ADR-Loss of Jurisdiction Cases | Bill Of Lading | Arbitration

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. NO.

152471 August 18, 2006 FIESTA WORLD MALL CORPORATION, Petitioner, vs. LINBERG PHILIPPINES, INC., Respondent. DECISION SANDOVAL-GUTIERREZ, J.: For our resolution is the instant Petition for Review on Certiorari assailing the Decision dated December 3 12, 2001 and Resolution dated February 28, 2002 rendered by the Court of Appeals in CA-G.R. SP No. 63671, entitled "Fiesta World Mall Corporation, petitioner, versus Hon. Florito S. Macalino, Presiding Judge of the Regional Trial Court (RTC), Branch 267, Pasig City, and Linberg Philippines, Inc., respondents." The facts of this case are: Fiesta World Mall Corporation, petitioner, owns and operates Fiesta World Mall located at Barangay Maraouy, Lipa City; while Linberg Philippines, Inc., respondent, is a corporation that builds and operates power plants. On January 19, 2000, respondent filed with the Regional Trial Court (RTC), Branch 267, Pasig City, a Complaint for Sum of Money against petitioner, docketed as Civil Case No. 67755. The complaint alleges that on November 12, 1997, petitioner and respondent executed a build-own-operate agreement, 4 entitled "Contract Agreement for Power Supply Services, 3.8 MW Base Load Power Plant" (the Contract). Under this Contract, respondent will construct, at its own cost, and operate as owner a power plant, and to supply petitioner power/electricity at its shopping mall in Lipa City. Petitioner, on the other hand, will pay respondent "energy fees" to be computed in accordance with the Seventh Schedule of the Contract, the pertinent portions of which provide: 2.1 x xx E1 988,888 kw-hr x BER E2 (ED-988,888) x BER Where: E1 & E2 Energy fees in pesos for the billing period. Where E1 is based on the minimum energy off-take of 988,888 kw-hrs.per month and E2 is based on the actual meter reading less the minimum off-take.
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BER Base energy rate at Ps 2.30/Kw-Hr billing rate based on the exchange rate of Ps 26.20 to the US dollar, and with fuel oil to be supplied by LINBERG at its own cost. The base energy rate is subject to exchange rate adjustment accordingly to the formula as follows: BER 0.6426 + 0.3224 Pn + 1.345 Fn 26.40 4.00 WHERE: Pn is defined as the average of the BangkoSentralngPilipinas published dealing rates for thirty (30) trading days immediately prior to the new billing rate. Fn Weighted average of fuel price per liter based on the average of the last three (3) purchases made by LINBERG as evidenced by purchase invoices. ED Energy delivered in kw-hrs per meter reading. 3. Minimum Energy Off-Take The energy fees payable to LINBERG shall be on the basis of actual KWH generated by the plant. However, if the actual KWH generated is less than the minimum energy off-take level, the calculation of the energy fees shall be made as if LINBERG has generated the minimum energy off-take level of 988,888 KW-HR per month. The complaint further alleges that respondent constructed the power plant in Lipa City at a cost of about P130,000,000.00. In November 1997, the power plant became operational and started supplying power/electricity to petitioner s shopping mall in Lipa City. In December 1997, respondent started billing petitioner. As of May 21, 1999, petitioner s unpaid obligation amounted to P15,241,747.58, exclusive of interest. However, petitioner questioned the said amount and refused to pay despite respondent s repeated demands. In its Answer with Compulsory Counterclaim, petitioner specifically denied the allegations in the complaint, claiming that respondent failed to fulfill its obligations under the Contract by failing to supply all its power/fuel needs. From November 10, 1998 until May 21, 1999, petitioner personally shouldered the cost of fuel. Petitioner also disputed the amount of energy fees specified in the billings made by respondent because the latter failed to monitor, measure, and record the quantities of electricity delivered by taking photographs of the electricity meter reading prior to the issuance of its invoices and 5 billings, also in violation of the Contract. Moreover, in the computation of the electrical billings, the minimum off-take of energy (E2) was based solely on the projected consumption as computed by respondent. However, based on petitioner s actual experience, it could not consume the energy pursuant to the minimum off-take even if it kept open all its lights and operated all its machinery and equipment for twenty-four hours a day for a month. This fact was admitted by respondent. While both parties had discussions on the questioned billings, however, "there were no earnest efforts to resolve the differences in accordance with the arbitration clause provided for in the Contract." Finally, as a special affirmative defense in its answer, petitioner alleged that respondent s filing of the complaint is premature and should be dismissed on the ground of non-compliance with paragraph 7.4 of the Contract which provides:

Inc. The sole issue for our resolution is whether the filing with the trial court of respondent s complaint is premature. expressly intended that the said matter in dispute must first be resolved by an arbitration panel before it reaches the court. the trial court denied petitioner s motion for lack of merit. In its Order dated October 3. Moreover. Suffice it to state that there is nothing in the Contract providing that the parties may dispense with the arbitration clause. however. less confrontational. We cannot agree with respondent that it can directly seek judicial recourse by filing an action against petitioner simply because both failed to settle their differences amicably. the instant Petition for Review on Certiorari. However. They made such arbitration mandatory. 1992. they provide solutions that are less time-consuming. Its potentials as one of the alternative dispute resolution methods that are now rightfully vaunted as the wave of the future in international relations.e. Corollarily." The parties. and in the event that a settlement of any such dispute or difference is not reached.2 above.4 of the Contract. To brush aside a contractual agreement calling for arbitration in case of disagreement between the parties would therefore be a step backward. without prior recourse to arbitration as required in the Contract. SP No. plus interest computed pursuant to Art. however. 1993. v.R. is recognized worldwide. while the other two (2) to be each chosen by the parties themselves. then the provisions of Article XXI shall apply. 2002. 92683. petitioner elevated the matter to the Court of Appeals via a Petition for Certiorari. Court of Appeals. Dissatisfied. referred to in paragraph 17. This was opposed by respondent. and more 9 productive of goodwill and lasting relationships. 2001. 63671. And because it covers the dispute 8 between them in the present case. As we held in BF 10 Corporation v. March 22.R. in incorporating such agreement in their Contract. one (1) by mutual choice. 91228. Since that agreement is 7 binding between them. less tedious.. it shall pay the undisputed amount on or before such date(s). In this connection. the same "shall be resolved by arbitration of three (3) persons. that "the parties hereto submit to the exclusive jurisdiction of the proper courts of Pasig City" merely provides for the venue of any action arising out of or in connection with the stipulations of the parties in the Contract. that both parties must resolve the disputes within thirty (30) days. petitioner filed a Motion to Set Case for Preliminary Hearing on the ground that respondent violated the arbitration clause provided in the Contract. G. Alternative dispute resolution methods or ADRs like arbitration. and that since the parties failed to settle their dispute. i. Republic of the Philippines for the hearing and determination of any action or proceeding arising out of or in connection with this Agreement. docketed as CA-G. 206 SCRA 545. 2000. Paragraph 7. respondent. 2001. thus violating the arbitration clause in the Contract. 1953 of Republic Act No. Article XXI. XXV from the date FIESTA WORLD paid for the erroneous billing. then respondent may resort to court action pursuant to paragraph 17.4 of the Contract on arbitration is not the provision applicable to this case. LINBERG shall be liable to pay FIESTA WORLD for the cost of such deterioration. Thus. Court of Appeals. On December 12. mandates that should petitioner dispute any amount of energy fees in the invoice and billings made by respondent. while the other two (2) to be each chosen by the parties themselves. Court of Appeals. we note that the computation of the energy fees disputed by petitioner also involves technical matters that are better left to an arbitration panel who has expertise in those areas. 551). Even before the approval on June 19.2 of the same Contract which provides: 17. Inc. It should be noted that in this jurisdiction.4 Disputes If FIESTA WORLD disputes the amount specified by any invoice. reads: ARTICLE XXI JURISDICTION The parties hereto submit to the exclusive jurisdiction of the proper courts of Pasig City. It bears stressing that such arbitration agreement is the law between the parties. 876 was adopted to supplement the New Civil Code s provisions on arbitration (Chung Fu Industries Phils. By enabling the parties to resolve their disputes amicably. one (1) by mutual choice. within fourteen (14) days after the due date for such invoice and all or any part of the disputed amount paid to LINBERG shall be paid together with interest pursuant to Article XXV from the due date of the invoice.. thereby rendering its cause of action premature. No. it is well within petitioner s right to demand recourse to arbitration. Republic Act No. they are expected to abide by it in good faith. claiming that paragraph 7. It is agreed. arbitration has been held valid and constitutional. since respondent has already filed a complaint with the trial court without prior recourse to arbitration. (Underscoring supplied) Thereafter. quoted earlier. v. 220 SCRA 281-290). Petitioner then filed a Motion for Reconsideration but it was denied in an Order dated January 11. Article XXI on jurisdiction cited by respondent. negotiation and conciliation are encouraged by this Court. G.7. 876 (The Arbitration Law). either of them may compel the other to arbitrate. February 25. otherwise any delay in payment resulting to loss to LINBERG when converted to $US as a result of depreciation of the Pesos shall be for the account of FIESTA WORLD. Hence. No. To brush aside such agreement providing for arbitration in case of disputes between the parties would be a step backward. and the disputed amount shall be resolved by arbitration of three (3) persons. mediation. the appellate court rendered its Decision dismissing the petition and affirming the challenged Orders of the trial court. the proper procedure to enable an arbitration panel to resolve the parties 11 dispute pursuant to their Contract is for the trial court to stay the proceedings. It is clear from the records that petitioner disputed the amount of energy fees demanded by respondent. this Court has countenanced the settlement of disputes through arbitration (Puromines.2 Amicable Settlement The parties hereto agree that in the event there is any dispute or difference between them arising out of this Agreement or in the interpretation of any of the provisions hereto. they shall endeavor to meet together in an effort to resolve such dispute by discussion between them but failing such resolution the Chief Executives of LINBERG and FIESTA WORLD shall meet to resolve such dispute or difference and the joint decision of such shall be binding upon the parties hereto. After the arbitration . filed directly with the trial court its complaint.R. in case of erroneous billings. Petitioner s Motion for Reconsideration of the above Decision was likewise denied by the appellate court 6 in its Resolution dated February 28.

Pasig City is directed to suspend the proceedings in Civil Case No. The parties are ordered to submit their controversy to the arbitration panel pursuant to paragraph 7. 67755 until after the Arbitration Panel shall have resolved the controversy and submitted its report to the trial court. 63671 are REVERSED. then the trial court may confirm the award made by the 12 arbitration panel. Branch 267. The Regional Trial Court. .proceeding has been pursued and completed. Costs against respondent.R. SP No. In sum.4 of the Contract. we hold that the Court of Appeals erred in disregarding the arbitration clause in the parties Contract. WHEREFORE. The assailed Decision and Resolution of the Court of Appeals in CA-G. SO ORDERED. we GRANT the instant petition.

between Parcel Tankers. Sycip. 13498 pending the return of the corresponding arbitral award. Netherlands. the arbitral clause in the Charter Party should have been incorporated into the Bill of Lading. dated 21 December 1984. representing the amount the INSURER had paid the SHIPPER-ASSURED. We rule against that submission. Philippines. On 21 August 1989. the remedy of prohibition would lie since it would be useless and a waste of time to go ahead with the proceedings (University of Sto. the INSURER is subject to the provisions of the Bill of Lading.) INC.: We uphold the ruling of respondent Court of Appeals that the claim or dispute herein is arbitrable." The CARRIER then resorted to a Petition for Certiorari and Prohibition with prayer for Preliminary Injunction and/or Temporary Restraining Order before the respondent Appellate Court seeking the 2 annulment of the 19 November 1987 RTC Order. which includes a provision that the shipment is carried under and pursuant to the terms of the Charter Party.S. 1987 deferring resolution on petitioner Stolt-Nielsen's Motion to Dismiss/Suspend Proceedings is hereby SET ASIDE. and that the arbitration clause is void for being 1 unreasonable and unjust. We proceed to the second but more crucial issue: Are the terms of the Charter Party. 97 Phil. Upon receipt of the cargo by the CONSIGNEE in the Netherlands. Even a cursory reading of the subject Bill of Lading. and deferred resolution on the Motion to Dismiss/Suspend Proceedings until trial on the merits "since the ground alleged in said motion does not appear to be indubitable. the American International Underwriters (Philippines). et al. Branch 58 (RTC). Inc. which they have done. and COURT OF APPEALS. The claim filed by the SHIPPER-ASSURED with the CARRIER having been denied. 84 Phil.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. 87958 April 26. the RTC denied the Motion.... petitioners. vs. as subrogee of the SHIPPER-ASSURED. 787 [1955]). On 21 April 1986. which can not be the subject of a special civil action on certiorari and prohibition. Inc. covered by Tanker Bill of Lading BL No.. with interest. it is subrogee only with respect to the Bill of Lading. and respondent Judge is directed to suspend the proceedings in Civil case No. before the Regional Trial Court of Makati. STOLT-NIELSEN PHILIPPINES. the holder of the Bill of Lading. On 9 January 1985. we resolved to give due course and required the parties to submit their respective Memoranda. 439. U. the INSURER indemnified the SHIPPER pursuant to the stipulation in the marine cargo policy covering said shipment. for recovery of the sum of P1. the case before us falls under the exception. respondents. Hernandez &Gatmaitan for Stolt-Nielsen Phil. private respondent NUFIC (the INSURER) is ordered to refer its claims for arbitration. where it clearly appears that the trial Judge or Court is proceeding in excess or outside of its jurisdiction. providing for arbitration.21. consigned to "NieuweMatex" at Rotterdam. 424 [1954]. On 28 July 1987. (hereinafter referred to as SHIPPER) shipped 404. It appears that the Bill of Lading issued by the CARRIER contained a general statement of incorporation of the terms of a Charter Party between the SHIPPER and Parcel Tankers. Batangas.469. PA/AMERICAN INTERNATIONAL UNDERWRITER (PHIL. Inc. entered into in Greenwich. in relation to the Charter Party. as insurer. from Bauan. the last filed having been Noted on 23 October 1989. 106 Phil. a non-life American insurance corporation. The INSURER opposed the dismissal/suspension of the proceedings on the ground that it was not legally bound to submit the claim for arbitration inasmuch as the arbitration clause provided in the Charter Party was not incorporated into the Bill of Lading. Tomas vs. The CARRIER moved to dismiss/suspend the proceedings on the ground that the RTC had no jurisdiction over the claim the same being an arbitrable one. that as subrogee of the SHIPPER-ASSURED.S.A. particularly the provision on arbitration. et al. binding on the INSURER? The INSURER postulates that it cannot be bound by the Charter Party because. the respondent Court promulgated the Decision now under review. vs. Generally. 94 Phil. CIR. Salazar.. The shipment was insured under a marine cargo policy with Petitioner National Union Fire Insurance Company of Pittsburg (hereinafter referred to as INSURER). Macadaeg. No. U. but subsequently reconsidered its action on 19 November 1987. United Coconut Chemicals. San Beda College vs. While a Court Order deferring action on a motion to dismiss until the trial is interlocutory and cannot be challenged until final judgment.R. MELENCIO-HERRERA. it was found to be discolored and totally contaminated. the order of respondent Judge dated November 19." a tanker owned by Stolt-Nielsen Philippines Inc. Inc. First. Villanueva. still. Inc. INC. that only the Bill of Lading should regulate the relation among the INSURER. the INSURER filed suit against the CARRIER. through its settling agent in the Philippines. this would be true. BAT-1. 674 [1949]. between the SHIPPER-ASSURED and Parcel Tankers. herein petitioner-INSURER alleges that the RTC Order deferring resolution of the CARRIER's Motion to Dismiss constitutes an interlocutory order. Enrique vs. the other petitioner herein. (hereinafter referred to as CARRIER). reveals the Court's patent lack of jurisdiction to hear and decide the claim. Inc..774 metric tons of distilled C6-C18 fatty acid on board MT "StoltSceptre. Connecticut.. Ibanez. However. The pertinent portion of the Bill of Lading in issue provides in part: This shipment is carried under and pursuant to the terms of the Charter dated December 21st 1984 at Greenwich.619. On 12 April 1989. J.. and that in order to bind it. Fajardo Law Offices for petitioners. et al. and the CARRIER. 1990 NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURG. [1959] citing Philippine International Fair.A. . Connecticut. with the following dispositive tenor: WHEREFORE'.

vs. it pertinently provides: 1.. unless it finds that the said agreement is null and void. It has not been shown that the arbitral clause in question is null and void. the two thus chosen. it could have easily obtained a copy thereof either from the shipper or the charterer. referral to arbitration in New York pursuant to the arbitration clause. performance or termination of this Charter Party shall be settled in New York. and United Coconut Chemicals. In fine. as an alternative mode of settling disputes.R. Arbitration. Owner and Charterer each appointing an arbitrator. 460 F 2d 89. and a judgment of the court shall be entered upon any award made by said arbitrator. Inc. because as subrogee it stepped into the shoes of the SHIPPER-ASSURED and is subrogated merely to the latter's rights.El. the INSURER is contractually bound by the terms of the Charter party. who shall be a merchant. therefore. We hold. 13498 below. Home Insurance Co. . deed of freight. "the bill of lading operates as the receipt for the goods.N. The Bill of Lading becomes.Y." under the 10 May 1965 Resolution No. M/T Gilda. that the INSURER cannot avoid the binding effect of the arbitration clause. as Charterer and all the terms whatsoever of the said Charter except the rate and payment of freight specified therein apply to and govern the rights of the parties concerned in this shipment. Any dispute arising from the making. 194 F. 4 April 1968. 70 SCRA 122).. 790 F 2d 1209. shall. This should include the provision on arbitration even without a specific stipulation to that effect. Special Provisions.R. Ltd. American Steamship Agencies. Civil Code). vs. Greenstone Shipping Co. good customs. vs. signed by the parties or contained in an exchange of letters or telegrams. 876 (The Arbitration Law) also expressly authorizes arbitration of domestic disputes. 1972]. or incapable of being performed. (Emphasis supplied) While the provision on arbitration in the Charter Party reads: H. morals. By subrogation. 1960].D. the INSURER "cannot feign ignorance of the arbitration clause since it was already charged with notice of the existence of the charter party due to an appropriate reference thereof in the bill of lading and. broker or individual experienced in the shipping business. No. Nothing in this clause shall be deemed to waive Owner's right to lien on the cargo for freight. 3. or demurrage.Inc.. inoperative or incapable of being performed. is. Book IV. and is the law between the parties who are bound by its terms and condition provided that these are not contrary to law. when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article. S. The court of a Contracting State. It can recover only the amount that is recoverable by the assured. G. No. necessarily. Arbitration. Costs against petitioners. SO ORDERED. Transworld Oil. inoperative. 23 SCRA 24).A. finding no reversible error in respondent Appellate Court's 12 April 1989 Decision. 1984]). L-27796. Any claim of inconvenience or additional expense on its part should not render the arbitration clause unenforceable. by the exercise of ordinary diligence. refer the parties to arbitration. G. 71). Stated otherwise. Ind. Marine Tankers Corp. Paul Fire and Marine Insurance Co. it became privy to the Charter Party as fully as the SHIPPER before the latter was indemnified. p. The entire contract must be read together and its clauses interpreted in relation to one another and not by parts. Charter Parties and Ocean Bills of Lading (5th ed. Supp 161. the Bill of Lading incorporates by reference the terms of the Charter Party. at the request of one of the parties. Nor has any conflict been pointed out between the Charter Party and the Bill of Lading. but not as varying the contract between the charterer and the shipowner" (In re Marine Sulphur Queen. Title XIV. Macondray. therefore. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship. Republic Act No. 71 of the Philippine Senate. Clearly. The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement. 1986]. and suspension of the proceedings in Civil Case No. a suit by the INSURER is subject to the same agreements (see St. Ministry of Commerce vs. vs. indeed called for. 588 F Supp [D. only a receipt and not the contract of carriage in a charter of the entire vessel. Copy of the Charter may be obtained from the Shipper or Charterer. if they cannot agree. pending the return of the arbitral award. Moreover. giving reciprocal recognition and allowing enforcement of international arbitration agreements between parties of different nationalities within a contracting state. L-25599. which includes by reference the terms of the Charter Party. xxxxxxxxx 4.. and the charterer is also the holder of the bill of lading. WHEREFORE. for the contract is the Charter Party (Shell Oil Co. Foreign arbitration as a system of settling commercial disputes of an international character was likewise recognized when the Philippines adhered to the United Nations "Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of 1958. 103 [2d Cir. in cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard a vessel under a charter party. has long been recognized and accepted in our jurisdiction (Chapter 2. and as document of title passing the property of the goods. Thus. shall nominate a third arbitrator who shall be an admiralty lawyer. It is settled law that the charter may be made part of the contract under which the goods are carried by an appropriate reference in the Bill of Lading (Wharton Poor. And since the right of action of the SHIPPER-ASSURED is governed by the provisions of the Bill of Lading. Civil Code). as the subrogee of the SHIPPER. concerning a subject matter capable of settlement by arbitration. Such arbitration shall be conducted in conformity with the provisions and procedure of the United States arbitration act. 25 March 1976. whether contractual or not. 2. As the respondent Appellate Court found. 163 [S. 1212 [5th Cir. public order and public policy (Article 1306. the instant Petition for Review on certiorari is DENIED and the said judgment is hereby AFFIRMED.

Del Rosario & Del Rosario for private respondent. That the defendant is not the ship owner or common carrier and therefore plaintiff does not have a legal right against it since every action must be brought against the real party in interest has no merit either for by the allegations in the complaint the defendant herein has been impleaded as charterer of the vessel. (not a party in this case) entered into a contract with private respondent Philipp Brothers Oceanic. NOCON. the shipments covered by Bill of Lading Nos. Three bills of lading were issued by the shipagent in the Philippines.000 metric tons for discharge in Manila. J. filed its Answer to the complaint. petitioner filed a complaint with the trial court for breach of contract of carriage against Maritime Factors.R. the facts show that petitioner. the decision of an Umpire appointed by them to be final.. in part. v. (which was not included as respondent in this petition) as ship-agent in the Philippines for the owners of the vessel MV "LilianaDimitrova. 1 dated May 12. . 91228 March 22. thus: 9. the vessel M/V "LilianaDimitrova" loaded on board at Yuzhny. Inc. .. petitioner. 1988. However. Puromines. 89-47403. to be delivered to petitioner." while private respondent. The Arbitrators and Umpire are all to be commercial men and resident in London. and Bill of Lading No. USSR.8. Maritime Factors.: This is a special civil action for certiorari and prohibition to annul and set aside the Decision of the 1 respondent Court of Appeals dated November 16. respondents. and Philipp Brothers Oceanic. Inc. among others an arbitration clause which states. This submission may be made a rule of the High Court of Justice in England by either 2 party. Inc. was impleaded as charterer of the said vessel and proper party to accord 5 petitioner complete relief. Bill of Lading No. vs. Inc. "B" and "C" to the complaint state. while private respondent filed a motion to dismiss. The appellate court found that the arbitration provision in the sales contract and/or the bills of lading is applicable in the present case. "any dispute arising under this Bill of Lading shall be referred to arbitration of the Maritime Arbitration Commission at the USSR Chamber of Commerce and Industry. hardened and lumpy.500 metric tons likewise for discharge in Manila. 1989.000 metric tons for unloading in Iloilo City.. namely: Bill of Lading No. Inc. The motion to dismiss was opposed by petitioner contending the inapplicability of the arbitration clause inasmuch as the cause of action did not arise from a violation of the terms of the sales contract but rather for claims of cargo damages where there is no arbitration agreement. 6 Kuibyshevskaia Str. that it was prematurely filed. Culled from the records of this case. It is also noted that the bills of lading attached as Annexes "A". 3. on the grounds that the complaint states no cause of action.056. Inc. Arbitration Any disputes arising under this contract shall be settled by arbitration in London in accordance with the Arbitration Act 1950 and any statutory amendment or modification thereof. . Consequently. Philipp Brothers Oceanic. the trial court denied respondent's motion to dismiss in this wise: The sales contract in question states in part: Any disputes arising under this contract shall be settled by arbitration . INC. 1988. 1989. 1989 reversing the order of the trial court and dismissing petitioner's complaint in Civil Case No. in accordance with the rules of procedure of said commission. 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. covering 1. 2 was discharged in Iloilo City complete and in good order and condition. Fajardo Law Offices for petitioner. discolored and contaminated with rust and dirt. Damages were valued at P683. for the sale of prilled Urea in bulk. petitioner's complaint was dismissed." 3 4 G.29 including additional discharging expenses. Inc. Inc. and should they be unable to agree. The Sales Contract No. Each party is to appoint an Arbitrator. a 7 proper party. Thus. also dated May 12. 1993 PUROMINES. dated February 9. 2 of even date covering 4. Elevating the matter to the Court of Appeals. S151. COURT OF APPEALS and PHILIPP BROTHERS OCEANIC. (Puromines for brevity) and Makati Agro Trading. caked. (emphasis supplied) A perusal of the facts alleged in the complaint upon which the question of sufficiency of the cause of action is to be determined shows quite clearly that the cause of action of the complaint arose from a breach of contract of carriage by the vessel chartered by the defendant Philipp Brothers Oceanic. hence. and that petitioner should comply with the arbitration 6 clause in the sales contract.8. Maritime Factors. Inc.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION The shipment covered by Bill of Lading No. the aforementioned arbitration clause cannot apply to the dispute in the present action which concerns plaintiff's claim for cargo loss/damage arising from breach of contract of carriage. Said the court: An examination of the sales contract No. S151. On April 26.01018 shows that it is broad enough to include the claim for damages arising from the carriage and delivery of the goods subject-matter thereof. INC. 1 and 3 were discharged in Manila in bad order and condition. 1988 covering 10. Inc. Moscow.. Maritime Factors Inc.. No.01018 provided. entitled Puromines. On or about May 22.

be material to show what kind of charter party the respondent had with the shipowner to determine respondent's liability. petitioner said that "[t]he cause of action of the complaint arose from breach of contract of carriage by the vessel that was chartered by defendant 9 Philipp Brothers.000 metric tons to Puromines and approximately 15. which leaves the general . Charter or charter parties are of two kinds. the buyer may decline to treat the delivery to the carrier as a delivery to himself. the (petitioner) is bound by the provisions and terms of said bill of lading and of the arbitration clause incorporated in the sales contract. If the charter is a contract of affreightment. Petitioner states in its complaint that Philipp Brothers "was the charterer of the vessel MV "LilianaDimitrova" which transported the shipment from Yuzhny USSR to Manila. 1523 of the Civil Code provides: Art. xxxxxxxxx The disputed sales contract provides for conditions relative to the delivery of goods. or unless a contrary intent appears. Charter of demise or bareboat and contracts of affreightment. As argued by respondent on its motion to dismiss. Sellers to appoint neutral survey for Seller's account to conduct initial draft survey at first discharge port and final survey at last discharge port. petitioner argues that the sales contract does not include the contract of carriage which is a different contract entered into by the carrier with the cargo owners. approximately 5. including the provision thereof on "arbitration. command and navigation of the ship. having regard to the nature of the goods and the other circumstances of the case. 5. In the event of co-shipment to a third party within Philippines same to be discussed with and acceptable to both Puromines and Makati Agro. the seller has the obligation to transmit the goods to the buyer. It is a contract for a special service to be rendered by the owner of 12 the vessel and under such contract the general owner retains the possession. . demurrage. therefore. "the (petitioner) derives his right to the cargo from the bill of lading which is the contract of affreightment together with the sales contract. We agree with the court a quo that the sales contract is comprehensive enough to include claims for damages arising from carriage and delivery of the goods. Art. 4. and contamination by rust and dirt of the damaged portions of the shipment were due to the improper ventilation and inadequate storage facilities of the vessel. As a general rule. being the charterer of the vessel MV "LilianaDimitrova. The charterer mans the vessel with his own people and becomes. subject to liability to others for damages caused by negligence. weight as determined by the bill of lading at load port and more particularly the following provisions: 3.29 Philippine currency. To create a demise the owner of a vessel must completely and exclusively relinquish possession. The issue raised is: 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. Sellers to have right to ship material as partial shipment or co-shipment in addition to above. all parties are obliged to respect the terms and conditions of the said sales contract. Surveyors results to be binding and final. or may hold the seller responsible in damages. but rather on the contract of carriage. wetting and melting. the seller is authorized or required to send the goods to the buyer." In the present petition. command and navigation thereof to the charterer. It is expressly and mutually agreed that neither Sellers nor vessel's Owners have any liability to separate cargo or to deliver cargo separately or to deliver minimum/maximum quantities stated on individual Bills of Lading. If the seller omit so to do. that the wetting of the cargo was attributable to the failure of the crew to close the hatches before and when it rained while the shipment was being unloaded in the Port of Manila. Unless otherwise authorized by the buyer. the owner pro hac vice. whether named by the buyer or not. the charterer or freighter merely having use of the space in the vessel in return for his 13 payment of the charter hire.056. At each port vessel is to discharge in accordance with Buyers local requirements and it is Buyer's responsibility to separate individual quantities required by each of them at each port during or after discharge.Considering that the private respondent was one of the signatories to the sales contract . delivery of the goods to a carrier. Under the demise or bareboat charter of the vessel. and the goods are lost or damaged in course of transit. That it was an error for the respondent court to touch upon the arbitration provision of the bills of lading in its decision inasmuch as the same was not raised as an issue by private respondent who was not a party in the bills of lading (emphasis Ours). 8 petitioner suffered damages in the total amount of P683. the seller must make such contract with the carrier on behalf of the buyer as may be reasonable. . and that as a direct and natural consequence of the unseaworthiness and negligence of the vessel (sic). Sellers to refund the difference." Hence." Assuming arguendo that the liability of respondent is not based on the sales contract. a contract of affreightment is one in which the owner of the vessel leases part or all of its space to haul goods for others. for the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer. Moreover. anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all. in its Opposition to the Motion to Dismiss. the charterer will generally be considered as owner for the voyage or service stipulated. Petitioner contradicts itself. in 11 effect. second and third paragraphs. However. On the other hand." it would. the contracting of a carrier to deliver the same. Consequently. this petition. In the event draft survey results show a quantity less than the combined Bills of Lading quantity for both Puromines and Makati Agro. first. 1523.000 metric tons to Makati Agro. except in the cases provided for in article 1503." (emphasis supplied). Intention is to ship in one bottom." Petitioner further alleged that the caking and hardening. such as date of shipment. and concomitant thereto. Where in pursuance of a contract of sale. American jurisprudence defines charter party as a contract by which an entire ship or some principal part 10 thereof is let by the owner to another person for a specified time or use. In the event that draft survey results show a quantity in excess of combined Bills of Lading quantity of both Puromines and Makati Agro then Buyers to refund the difference.

the charterer. and is answerable for loss. then it cannot be held liable for the damages caused by the breach of contract of carriage. 20 . is liable as carrier on the contract of affreightment made by himself or by the master with third persons. On the other hand. the courts will look with favor upon such amicable arrangements and will only interfere with great reluctance to anticipate or nullify the action of 17 the arbitrator. The duty of the court in this case is not to resolve the merits of the parties' claims but only to determine if they should proceed to arbitration or not. Assuming that in the present case. and not the owner. petition is hereby DISMISSED and the decision of the court a quo is AFFIRMED.. whether the liability of respondent should be based on the sales contract or that of the bill of lading. disputes or differences between the parties hereto relative to the construction of the building." "B. subject to the terms and conditions of the sales contract. Even before the enactment of Republic Act No. As pointed out in the case of Mindanao Portland Cement Corp." xxxxxxxxx We hold that the terms of paragraph 15 clearly express the intention of the parties that all disputes between them should first be arbitrated before court action can 21 be taken by the aggrieved party. the Court said: Since there obtains herein a written provision for arbitration as well as failure on respondent's part to comply therewith. Petitioner being a signatory and party to the sales contract cannot escape from his obligation under the arbitration clause as stated therein." and are therefore parts thereof and may be considered as evidence although not introduced as 16 such. responsibilities of ownership rest on 14 the owner and the charterer is usually free from liability to third persons in respect of the ship. This proceeding is merely a summary remedy to enforce the agreement to arbitrate. Hence. which agreement would be void. remains liable as carrier and must answer for any breach of duty as to the care. loading or unloading of the 15 cargo. this Court has countenanced the settlement of disputes through arbitration. Neither can petitioner contend that the arbitration provision in the bills of lading should not have been discussed as an issue in the decision of the Court of Appeals since it was not raised as a special or affirmative defense. in which the case the determination by arbitration is a condition precedent "for taking any court action. arbitration has been held valid and constitutional. McDonough Construction Company of 18 Florida wherein the plaintiff sued defendant for damages arising from a contract. then Philipp Brothers is liable to Puromines. WHEREFORE. In any case. The rule now is that unless the agreement is such as absolutely to close the doors of the courts against the parties. the parties are nevertheless obligated to respect the arbitration provisions on the sales contract and/or the bill of lading. Chan. And although it has been ruled that a frivolous or patently baseless claim should not be ordered to arbitration it is also recognized that the mere fact that a defense exists against a claim does not make it frivolous or 19 baseless. 876. Inc. An owner who retains possession of the ship. SO ORDERED. if the contract between respondent and the owner of the vessel MV "LilianaDimitrova" was merely that of affreightment. Premises considered.01018 to the present dispute. it was then proper for the court a quo to discuss the contents of the bills of lading. the charter party is a demise or bareboat charter. Going back to the main subject of this case. though the hold is the property of the charterer. 6 Republic Act 876). Respondent's arguments touching upon the merits of the dispute are improperly raised herein. the evidence of which is the bills of lading. We uphold the validity and applicability of the arbitration clause as stated in Sales Contract No. The three bills of lading were attached to the complaint as Annexes "A. and if possession is transferred to the charterer by virtue of a demise.8. having been made part of the record. They should be addressed to the arbitrators. Responsibility to third persons for goods shipped on board a vessel follows the vessel's possession and employment. We upheld the provision of a contract which required the parties to submit their disputes to arbitration and We held as follows: The trial court sensibly said that "all the causes of action alleged in the plaintiff's amended complaint are based upon the supposed violations committed by the defendants of the "Contract of Construction of a Building" and that "the provisions of paragraph 15 hereof leave a very little room for doubt that the said causes of action are embraced within the phrase "any and all questions.owner in possession of the ship as owner for the voyage." and "C. damage or nondelivery of goods received for transportation. the court a quo rightly ordered the parties to proceed to their arbitration in accordance with the terms of their agreement (Sec. the rights. In the case of Bengson v." which must be determined by arbitration of two persons and such determination by the arbitrators shall be "final. S151. v. conclusive and binding upon both parties" unless they go to court.

Ordoñez and the Chief Justice. There is no irregularity RESOLUTION YNARES-SANTIAGO. to influence the Chief Justice in any manner whatsoever. 168384 August 18. No." the movant assailed certain "proceedings in this Honorable Court s First Division. Panganiban.: Before the Court is a "Motion to Inhibit the Honorable Chief Justice and Motion to Refer Case to the Court En Banc. Following his misperception of "closeness and bonding between Atty. . PAULINO M. and on nothing else. he had no similar closeness with Atty. personally or through others. there had been no conversation or communication. there is no need to implead the lower courts or judges thereof either as petitioners or respondents. (3) True. 1999). on several occasions. May 19. (2) The alleged "unpleasant interaction these past 19 years between Atty. Chavez. Respondents. Ordoñez and Associates. According to the movant. has voted in favor of causes and parties represented by Atty. In fact. That is why he has not inhibited himself from cases involving Atty." The movant adds that "the dizzying pace by which private respondents motions have been received and favorably acted upon in record time supports Atty. the Chief Justice was an associate (not a partner) in 1961 to 1963 in the Salonga. the Chief Justice. 2006. However. Chavez knows that he has won the vote of the Chief Justice without his having to speak with or influence him in any manner. BATTAD. In fact. he has had a close personal and professional relationship with the principal partner in that law firm. As already stated. to vote against parties/causes represented by the former Secretary of Justice. Petitioner. impartial and neutral manner in disposing of incidental issues and motions presented by the parties. he assures movant (and all concerned) that he will continue with his vow "to lead a judiciary characterized by four Ins: independence. in their capacities as Arbitrators of the CONSTRUCTION INDUSTRY ARBITRATION COMMISSION. Ordoñez to uphold the CIAC. (7) In a few months. Ordoñez has been seriously ill. impartial and neutral. Neither is the Chief Justice aware of any alleged personal interest of Atty. 1998. (4) In fairness to all concerned. 863. Ordoñez. Chavez and Atty. when so warranted by the facts and law. (6) Movant s perception "that Atty. Atty. PCGG (360 Phil. Francisco I. going in and out of the hospital. While some orders and actions. Ordoñez s concern for and interest in upholding the CIAC jurisdiction must have somehow been relayed to the Honorable Chief Justice" is completely baseless. directly or indirectly." dated August 4. He has never attempted. SR. NOTO and ERNESTO J. Rather it is impelled by Atty. he merely concurred with the actions/rulings proposed by the ponente. vs. 366 Phil. Chavez s perception that private respondents motions without as much as requiring petitioner to respond thereto have been granted special attention and favor by the Honorable Chief Justice. ANTONIO YULO BALDE II. directly or indirectly. Ordoñez has never spoken. Ordoñez and the Chief Justice" to impair the latter s objectivity and impartiality has no basis. as public respondent was denied because Section 4. Salonga was/is a party or a 1 counsel. industry and intelligence. the Motion to Inhibit the Chief Justice "is not an accusation of wrongdoing on the part of the Honorable Chief Justice. Jr. these proceedings can easily be explained. Branch 203. with the Chief Justice on any matter pending in the Supreme Court and in any other court. Rule 45 of the Rules of Court provides that in a petition for review on certiorari to the Supreme Court. they are really collective actions of the entire Division. Regional Trial Court of Muntinlupa City. he has not hesitated. directly or indirectly. Sen.. Chavez s perception about the alleged "closeness and the good relationship between Atty. December 9. That is the reason the Chief Justice has inhibited himself from cases in which Sen. Ordoñez. SedfreyOrdoñez with whom Chief Justice worked either as associate or partner sometime ago" has nothing to do at all with the concurrences made by the Chief Justice on this case. between the Chief Justice and Atty. the Chief Justice did not initiate or propose any of the actions and rulings made by the Court. court. True also. I. for the following reasons: (1) The actions taken on the various motions and incidents enumerated by the movant were made by the entire membership of the First Division. 133. One outstanding example is Chavez v." On the other hand. which incidentally had been dissolved in 1987." II.. REYES doing business under the name and style CBH REYES ARCHITECTS." (bold types in original) Atty. personally or through others. Like the three other Division members. over the past several months. not merely those of the Chair. Ordoñez (or anyone representing him) about any matter related to any case in this. This is the normal procedure in all Divisions. especially temporary restraining orders. Atty. It is totally inconceivable that he will smear his eleven year record of integrity. SPOUSES CESAR and CARMELITA ESQUIG and ROSEMARIE PAPAS. Jovito R. independence and ethical conduct in the Supreme Court with any action that is less than "objective. not just in the First. Not being the ponente. which was written by then Associate Justice Artemio V. Salonga. J. And yet the Chief Justice has not even visited or spoken with him during such period. the Honorable Chief Justice has not acted in an objective. 2006 CHARLES BERNARD H. filed by Atty. or any other. Chavez.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. (5) On the other hand.R. the Chief Justice understands that Atty. Chavez s perception that in this case. Pedro Sabundayo. are issued in the name of the Division chairman (who in this case is the Chief Justice). Presiding Judge." However. These concurrences were given on the basis only of legal merit. thus: (1) Respondents Motion to Include Hon. integrity. the incumbent Chief Justice is scheduled to retire from the judiciary.

respondents filed an Urgent Motion for Clarification of the above resolution. Spouses Mely and Cesar Esquig.000. Meanwhile. It was a remedy intended to avoid any irreparable injury that might be caused to the parties. Reyes.00 representing the cost of the additional works. 2006 to enforce the decision dated July 29.000.00. the CIAC rendered a decision on the merits of the case awarding in favor of 3 respondents the sum of P4. to reimburse the overpayments made by respondents. in the alternative. Branch 203. P500. attorney s fees and costs of the suit. 2006 and July 19. Based on the same Design-Build Construction Agreement. from continuing with any of the proceedings in Civil Case No. The case is presently on appeal with the Court of Appeals 4 docketed as CA-G. It appears from the records that petitioner filed a complaint against respondents with the Regional Trial Court of Muntinlupa City which was docketed as Civil Case No. 03-110 in favor of petitioner ordering the respondents to pay P840. Sheriff Bagabaldo went to the residence of respondent Papas and levied several 7 of her personal properties. Both the July 12. This is in accordance with Section 4(3). and impose the corresponding sanctions in case of non-filing or unauthorized filing of such pleadings and documents or non-compliance with the conditions therefor. is in order. directed Sheriff Melvin T. 2006. Muntinlupa City.00) within a period of five (5) days from notice hereof x xx.658. the Supreme Court may require or allow the filing of such pleadings. (6) There is no truth or basis to the allegation that the case has been given "special attention. Jr. 2006." In their Second Manifestation with Prayer for Issuance of a Temporary Restraining Order/Injunction filed with this Court on July 10.094. P500. Since it did not acquire jurisdiction over the controversy. If we allow the RTC Judge and the Sheriff to continue with the proceedings in Civil 6 2 Case No. 2005. 9 This Court exercised its discretion when it did not require petitioner to file comment on respondents Manifestation with Urgent Motion to Resolve with Prayer for Injunction. P296. Reyes. 03-110. neither did it encroach on the jurisdiction of the Court of Appeals or of the lower court when it issued the Resolution dated July 12. Respondents bewailed that despite the pronouncement of the Court of Appeals that the CIAC. 2005 in Civil Case No. the Court further resolves to issue a TEMPORARY RESTRAINING ORDER enjoining the Presiding Judge. Branch 203 from continuing with any of the proceedings in Civil Case No. (4) A petition review under Rule 45 of the Rules of Court is not a matter of right but of sound judicial 8 discretion.R. 2005. then. WHEREFORE. 2006 ordering the sheriff to implement the writ of execution dated May 17. (3) Thereafter.when the Resolution denying respondents motion was issued when the Chief Justice was on official leave. the parties insist that the other breached their obligation under the Design-Build Construction Agreement." [subject matter of the assailed Court of Appeals decision and resolution dated February 18." (2) The issuance of a TRO enjoining the Presiding Judge of Muntinlupa City. then it would necessarily follow that the Regional Trial Court does not have jurisdiction. It may further be said that the issuance of a TRO on July 12. 2006.419. 2006 is not a final determination of the matter. SP No.00 as exemplary damages. Bagabaldo to implement the writ of execution by causing the respondents to "render an accounting of all the construction materials they bought for the construction of the project x xx. P500. we issued a resolution which is a clarification of the TRO issued on July 12. 2006. Regional Trial Court. Thus on July 12. On June 8. Accordingly. . It is important to mention that in both cases. and Compliance. memoranda or documents as it may deem necessary within such periods and under such conditions as it may consider appropriate. 03-110 praying that an accounting be rendered to determine the cost of the materials purchased by respondent Papas. respectively. and to pay liquidated damages. Judge Sabundayo. upon the private respondents filing of a bond in the amount of Three Hundred Thousand Pesos (P300. doing business under the name and style of CBH Reyes Architects vs. Antonio YuloBalde II. respondents clearly established that they are entitled to the issuance of a TRO. It may be recalled that the CIAC and the trial court each asserted its jurisdiction over the controversy to the exclusion of the other. whatever judgment that would be rendered in the instant case would be rendered nugatory.000.000. 03-110 entitled "Charles Bernard H. Otherwise stated. For purposes of determining whether the petition should be dismissed or denied. 2006. without the concurrence of at least three of such Members. and despite the pendency of the instant case before us.00 as attorney s fees and costs of the suit. on July 29. or where the petition is given due course. there is compelling reason to issue a TRO as the respondents satisfactorily established they are entitled to the relief demanded.000.00 by way of moral damages. to levy the goods and chattels of the [respondents] x xx 5 and to make the sale thereof x xx. 83816 entitled "Charles Bernard H." All actions on the motions and incidents have been performed regularly. 03-110. The Motion to Refer Case to the Court En Banc is GRANTED. the Court issued a Resolution that reads: Acting on the prayer for issuance of a temporary restraining order/injunction. doing business under the name and style CBH REYES ARCHITECTS vs. 2006 until 4 o clock in the morning of July 8. to pay the cost to finish the same. and that respondents be ordered to pay moral and exemplary damages. Article VIII of the Constitution which provides that "cases or matters heard by a division shall be decided or resolved with the concurrence of a majority of the Members who actually took part in the deliberations on the issues in the case and voted thereon. not the Regional Trial Court. the Regional Trial Court still proceeded with the implementation of the writ. Petitioner however argues that the Regional Trial Court properly took cognizance of the case while respondents claim that CIAC has the exclusive and original jurisdiction on the subject matter. Respondents satisfactorily established that they are entitled to the injunction. In an Order dated May 17. that the Design-Build Construction Agreement be ordered rescinded because respondents breach the same. on July 19. 90136. which has jurisdiction over the case. briefs. The remaining Members of the Division can proceed with official business despite the absence of the Chief Justice as long as the required majority is present. 2006.98. 2005 and May 20. 2006 ordering the designated sheriff to implement the writ of execution dated May 17. As discussed. 2006 Resolutions are covered by the same bond in the amount of P300. 03-110 and from enforcing the Order of the trial court dated June 29. Urgent Motion for Clarification. respondents averred that from July 7. Second Manifestation with Prayer for Issuance of a Temporary Restraining Order/Injunction. respondents filed with the Construction Industry Arbitration Commission (CIAC) a complaint praying that petitioner be ordered to finish the project or. in CA-G. 2006. the trial court rendered judgment in Civil Case No. SP No. SO ORDERED. then the writ of execution that it issued was void.95 representing the balance of the contract price.300. 2006. and in no case. that respondents be ordered to pay the cost of the additional works done on the property. (5) The Court did not exceed its jurisdiction. 2005. et al. if we rule in the instant case that CIAC has jurisdiction over the controversy. In view of the above circumstances. the Motion to Inhibit the Honorable Chief Justice is DENIED.R. et al"] and from enforcing the Order dated June 29.

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