin for further hearing.

11

CALIFORNIA AND HAWAIIAN SUGAR COMPANY, ET. AL Y PIONEER INSURANCE AND

SURETY CORPORATION

G.R. NO. 139273, NOVEMBER 28, 2000

FACTS:

On November 27, 1990, MV Sugar Islander vessel arrived at Manila carrying a cargo of soybean in
bulk, insured with Pioneer Insurance against all risk in the amount of Php 19,976,404.00 and consigned to
several consignees, one of which was Metro Manila Feed Millers Association whereas an arbitration clause was
incorporated in the bill of lading. Upon discharging of cargo, Pioneer claims a shortage of 255.051 metric tons
of the soybean. However, California and Hawaiian Sugar Company refused to pay the shortage valued at Php 1,
621,171.16, hence, Pioneer, as insurer paid consignee and later filed a complaint for damages against both.

In their answer, they filed a motion to dismiss Pioneer’s claim is premature, the same being arbitrable.
The Regional Trial Court ruled in favor of Pioneer. The Court of Appeals also ruled in favor of Pioneer ruling
that the arbitration clause provided in the charter party did not bind Pioneer.

ISSUE:

Whether the arbitration clause did not bind Pioneer.

HELD:

No, It binds the respondent, Pioneer. There was nothing in the Pan Malayan Doctrine to wit:

The right of subrogation is not dependent upon, nor does it grow out of, any privity contract or upon
written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer.

That prohibited the applicability of the arbitration clause of the subrogee. The issue of the accrual of
the right of subrogation is completely different from the consequences of such subrogation, that is the rights
that the insurer acquires from the insured upon payment of the indemnity.

12

ASSET PRIVATIZATION TRUST V. COURT OF APPEALS

G.R. NO. 121171, DECEMBER 29, 1998

FACTS:
 By virtue of a Memorandum of Agreement (MOA), the Republic of the Philippines thru the Surigao
Mineral Reservation Board, granted Marinduque Mining and Industrial Corporation (MMIC) the exclusive
right to explore, develop and exploit nickel, cobalt and other minerals in the Surigao mineral reservation. The
Philippine Government undertook to support the financing of MMIC by purchase of MMIC debenture bonds
and extension of guarantees.

Later, MMIC, Philippine National Bank (PNB) and the Development Bank of the Philippines (DBP)
executed a Mortgage Trust Agreement whereby MMIC, as mortgagor, agreed to constitute a mortgage in favor
of PNB and DBP as mortgagees, over all MMIC’s assets. MMIC had an outstanding loan with DBP and with
PNB, a total Government exposure of Php 22,668,537,770.05, Thus, a financial restructuring plan (FRP)
designed to reduce MMIC’s interest expense through debt conversion to equity was drafted by the Sycip Gorres
Velayo accounting firm and was approved by the Board of Directors of the MMIC. However, the proposed
FRP had never been formally approved by either PNB or DBP.

The loans of MMIC became overdue,and DBP and PNB decided to exercise their right to
extrajudicially foreclose the mortgages in accordance with the Mortgage Trust Agreement. MMIC’s assets were
then foreclosed, sold and transferred to Asset Privatization Trust (APT). A derivative suit against DBP and
PNB before the RTC of Makati, for Annulment of Foreclosures, Specific Performance and Damages was filed.

The parties mutually agreed to submit the case to arbitration by entering into a "Compromise and
Arbitration Agreement." And the Arbitration Committee rendered a majority decision in favor of MMIC ruling
that the foreclosure was illegal ang invalidly done. The RTC upheld and confirmed the award made by the
Arbitration Committee in favor of MMIC and against the Government, represented by APT for damages in the
amount of 2.5 billion. APT countered with an "Opposition and Motion to Vacate Judgment" .

Issue:

Whether the arbitrators exceeded their powers in the said case.

Held:

Yes, the arbitrators exceeded their powers. The award may be vacated.

Sections 24 and 25 of the Arbitration Law provide grounds for vacating, rescinding or modifying an
arbitration award. Where the conditions described in Articles 2038, 36 2039, 37 and 2040 38 of the Civil Code
applicable to compromises and arbitration are attendant, the arbitration award may also be annulled.nrob1es
virtual 1aw library
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:chanrob1es virtual 1aw library

(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 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.

Section 25 which enumerates the grounds for modifying the award provides:chanrob1eary

SEC. 25. Grounds for modifying or correcting award — In anyone of the following cases, the court must make
an order modifying or correcting the award, upon the application of any party to the controversy which was
arbitrated:chanrob1es virtual 1aw library

(a) Where there was an evident miscalculation of figures, or an evident mistake in the description of any
person, thing or property referred to in the award; or

(b) Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of the
decision upon the matter submitted, or

(c) Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if it had
been a commissioner’s report, the defect could have been amended or disregarded by the court.

it should be stressed that while a court is precluded from overturning an award for errors in the
determination of factual issues, nevertheless, if an examination of the record reveals no support whatever
for the arbitrators determinations, their award must be vacated. In the same manner, an award must be
vacated if it was made in "manifest disregard of the law." Against the backdrop of the foregoing provisions
and principles, we find that the arbitrators came out with an award in excess of their powers and palpably
devoid of factual and legal basis.

13

AGAN, JR., ET AL.V. PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., ET AL.,

G.R. NO. 155001, MAY 5, 2003

FACTS:

Department of Transportation and Communications (DOTC) engaged the services of Aeroport de

Paris (ADP) to conduct a comprehensive study of the Ninoy Aquino International Airport (NAIA)

Some time in 1993, six business leaders consisting of John Gokongwei, Andrew Gotianun, Henry Sy,
Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with then President Fidel V. Ramos and formed the
Asia's Emerging Dragon Corp. (AEDC). AEDC submitted an unsolicited proposal to the Government through
the DOTC/MIAA for the development of NAIA International Passenger Terminal III (NAIA IPT III) under a
build-operate-and-transfer arrangement pursuant to RA 6957 as amended by RA 7718 (BOT Law).

the DOTC issued Dept. Order constituting the Prequalification Bids and Awards Committee (PBAC)
for the implementation of the NAIA IPT III project. Several bid conferences were conducted. Later, the
Government and PIATCO signed an Amended and Restated Concession Agreement (ARCA). Which amended
some provisions of the Concession agreement that has been made, it specifically provided in Sec. 10.02 the
venue of the arbitration proceedings in case a dispute or controversy arises between the parties to the
agreement.

Subsequently, the Government and PIATCO signed three Supplements to the ARCA. The First
Supplement to the ARCA amended Sec. 1.36 of the ARCA defining "Revenues" or "Gross Revenues, It also
amended Sec. 6.01 (c) of the ARCA pertaining to the Disposition of Terminal Fees; Sec. 6.02 of the ARCA by
inserting an introductory paragraph; and Sec. 6.02 (a) (iii) of the ARCA referring to the Payments of
Percentage Share in Gross Revenues. The Second Supplement to the ARCA contained provisions concerning
the clearing, removal, demolition or disposal of subterranean structures uncovered or discovered at the site of
the construction of the terminal by the Concessionaire. the Third Supplement provided for the obligations of
the Concessionaire as regards the construction of the surface road connecting Terminals II and III.

In their consolidated Memorandum, the Office of the Solicitor General and the Office of the
Government Corporate Counsel prayed that the present petitions be given due course and that judgment be
rendered declaring the 1997 Concession Agreement, the ARCA and the Supplements thereto void for being
contrary to the Constitution, the BOT Law and its Implementing Rules and Regulations.

PIATCO then informed the Court that on March 4, 2003 PIATCO commenced arbitration proceedings
before the International Chamber of Commerce, International Court of Arbitration (ICC) by filing a Request for
Arbitration with the Secretariat of the ICC against the Government of the Republic of the Philippines acting
through the DOTC and MIAA.

ISSUE:

  Whether the arbitration step taken by PIATCO will oust the Court of its jurisdiction over the cases at
bar. Whether the petitioners may be bound by the ARCA clause.

Held:

No. the Concession Agreement, the Amended and Restated Concession Agreement and the
Supplements thereto are null and void. The Court is aware that arbitration proceedings pursuant to Section
10.02 of the ARCA have been filed at the instance of respondent PIATCO. Again, we hold that the arbitration
step taken by PIATCO will not oust this Court of its jurisdiction over the cases at bar.

As contracts produce legal effect between the parties, their assigns and heirs, only the parties to the
Distributorship Agreement are bound by its terms, including the arbitration clause stipulated therein. To tolerate
the splitting of proceedings by allowing arbitration as to some of the parties on the one hand and trial for the
others on the other hand would, in effect, result in multiplicity of suits, duplicitous procedure and
unnecessary delay. Thus, we ruled that the interest of justice would best be served if the trial court hears and
adjudicates the case in a single and complete proceeding.

No, petitioners in the present cases who have presented legitimate interests in the resolution of the
controversy are not parties to the PIATCO Contracts. Accordingly, they cannot be bound by the arbitration
clause provided for in the ARCA and hence, cannot be compelled to submit to arbitration proceedings. A
speedy and decisive resolution of all the critical issues in the present controversy, including those raised
by petitioners, cannot be made before an arbitral tribunal. The object of arbitration is precisely to allow an
expeditious determination of a dispute. This objective would not be met if this Court were to allow the parties
to settle the cases by arbitration as there are certain issues involving non-parties to the PIATCO Contracts
which the arbitral tribunal will not be equipped to resolve.

14

ASSOCIATED BANK V. COURT OF APPEALS

G.R. NO. 107918, JUNE 14, 1994.

FACTS:

 In a complaint for Violation of the Negotiable Instrument Law and Damages, Flores et al seek the
recovery of the amount of Php 900,913.60 which associated bank charged against their current account by
virtue of the sixteen (16) checks drawn by them despite the apparent alterations therein with respect to the name
of the payee, that is, the name Filipinas Shell was erased and substituted with Ever Trading and DBL Trading
by their supervisor Jeremias Cabrera, without their knowledge and consent.

With leave of court, Associated Bank filed then a third party complaint in the trial court for
reimbursement, contribution and indemnity against the Philippine Commercial and Industrial Bank (PCIB), the
Far East Bank and Trust, Co. (FEBTC), Security Bank and Trust Co. (SBTC), and the Citytrust Banking
Corporation (CTBC.

A Motion To Dismiss was filed by Security Bank and Trust Company on the grounds that third-party
plaintiff failed to resort to arbitration as provided for in Section 36 of the Clearing House Rules and
Regulations of the Philippine Clearing House Corporation, The RTC dismissed the third party complaint for
lack of jurisdiction and the CA affirmed in toto.

ISSUE:
 Whether associated bank may skip the arbitration process of PCHC and seek relief to the Court.

HELD:

No, 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. Since claims relating to
the regularity of checks cleared by banking institutions are among those claims which should first be submitted
for resolution by the PCHC’s Arbitration Committee, petitioner Associated Bank, having voluntarily bound
itself to abide by such rules and regulations, is estopped from seeking relief from the Regional Trial Court on
the coattails of a private claim and in the guise of a third party complaint without first having obtained a
decision adverse to its claim from the said body. It cannot bypass the arbitration process on the basis of its
averment that its third party complaint is inextricably linked to the original complaint in the Regional
Trial Court.

15

HEIRS OF AUGUSTO L. SALAS, JR. V. LAPERAL REALTY CORPORATION, ET AL.

G.R. NO. 135362, DECEMBER 13,1999

FACTS:

Salas owned a land in Lipa, Batangas. he entered into an Owner-Contractor Agreement with Laperal
Realty Corporation to render and provide complete (horizontal) construction services on his land. He later
executed a Special Power of Attorney in favor of Laperal Realty to exercise general control, supervision and
management of the sale of his land, for cash or on installment basis before leaving for a business trip in nueva
ecija. After seven years, he still did not return, hence, he was presumed dead. Laperal realty subdivided the land
and sold it to the respondent buyers.

The heirs of salas sought to rescind the sales, however the RTC dismissed their petition on the ground
that they failed to first resort to arbitration.

ISSUE:

Whether failure to arbitrate is a ground for dismissal

HELD:

NO.

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

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

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.

16

COCA-COCA BOTTLERS PHILIPPINES, INC. SALES FORCE UNION-PTGWO-BALAIS V. COCA-

COLA BOTTLERS PHILIPPINES, INC.

G.R. NO. 155651, JULY 28, 2005

FACTS:

Coca-Cola Bottlers Philippines., Inc. ("CCBPI") terminated twenty seven (27) rank-and-file, regular
employees and members of the San Fernando Rank-and-File Union ("SACORU") on the ground of redundancy
due to the ceding out of two selling and distribution systems, the Conventional Route System ("CRS") and Mini
Bodega System ("MB") to the Market Execution Partners ("MEPS"). The union members filed a Notice of
Strike with the National Conciliation and Mediation Board (NCMB) on the ground of unfair labor practice,
among others. SACORU conducted a strike vote where a majority decided on conducting a strike.

Later, the then Secretary of the Department of Labor and Employment (DOLE), Marianito D. Roque,
assumed jurisdiction over the labor dispute by certifying for compulsory arbitration the issues raised in the
notice of strike. pending hearing of the certified case, SACORU filed a motion for execution of the dispositive
portion of the certification order praying that the dismissal of the union members not be pushed through
because it would violate the order of the DOLE Secretary not to commit any act that would exacerbate the
situation. However, such resolution was suspended.

The NLRC dismissed the complaint for unfair labor practice and declared as valid the dismissal of the
employees due to redundancy.With the NLRC's denial of its motion for reconsideration, SACORU filed a
petition for certiorari under Rule 65 of the Rules of Court before the CA. The CA, however, dismissed the
petition and found that the NLRC did not commit grave abuse of discretion.

ISSUE:

Whether Roque is allowed to ceertify the dispute to NLRC for compulsary arbitration.

HELD:

Yes, When the Secretary exercises these powers, he is granted "great breadth of discretion" in order to
find a solution to a labor dispute. The most obvious of these powers is the automatic enjoining of an impending
strike or lockout or the lifting thereof if one has already taken place. Assumption of jurisdiction over a labor
dispute, or as in this case the certification of the same to the NLRC for compulsory arbitration, always co-exists
with an order for workers to return to work immediately and for employers to readmit all workers under the
same terms and conditions prevailing before the strike or lockout.

from the date the DOLE Secretary assumes jurisdiction over a dispute until its resolution, the parties
have the obligation to maintain the status quo while the main issue is being threshed out in the proper forum -
which could be with the DOLE Secretary or with the NLRC. This is to avoid any disruption to the economy
and to the industry of the employer - as this is the potential effect of a strike or lockout in an industry
indispensable to the national interest - while the DOLE Secretary or the NLRC is resolving the dispute.

17

NATIONAL STEEL CORPORATION V. RTC LANAO DEL NORTE BRANCH 2, TLIGAN CITY,

G.R. NO. 127004, MARCH 11,1999

FACTS:
 Edward Willkom Enterprises Inc. (EWEI) together with one Ramiro Construction and respondent-
petitioner National Steel Corporation (NSC) executed a contract whereby the former jointly undertook the
Contract for Site Development for the latter's Integrated Iron and Steel Mills Complex to be established at
Iligan City. Sometime later, the services of Ramiro Construction was terminated and EWEI took over Ramiro's
obligation. Differences later arose and EWEI filed a civil case before the Regional Trial Court of Lanao del
Norte, for the payments of P458,381.001 with interest from the time of delay. On the otherhand, NSC filed an
answer with counterclaim.

The said complaint and counterclaim was later dismissed by the presiding judge and both parties
submitted into arbitration. After a series of hearings, the Board of Arbitrators concluded that the work was
completed by EWEI and NSC was directed to pay EWEI the following: (a) P458,381.00 representing EWEI's
last billing with interest thereon at the rate of 1-1/4% per month from January 1, 1985 to actual date of
payment;(b) P1,335,514.20 representing price escalation adjustment under PD No. 1594, with interest thereon
at the rate of 1-1/4% per month from January 1, 1985 to actual date of payment;(c) P50,000 as and for
exemplary damages;(d) P350,000 as and for attorney's fees; and(e) P35,000.00 as and for cost of arbitration. .
The Regional Trial Court confirmed in toto the award by the the board and the motion for reconsideration by
the NSC was denied.

ISSUE:

Whether the award shall be vacated for there was evident partiality in the assailed decision of the
Arbitrators in favor of the respondent.

HELD:

No, however it must be modified. A stipulation to refer all future disputes or to submit an ongoing
dispute to an arbitrator is valid.The parties in the present case, upon entering into a Contract for Site
Development, mutually agreed that any dispute arising from the said contract shall be submitted for arbitration.

In a Petition to Vacate Arbitrator's Decision before the trial court, regularity in the performance of
official functions is presumed and the complaining party has the burden of proving the existence of any of the
grounds for vacating the award, as provided for by Sections 24 of the Arbitration Law, to wit:

Sec. 24 GROUNDS FOR VACATING THE 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;

(b) That there was evident partiality or corruption in the arbitrators of 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 wilfully refrained from disclosing such
disqualification 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. . . .

Petitioner's allegation that there was evident partiality is untenable. It is anemic of evidentiary
support. But, what cannot be upheld is the Board's imposition of a 1-1/4% interest per month from January 1,
1985 to actual date of payment. There is nothing in the said contract to justify or authorize such an award. The
trial court should have therefore disregarded the same and instead, applied the legal rate of 6% per annum, from
Jan. 1, 1985 until this decision becomes final and executory. This is so because the legal rate of interest on
monetary obligations not arising from loans or forebearance of credits or goods is 6%  per annum in the
absence of any stipulation to the contrary.
WHEREFORE, the awards made by the Board of Arbitrators which the trial court adopted in its decision of
July 31, 1996, are modified, thus: (1) The award of P474,780.23 for Billing No. 16-Final and P1,335,514.20 for
price adjustment shall be paid with legal interest of six (6%) percent per annum, from January 1, 1985 until this
decision shall have become final and executory; (2) The award of P50,000 for exemplary damages and
attorney's fees of P350,000 are deleted; and (3) The cost of arbitration of P35,000 to supplement arbitration
agreement has to be paid.

18

DEL MONTE CORPORATION-USA V. CA

G.R. NO. 136154, FEBRUARY 7, 2001

FACTS:

 In a Distributorship Agreement, petitioner Del Monte Corporation-USA (DMC-USA) appointed

Montebueno Marketing, Inc. (MMI) as the sole and exclusive distributor of its Del Monte products in the
Philippine. The Agreement provided an arbitration clause which states —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 . . . .

Immediately after its appointment, private respondent MMI appointed Sabrosa Foods, Inc. (SFI), with
the approval 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. Later MMI, SFI and MMI’s Managing Director filed a
Complaint against petitioners before the Regional Trial Court of Malabon for DMC-USA products continued to
be brought into the country by parallel importers despite the appointment of MMI as the sole and exclusive
distributor of Del Monte products thereby causing them great embarrassment and substantial damage. DMC-
USA filed a Motion to Suspend Proceedings invoking the arbitration clause in their Agreement with private
respondents. The trial court deferred the motion. Their motion for reconsideration was denied. On appeal the
Court of Appeals affirmed and upheld the decision of the trial court that the alleged damaging acts recited in the
Complaint, constituting petitioners’ causes of action, required the interpretation of Art. 21 of the Civil Code 16
and that in determining whether petitioners had violated it "would require a full blown trial" making arbitration
"out of the question." Petitioners’ Motion for Reconsideration of the affirmation was denied. Hence, this
Petition for Review.

ISSUE:

whether the dispute between the parties warrants an order compelling them to submit to arbitration.

HELD:

No, The Agreement between petitioner DMC-USA and 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. 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 for 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, in accordance with the recent case
of Heirs of Augusto L. Salas, Jr. v. Laperal Realty Corporation, which superseded that of Toyota Motor
Philippines Corp. v. Court of Appeals.
 The object of arbitration is to allow the expeditious determination of a dispute. 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.

19

JORGE GONZALES AND PANEL OF ARBITRATORS V. CLIMAX MINING LTD., ET AL.

G.R. NO. 161957, JANUARY 22,2007

FACTS:

This is a consolidation of two petitions rooted in the same disputed Addendum Contract entered into
by the parties. In one case, the Court held that the DENR Panel of Arbitrators had no jurisdiction over the
complaint for the annulment of the Addendum Contract on grounds of fraud and violation of the Constitution
and that the action should have been brought before the regular courts as it involved judicial issues.

Gonzales averred that the DENR Panel of Arbitrators Has jurisdiction because the case involves a
mining dispute that properly falls within the ambit of the Panel’s authority. Climax Mining Ltd., et al., on the
other hand, seek reconsideration on the decision holding that the case should not be brought for arbitration
under R.A. No. 876. They argued that the arbitration clause in the Addendum Contract should be treated as an
agreement independent of the other terms of the contract, and that a claimed rescission of the main contract
does not avoid the duty to arbitrate.

On another case, Gonzales challenged the order of the RTC requiring him to proceed with the
arbitration proceedings while the complaint for the nullification of the Addendum Contract was pending before
the DENR Panel of Arbitrators. He contended that any issue as to the nullity, inoperativeness, or incapability of
performance of the arbitration clause/agreement raised by one of the parties to the alleged arbitration agreement
must be determined by the court prior to referring them to arbitration. Climax-Arimco contended that an
application to compel arbitration under Sec. 6 of R.A. No. 876 confers on the trial court only a limited and
special jurisdiction, a jurisdiction solely to determine (a) whether or not the parties have a written contract to
arbitrate, and (b) if the defendant has failed to comply with that contract.

ISSUE:

Whether Panel of Arbitrators Has jurisdiction because the case involves a mining dispute that properly
falls within the ambit of the Panel’s authority. Whether the issue must be determined by the court prior to
referring them to arbitration.

HELD:

No, 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.

Yes, 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 proceeding shall be
dismissed." ( La Naval Drug Corporation v. Court of Appeals).

The doctrine of separability or severability enunciates that an arbitration agreement is independent of

the main contract. The arbitration agreement is to be treated as a separate agreement and the arbitration
agreement does not automatically terminate when the contract of which it is part comes to an end.

The 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.

20

OIL AND NATURAL GAS COMMISSION V. CA AND PACIFIC CEMENT COMPANY, INC.

G.R. NO. 114323, JULY 28,1998

FACTS:

OIL AND NATURAL GAS COMMISSION is a foreign corporation owned and controlled by the
Government of India while the private respondent is a private corporation duly organized and existing under the
laws of the Philippines. They entered a contract undertook to supply the petitioner 4300 metric tons of oil well
cement for the amount of $477,300.00 by opening an irrevocable letter of credit in favor of the latter. The oil
well cement was loaded on MV SURUTANA NAVA at Surigao City, Philippines for delivery at Bombay and
Calcutta, India. However, due to a dispute between the shipowner and the private respondent, the cargo was
held up in Bangkok and did not reach its point destination and failed to deliver the oil well cement.

Thereafter, they agreed that the entire 4,300 metric tons of oil well cement with Class "G" cement cost
free at the petitioner's designated port. However, upon inspection, the Class "G" cement did not conform to the
petitioner's specifications. Hence, they referred to arbitration. An arbitral award was made in favor of the
petitioner directing the respondent to pay US $ 899,603.77 with interest at the rate of 6%. To enable the
petitioner to execute the above award in its favor, it filed a Petition before the Court of the Civil Judge in Dehra
Dun. The foreign court issued notices to the private respondent for filing objections to the petition. The private
respondent complied and sent its objections but the foreign court refused to admit the private respondent's
objections for failure to pay the required filing fees.

Accordingly, the petitioner filed a complaint with Branch 30 of the Regional Trial Court (RTC) of
Surigao City for the enforcement of the aforementioned judgment of the foreign court. The private respondent
moved to dismiss the complaint .The petitioner filed its opposition to the said motion to dismiss, and the private
respondent, its rejoinder thereto. The RTC held that the rule prohibiting foreign corporations transacting
business in the Philippines without a license from maintaining a suit in Philippine courts admits of an
exception, that is, when the foreign corporation is suing on an isolated transaction as in this case. The CA
affirmed the RTC.

ISSUE:

whether the arbitrator had jurisdiction over the dispute between the petitioner and the private
respondent under Clause 16 of the contract.

HELD:

Yes, Clause 16, particularly the phrase, ". . . or as to any other questions, claim, right or thing
whatsoever, in any way arising or relating to the supply order/contract, design, drawing, specification,
instruction . . ."

The non-delivery of the oil well cement is definitely not in the nature of a dispute arising from the
failure to execute the supply order/contract design, drawing, instructions, specifications or quality of the
materials. A perusal of Clause 16 shows that the parties did not intend arbitration to be the sole means of
settling disputes. This is manifest from Clause 16 itself which is prefixed with the proviso, "Except where
otherwise provided in the supply order/contract . . .", thus indicating that the jurisdiction of the arbitrator is not
all encompassing, and admits of exceptions as may be provided elsewhere in the supply order/contract. We
believe that the correct interpretation to give effect to both stipulations in the contract is for Clause 16 to be
confined to all claims or disputes arising from or relating to the design, drawing, instructions, specifications or
quality of the materials of the supply order/contract, and for Clause 15 to cover all other claims or disputes.

The petitioner then asseverates that granting, for the sake of argument, that the non-delivery of the oil
well cement is not a proper subject for arbitration, the failure of the replacement cement to conform to the
specifications of the contract is a matter clearly falling within the ambit of Clause 16. When the 4,300 metric
tons of oil well cement were not delivered to the petitioner, an agreement was forged between the latter and the
private respondent that Class "G" cement would be delivered to the petitioner as replacement. Upon inspection,
however, the replacement cement was rejected as it did not conform to the specifications of the contract. Only
after this latter circumstance was the matter brought before the arbitrator. Undoubtedly, what was referred to
arbitration was no longer the mere non-delivery of the cargo at the first instance but also the failure of the
replacement cargo to conform to the specifications of the contract, a matter clearly within the coverage of
Clause 16.

21

DFA AND BSP V. HON. FRANCO T. FALCON, PRESIDING JUDGE OF RTC BR. 71 OF PASIG CITY

G.R. NO. 176657, SEPTEMBER 1, 2010

FACTS:

Department of Foreign Affairs (DFA) and BCA International Corporation (BCA) entered into
an agreement for the implementation of machine readable passport and visa project. Dispute arose
between DFA and BCA/Philippine Passport Corporation (PPC) due to alleged breaches by both parties. DFA
terminated its contract with BCA. BCA sent a notice of default against DFA. BCA filed for
arbitration with Philippine Dispute Resolution Center, Inc. (PDRCI). During the pendency of the Request for
Arbitration, DFA and BSP entered into an agreement for the latter to provide passports compliant with
international standards (E-Passports). BCA thereafter filed for a Petition for Interim Relief with the RTC of
Pasig. TRO and thereafter a writ of preliminary injunction were issued by RTC directed against DFA. DFA
filed the instant case alleging that TC committed GAD.

ISSUE:

A. Whether or not the E-Passport Project is a national government project

B. Whether or not the RTC has power to issue the writ of Preliminary Injunction

HELD:

A. NO. There is no legal or rational basis to apply the definition of the term "infrastructure project"
in one statute to another statute enacted years before and which already defined the types of projects it covers.
Rather, a reading of the two statutes involved will readily show that there is a legislative intent to treat
information technology projects differently under the BOT Law and the Government Procurement
Reform Act. This limited definition of "infrastructure project" in relation to information technology
projects under Republic Act No. 9184 is significant since the IRR of Republic Act No. 9184 has some
provisions that are particular to infrastructure projects and other provisions that are applicable only to
procurement of goods or consulting services. Implicitly, the civil works component of information
technology projects are subject to the provisions on infrastructure projects while the technological and
other components would be covered by the provisions on procurement of goods or consulting services
as the circumstances may warrant.

Taking into account the different treatment of information technology projects under the BOT Law
and the Government Procurement Reform Act, DFA and BSP’s contention the trial court had no jurisdiction
to issue a writ of preliminary injunction in the instant case would have been correct if the e-Passport
Project was a project under the BOT Law as they represented to the trial court.

B. Yes, Under Section 28, Republic Act No. 9285 or the Alternative Dispute Resolution Act of
2004, the grant of an interim measure of protection by the proper court before the constitution of an
arbitral tribunal is allowed. Section 3 (h) of the same statute provides that the "Court" as referred to in Article 6
of the Model Law shall mean a Regional Trial Court. 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. However, the prohibition in Republic Act No.
8975 is inoperative in this case, since DFA and BSP failed to prove that the e-Passport Project is national
government project as defined therein. Thus, the trial court had jurisdiction to issue a writ of
preliminary injunction against the e-Passport Project.

22

KOREA TECHNOLOGIES CO., LTD. (KOGIES) V. HON. ALBER A. LERMA, PRESIDING JUDGE OF
BR. 256, RTC MUNTINIUPA

G.R. NO. 143581, JANUARY 7, 2008

FACTS:

Korea Technologies Co., Ltd.(KOGIES), a Korean corporation, entered into a contract with Pacific
General Steel Manufacturing Corporation(PGSMC), a domestic corporation, whereby Korea Tech undertook to
ship and install in Pacific General’s site in Carmona, Cavite the machinery and facilities necessary for
manufacturing LPG cylinders, and to initially operate the plant after it is installed. due to its financial
difficulties, The plant, after completion of installation, could not be operated by Pacific General affecting the
supply of materials. Pacific General stopped payment and threatened to cancel the contract with Korea Tech
and dismantle the Carmona plant because of the latters nondelivery of equipments already paid for.

Pacific General filed before the Office of the Prosecutor a Complaint Affidavit for estafa against Mr.
Dae Hyun Kang, President of Korea Tech. Korea Tech informed PGSMC that it could not unilaterally rescind
the contract. KOGIES insisted that their dispute be settled by arbitration as provided by Article 15 of their
contract — the arbitration clause. Korea Tech initiated arbitration before the Korea Commercial Arbitration
Board in Seoul, Korea and, at the same time, commenced a civil action before the Regional Trial Court where
it prayed that Pacific General be restrained from dismantling the plant and equipment. The trial court denied the
application for preliminary injunction and declared the arbitration agreement null and void. Korea Tech moved
to dismiss the counterclaims for damages. Korea Tech filed a petition for certiorari before the Court of Appeals.
The court dismissed the petition and held that an arbitration clause which provided for a final determination of
the legal rights of the parties to the contract by arbitration was against public policy. Further appeal was made
to the Supreme Court by way of a petition for review.

ISSUE:

Whether the the arbitration clause was null and void, being contrary to public policy as it ousts the
local court of jurisdiction.

HELD:

No, the arbitration clause is not contrary to public policy.

The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance
with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board (KCAB), and that the
arbitral award is final and binding, is not contrary to public policy.an arbitration clause to resolve differences
and breaches of mutually agreed contractual terms is valid. Even before the approval on June 19, 1953 of
Republic Act No. 876, this Court has countenanced the settlement of disputes through arbitration. Republic Act
No. 876 was adopted to supplement the New Civil Code’s provisions on arbitration.

Being an inexpensive, speedy and amicable method of settling disputes,  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. It is thus
regarded as the "wave of the future" in international civil and commercial disputes. Brushing aside a contractual
agreement calling for arbitration between the parties would be a step backward.

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. Any doubt should be resolved in favor of
arbitration
 Having said that the instant arbitration clause is not against public policy, we come to the question on
what governs an arbitration clause specifying that in case of any dispute arising from the contract, an arbitral
panel will be constituted in a foreign country and the arbitration rules of the foreign country would govern and
its award shall be final and binding.

23

MCC INDUSTRIAL SALES CORPORATION V. SSANGYONG CORPORATION

G.R. NO. 170633, OCTOBER 17, 2007

FACTS:

MCC Industrial Sales (MCC), a domestic corporation, is engaged in the business of importing and
wholesaling stainless steel products.One of its suppliers is the Ssangyong Corporation (Ssangyong) an
international trading company. They conducted business through telephone calls and facsimile o telecopy
transmissions.

Ssangyong Manila Office sent, by fax, a letter addressed to Gregory Chan, MCC Manager of Sanyo
Seiki Stainless Steel Corporation, to confirm MCC's and Sanyo Seiki's order of 220 metric tons of hot rolled
stainless steel under a preferential rate of US$1,860.00 per metric tons. Chan, on behalf of the corporations,
assented and affixed his signature on the conforme portion of the letter. Ssangyong forwarded to MCC Pro
Forma Invoice containing the terms and conditions of the transaction. MCC sent back by fax to Ssangyong the
invoice bearing the conformity signature payment for the ordered steel products would be made through an
irrevocable letter of credit.

Because MCC could open only a partial letter of credit, the order for 220MT of steel was split into
two, Ssangyong sent another facsimile letter to MCC stating that its principal in Korea was already in a
difficult situation because of the failure of Sanyo Seiki and MCC to open the letter credits.

Later, MCC finally opened a letter of credit, The goods covered by the said invoice were then shipped
to and received by MC. Ssangyong then filed, a civil action for damages due to breach of contract against
defendants MCC, Sanyo Seiki and Gregory Chan before the Regional Trial Court of Makati City. defendants
filed a Demurrer to Evidence alleging that Ssangyong failed to present the original copies of the pro forma
invoices on which the civil action was based. RTC rendered its Decision in favor of Ssangyong. CA rendered
its Decisionaffirming the ruling of the trial court.

ISSUE:

Whether the print-out and/or photocopies of facsimile transmissions are electronic evidence and
admissible as such?

HELD:

No, R.A. No. 8792, otherwise known as the Electronic Commerce Act of 2000, considers an electronic
data message or an electronic document as the functional equivalent of a written document for evidentiary
purposes. The Rules on Electronic Evidence regards an electronic document as admissible in evidence if it
complies with the rules on admissibility prescribed by the Rules of Court and related laws, and is authenticated
in the manner prescribed by the said Rules. An electronic document is also the equivalent of an original
document under the Best Evidence Rule, if it is a printout or output readable by sight or other means, shown to
reflect the data accurately.

Thus, to be admissible in evidence as an electronic data message or to be considered as the functional

equivalent of an original document under the Best Evidence Rule, the writing must foremost be an “electronic
data message” or an “electronic document.”

24
 MAGELLAN CAPITAL MANAGEMENT CORPORATION (MCMC) AND MAGELLAN CAPITAL
HOLDINGS CORPORATION IR. V. ROLANDO M. ZOSA AND HON. JOSE P. SOBERAN OE G.R. NO.
129916, MARCH 26, 2001

FACTS:

Under a management agreement entered into, Magellan Capital Holdings Corporation (MCHC)
appointed Magellan Capital Management Corporation (MCMC) as manager for the operation of its business
and affairs. Pursuant thereto, petitioners and private respondent Rolando Zosa entered into “Employment
Agreement” designating the latter as President and CEO of MCHC. Zosa was elected as MCHC’s Vice-
Chairman/Chairman New Ventures Development to which he communicated his resignation on the ground that
it had less responsibility and scope and demanded that he be given termination benefits as provided in the
Employment Agreement. MCHC however, communicated its non-acceptance to the resignation and advised
Zosa that the agreement is terminated on account of the latter’s breach thereof.

Zosa invoked the Arbitration Clause of the agreement and both parties designated their arbitrators in
the panel. However, instead of submitting the dispute to arbitration, Zosa filed an action for damages against
petitioners before the RTC. Petitioners’s motion to dismiss was denied. Hence, Petitioners filed a petition for
certiorari and prohibition in the CA to which it was given due course. The RTC in compliance with the
decision, declared the arbitration clause in the agreement partially void and of no effect insofar as it concerns
the composition of arbitrators. Petitioners then filed this petition for review on certiorari.

ISSUE:

Whether or not the arbitration clause in the Employment Agreement is partially void and of no effect.

HELD:

Yes, The arbitration law, as all other laws, is intended for the good and welfare of everybody.

“From the foregoing arbitration clause, it appears that the two (2) defendants (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. Hence, apparently, plaintiff 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 , the two defendants (MCMC and MCHC) 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 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) and the third arbitrator to be chosen by the plaintiff [defendant Zosa]
and defendants ]. 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.

25

TRANSFIELD PHILIPPINES, INC. (TPT) V. LUZON HYDRO CORPORATION (LHC), AUSTRALIA

AND NEW ZEALAND BANKING GROUP LIMITED AND SECURITY BANK CORPORATION

G.R. NO. 146717, MAY 19, 2006

FACTS:
 Transfield entered into a turn-key contract with Luzon Hydro Corp. (LHC) whereby Transfield
undertook to construct a hydro-electric plants in Benguet and Ilocos. The contract provides for a period for
which the project is to be completed and also allows for the extension of the period provided that the extension
is based on justifiable grounds such as fortuitous event. In order to guarantee performance by Transfield, two
stand-by letters of credit were required to be opened.

During the construction of the plant, Transfield requested for extension of time citing fortuitous events
brought about by typhoon, barricades and demonstration. LHC did not give due course to the
extension of the period prayed for but referred the matter to arbitration committee. Both of them filed before
separate arbitration tribunals, ICC and CIAC respectively, to determine whether force majeure would justify the
delay. Pending the arbitration proceeding, Transfield filed a complaint for preliminary injunction against the
respondent banks to restrain them from paying on the securities and also against Luzon to prevent it from
calling on the securities. RTC issued a TRO but denied the application for writ of preliminary injunction. CA
affirmed RTC.

ISSUE:

Whether settlement of a dispute between the parties is a pre-requisite for the release of funds under a
letter of credit.

HELD:

No, Petitioner's argument that any dispute must first be resolved by the parties, whether through
negotiations or arbitration, before the beneficiary is entitled to call on the letter of credit in essence would
convert the letter of credit into a mere guarantee. Jurisprudence has laid down a clear distinction between a
letter of credit and a guarantee in that the settlement of a dispute between the parties is not a pre-requisite for
the release of funds under a letter of credit. In other words, the argument is incompatible with the very nature of
the letter of credit. If a letter of credit is drawable only after settlement of the dispute on the contract entered
into by the applicant and the beneficiary, there would be no practical and beneficial use for letters of credit in
commercial transactions.

A contract once perfected, binds the parties not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which according to their nature, may be in keeping with good faith,
usage, and law. A careful perusal of the Turnkey Contract reveals the intention of the parties to make the
Securities answerable for the liquidated damages occasioned by any delay on the part of petitioner. The call
upon the Securities, while not an exclusive remedy on the part of LHC, is certainly an alternative recourse
available to it upon the happening of the contingency for which the Securities have been proffered. Thus, even
without the use of the "independence principle," the Turnkey Contract itself bestows upon LHC the right to call
on the Securities in the event of default.

26

HUTAMA-RSEA JOINT OPERATIONS, INC. V. CITRA METRO MANILA TOLLWAYS CORPORATION

G.R. NO. 180640, APRIL 24, 2009

FACTS:

HUTAMA-RSEA Joint Operations Incorporation and Citra Metro Manila Tollways Corporation are
corporations organized and existing under Philippine laws.They entered into an Engineering Procurement
Construction Contract(EPCC) whereby HUTAMA-RSEA would undertake the construction of Stage 1 of the
Skyway Project. During the construction of the Skyway Project, HUTAMA-RSEA wrote Citra Metro on
several occasions demands of the former’s interim billings, pursuant to the provisions of the EPCC.

Citra Metro only partially paid the said interim billings prompting HUTAMA-RSEA to demand the
Citra Metro to pay the outstanding balance thereon, but the latter still failed to do so. Thereafter, they held
several meetings to discuss the possibility of amicably settling the dispute. Despite several meetings and
continuous negotiations, lasting for a period of almost one year, both parites failed to reach an amicable
settlement. Finally, HUTAMA-RSEA filed with the Construction Industry Arbitration Commission (CIAC) a
Request for Arbitration, seeking to enforce its money claims against respondent. In its Answer with Motion to
Dismiss, Citra Metro averred that the CIAC had no jurisdiction.

ISSUE:

Whether the CIAC had no jurisdiction over the case.

HELD:

Yes, Section 4 of Executive Order No. 1008 provides that The CIAC shall have original and exclusive
jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in
construction in the Philippines, whether the disputes arises before or after the completion of the contract, or
after the abandonment or breach thereof. These disputes may involve government or private contracts. For the
Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration.

The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials
and workmanship; violation of the terms of agreement; interpretation and/or application of contractual
provisions; amount of damages and penalties; commencement time and delays; maintenance and defects;
payment default of employer or contractor and changes in contract cost.

Further, Section 1, Article III of the CIAC Rules of Procedure Governing Construction Arbitration
(CIAC Rules), provides that 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.

An arbitration agreement or a submission to arbitration shall be in writing, but it need not be signed by
the parties, as long as the intent is clear that the parties agree to submit a present or future controversy arising
from a construction contract to arbitration.

Based on the foregoing provisions, the CIAC shall have jurisdiction over a dispute involving a
construction contract if said contract contains an arbitration clause (nothwithstanding any reference by
the same contract to another arbitration institution or arbitral body); or, even in the absence of such a
clause in the construction contract, the parties still agree to submit their dispute to arbitration.

It is undisputed that in the case at bar, the EPCC contains an arbitration clause in which the petitioner
and respondent explicitly agree to submit to arbitration any dispute between them arising from or connected
with the EPCC.

27

HI-PRECISION STEEL CENTER, INC. V. LIM KIM STEEL BUILDERS, INC. AND CIAC

G.R. NO. 110434, DECEMBER 13, 1993

FACTS:

Hi-Precision entered into a contract with Steel Builders under which the latter as Contractor was to
complete a 21 Million Pesos construction project owned by Hi-Precision with a period of 153 days. The said
completion of the project was then moved to November4, 1990, however, when the date came, only 75.8674%
of the project was actually completed.

Steel Builders filed a "Request for Adjudication" with Construction Industry Arbitration Commission
("CIAC") The CIAC formed an Arbitral Tribunal with three (3) members, two (2) being appointed upon
nomination of Hi-Precision and Steel Builders, respectively; the third member (the Chairman) was appointed
by the CIAC as a common nominee of the two (2) parties. Only the Chairman was a lawyer. After the
arbitration proceeding, the Arbitral Tribunal rendered a unanimous Award against Hi-Precision, hence Hi-
Precision moved to set aside the Award, contending basically that it was the contractor Steel Builders who had
defaulted on its contractual undertakings and that the Arbitral Tribunal committed grave abuse of discretion
when it allowed certain claims by Steel Builders and offset them against claims of Hi-Precision.

ISSUE:

Whether the finding of facts of the arbitral tribunal is final and unappealable.

HELD:

Yes, Voluntary arbitration involves the reference of a dispute to an impartial body, the members of
which are chosen by the parties themselves, which parties freely consent in advance to abide by the arbitral
award issued after proceedings where both parties had the opportunity to be heard. The basic objective is to
provide a speedy and inexpensive method of settling disputes by allowing the parties to avoid the formalities,
delay, expense and aggravation which commonly accompany ordinary litigation, especially litigation which
goes through the entire hierarchy of courts. Executive Order No. 1008 created an arbitration facility to which
the construction industry in the Philippines can have recourse. The Executive Order was enacted to encourage
the early and expeditious settlement of disputes in the construction industry, a public policy the implementation
of which is necessary and important for the realization of national development goals.

Aware of the objective of voluntary arbitration in the labor field, in the construction industry, and in
any other area for that matter, the Court will not assist one or the other or even both parties in any effort to
subvert or defeat that objective for their private purposes. The Court will not review the factual findings of an
arbitral tribunal upon the artful allegation that such body had "misapprehended the facts" and will not pass upon
issues which are, at bottom, issues of fact, no matter how cleverly disguised they might be as "legal questions."
The parties here had recourse to arbitration and chose the arbitrators themselves; they must have had
confidence in such arbitrators.

28

RUBEN N. BARRAMEDA, ET AL. V. ROMEO ATIENZA, ET AL.

G.R. NO. 129175, NOVEMBER 19, 2001

FACTS:

CANORECO is an electric cooperative organized under the provisions of P. D. No. 269, otherwise
known as the National Electrification Administration Decree, as amended by P. D. No. 1645. On July 10, 1996,
the Cooperative Development Authority (CDA) certified that CANORECO is registered as a full-fledged
cooperative under R. A. No. 6938.

On March 1, 1988, the National Electrification Administration (NEA) and CANORECO entered into a
Contract of Loan and First Mortgage of CANORECO properties for the improvement of the cooperatives
electrification program. One provision in the loan agreement is embodied in Article VI, Section 2, which
provides:

Section 2. In the event of default, the NEA may, in addition to the rights, privileges, powers and
remedies granted to it under Presidential Decree No. 269 and other pertinent laws, exercise any or all of the
following remedies.

c. Assign or appoint a Project Supervisor and/or General Manager

d. Take over the construction, operation, management and control of the SYSTEM

e. Take any other lawful remedial measure

On March 10, 1990, Congress enacted into law Republic Act No. 6938 (the Cooperative Code of the
Philippines) and Republic Act No. 6939 (creating the Cooperative Development Authority [CDA]).The latter
act vested the power to register cooperatives solely on CDA. One of the signatories to the loan contract was
petitioner Reynaldo V. Abundo, the general manager of CANORECO at that time. During Abundos
incumbency, he failed to pay the loan obligations as they fell due. Thus, as of March 31, 1995, CANORECO’s
outstanding loan with NEA amounted to seventy four (74) million pesos.
 Shortly, the group of Reynaldo V. Abundo contested the authority of NEA to supervise and control
CANORECO, filing with CDA several cases, On February 15, 1996, CDA declared the board meeting of May
28, 1995, void ab initio. Later, President Fidel V. Ramos issued Memorandum Order No. 409, in response to
letters from the Governor of Camarines Norte and the Office of the Sangguniang Panlalawigan regarding the
conflict between the NEA group and the CDA group, The order constituted an ad hoc committee to
temporarily take over and manage the affairs of CANORECO. NEA and CDA are both under the supervision
and control of the Office of the President. CANORECO elected as new board members Hence, A petition for
quo warranto was filed by Barrameda et al.

ISSUE:

Whether or not the Memorandum Circular No. 409 is the proper remedy to resolve the dispute in the
case at bar.

HELD:

NO, CANORECO, having registered itself with the CDA pursuant to Section 128 of R.A. No. 6938
and Section 17 of R.A. No. 6939, was brought under the coverage of said laws. Article 38 of R.A. No. 6938
vests upon the board of directors the conduct and management of the affairs of cooperatives, and Article 39
provides for the powers of the board of directors.Obviously there was a clear case of intra-cooperative dispute.
Article 121 of the Cooperative Code is explicit on how the dispute should be resolved; thus:

ART. 121. Settlement of Disputes. -- Disputes among members, officers, directors, and committee
members, and intra-cooperative disputes shall, as far as practicable, be settled amicably in accordance with
the conciliation or mediation mechanisms embodied in the by-laws of the cooperative, and in applicable
laws.

Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of
competent jurisdiction.

Complementing this Article is Section 8 of R. A. No. 6939, which provides: SEC. 8. Mediation and
Conciliation. Upon request of either or both or both parties, the [CDA] shall mediate and conciliate disputes
with the cooperative or between cooperatives: Provided, That if no mediation or conciliation succeeds within
three (3) months from request thereof, a certificate of nonresolution shall be issued by the commission prior to
the filing of appropriate action before the proper courts.

Even granting for the sake of argument that the party aggrieved by a decision of the CDA could pursue
an administrative appeal to the Office of the President on the theory that the CDA is an agency under its direct
supervision and control, still the Office of the President could not in this case, motu proprio or upon
request of a party, supplant or overturn the decision of the CDA.

29

EDUARDO J. MARINO, JR., ET AL. V. GIL GAMILLA, ET AL.

G.R. NO. 132400, JANUARY 31, 2005

FACTS:

Petitioners are among the executive officers and directors of University of Santo Tomas Faculty Union
(USTFU) while respondents are composed of UST faculty and USTFU members. The dispute arose when UST
and USTFU, represented by petitioners herein, entered a Memorandum of Agreement (MOA) whereby UST
faculty members belonging to the CBA unit were granted additional economic benefits and at the same time
stipulated a 10% check-off over said benefits to cover union dues and special assessment for Labor Education
Fund and attorney’s fees. Respondents filed with the Med Arbiter a complaint assailing, among others, the
check-off for union dues and attorney’s fees collected under the MOA for being violative of the rights and
conditions of membership in USTFU.

DOLE Regional Director, by virtue of an order consolidating all the complaints by the respondents,
rendered among others a decision in favor of the latter and ruled that the check-off collected as negotiation fees
were invalid. Both the Bureau of Labor Relations (BLR) and CA, on appeal, AFFIRMED said decision and
ordered to return to the general membership the amount collected by way of attorney’s fees, hence this petition.

ISSUE:

Whether the regular courts has no jurisdiction over the case.

HELD:

No, It is a settled rule that jurisdiction, once acquired, continues until the case is finally terminated.
The petition with the Med-Arbiter was filed ahead of the complaint in the civil case before the RTC. As such,
when the petitioners filed their complaint a quo, jurisdiction over the injunction and restraining order prayed for
had already been lodged with the Med-Arbiter.  The removal of padlocks and the access to the office premises
is necessarily included in petitioners' prayer to enjoin respondents from performing acts pertaining to union
officers and on behalf of the union. 

In observance of the principle of adherence of jurisdiction, it is clear that the RTC should not have
exercised jurisdiction over the provisional reliefs prayed for in the complaint.  A review of the complaint shows
that petitioners disclosed the existence of the petition pending before the Med-Arbiter and even attached a copy
thereof. The trial court was also aware of the decision of the Med-Arbiter declaring the supposed union officers'
election void ab initio and ordering  respondents to cease and desist from discharging the duties and functions
of the legitimate officers of the USTFU.  The trial court even obtained a copy of the said decision two (2 days
after its promulgation. Still, it continued the hearing on the application for injunction and eventually issued the
assailed orders.

Administrative agencies are tribunals of limited jurisdiction and as such, can exercise only those
powers which are specifically granted to them by their enabling statutes.  Consequently, matters over which
they are not granted authority are beyond their competence. While the trend is towards vesting administrative
bodies with the power to adjudicate matters coming under their particular specialization, to ensure a more
knowledgeable solution of the problems submitted to them, this should not deprive the courts of justice their
power to decide ordinary cases in accordance with the general laws that do not require any particular expertise
or training to interpret and apply. In their complaint in the civil case, petitioners do not seek any relief under the
Labor Code but the payment of a sum of money as damages on account of respondents' alleged tortuous
conduct. The action is within the realm of civil law and, hence, jurisdiction over the case belongs to the regular
courts. Like labor disputes, jurisdiction over intra-union and inter-union disputes does not pertain to the regular
courts.  It is vested in the Bureau of Labor Relations Divisions in the regional offices of the Department of
Labor.
30

A.D. GOTHONG MANUFACTURING CORPORATION EMPLOYEES UNION-ALU (THE UNION) V.

HON. NIEVES CONFESSOR, SECRETARY OF DOLE AND A.D. GOTHONG MANUFACTURING
CORPORATION (THE COMPANY)

G.R. NO. 113638, NOVEMBER 16, 1999

FACTS:

A. D. Gothong Manufacturing Corporation Employees Union-ALU ("Union") filed a petition for

certification election in its bid to represent the unorganized regular rank-and-file employees of A. D. Gothong
Manufacturing Corporation ("Company") excluding its office staff and personnel.  A certification election was
conducted whereas two votes were challenged by the Union those of which belonged to Plaza and Yap who
opposed and claimed they are rank and file employees.

The Med-Arbiter declared that the challenged voters Yap and Plaza are rank-and-file employees ruling
that the Union failed to present concrete and substantial evidence to establish the fact that challenged voters are
either managerial or supervising employees. Hence, the Union appealed to the Secretary of Labor insisting that
Yap and Plaza are supervisor and manager respectively of the corporation and are prohibited from joining the
proposed bargaining unit of rank-and-file employees. The Secretary of Labor affirmed the finding of the Med-
Arbiter. Motion for Reconsideration of the above resolution having been denied, the Union appeals to this
Court by petition for review on certiorari.

ISSUE:

Whether or not the Med-Arbiter erred in ruling against the Union.

HELD:

No, This Court is not a trier of facts. it is not the function of this Court to examine and evaluate the
probative value of all evidence presented to the concerned tribunal which formed the basis of its impugned
decision or resolution. Following established precedents, it is inappropriate to review that factual findings of
the Med-Arbiter regarding the issue whether Romulo Plaza and Paul Michael Yap are or are not rank-and-file
employees considering that these are matters within their technical expertise. They are binding on this Court as
we are satisfied that they are supported by substantial evidence, and we find no capricious exercise of judgment
warranting reversal by certiorari.