APPROPRIATE DISPUTE

RESOLUTION
CASE DIGESTS

Submitted by:

Resonable, Trisha Mae L.

JD 2C
 1. Koppel, Inc. v. Makati Rotary Club Foundation, Inc.
G.R. No. 198075, 2013

Facts:

Fedders Koppel, Incorporated (FKI), a manufacturer of air-conditioning products, was the

registered owner of a parcel of land located at Km. 16, South Superhighway, Parañaque City
(subject land). Within the subject land are buildings and other improvements dedicated to the
business of FKI.

In 1975, FKI bequeathed the subject land (exclusive of the improvements thereon) in favor of
herein respondent Makati Rotary Club Foundation, Incorporated by way of a conditional
donation. The respondent accepted the donation with all of its conditions.

On 26 May1975, FKI and the respondent executed a Deed of Donation evidencing their
consensus. The Deed of Donation also stipulated that the lease over the subject property is
renewable for another period of twenty-five (25) years " upon mutual agreement" of FKI and the
respondent. In October 1976, FKI and the respondent executed an Amended Deed of Donation
that reiterated the provisions of the Deed of Donation , including those relating to the lease of the
subject land.

Verily, by virtue of the lease agreement contained in the Deed of Donation and Amended Deed
of Donation, FKI was able to continue in its possession and use of the subject land. According to
petitioner, the Deedof Donation and Amended Deed of Donation actually established not only
one but two (2) lease agreements between FKI and respondent, i.e. , one lease for the first
twenty-five (25)years or from 1975 to 2000, and another lease for the next twenty-five (25)years
thereafter or from 2000 to 2025. 27 Both leases are material conditions of the donation of the
subject land.

Issue:

Whether the petitioner can invoke the arbitration clause in the 2005 lease agreement, and at the
same time assail its validity.

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Ruling:

Yes. The court noted that the dispute between petitioner and respondent stemmed from the
application of the 2005 Lease Contract, thereby under the arbitration clause of the same contract.

While it may be conceded that in arbitration of such disagreement, the validity of the 2005 Lease
Contract, or at least, of such contract’s rental stipulation would have to be determined, the same
would not render such disagreement non-arbitable. Petitioner may still invoke the arbitration
clause of 2005 Lease Contract notwithstanding the fact that it assails the validity of such
contract. This is due to the doctrine of separability. Under this doctrine, 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 of the main contract.
Based from these reasons, the arbitration clause may still be invoked.

2. J Plus Asia Development Corporation v. Utility Assurance Corporation

G.R. NO. 199650, 2013

Facts:

J Plus Asia, represented by its chairman Joo Han lee, and Martin Mabunay, entered into a
CONSTRUCTION AGREEMENT whereby Mabunay undertook to build the former’s
Condominium/hotel in Boracay. The project was to be completed within 1 yr from the siigning
of the NOTICE OF AWARD and receipt of 20% down payment (8.4 milllion) The down
payment was fully paid on January 14, 2008. Per the agreed work schedule, the completion date
of the project was December 31, 2008. Mabunay also submitted the required Performance Bond
issued by Utility Assurance Corporation (UTASSCO) in the amount equivalent to 20% down
payment or P8.4 million. Mabunay commenced work on January 7, 2008. However, as
evidenced by the Joint Construction Evaluation Result and Status, signed by both parties, the
project was only 31.39 % complete as of November 14, 2008.

Thus, J PLUS ASIA terminated the contract and sent demand letters to Mabunay and the surety.
J Plus Asia filed a request for arbitration before the Construction Industry Arbitration
Commission (CIAC) and prayed that MAbunay and Surety be ordered to pay 8.9 Million as

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liquidated damages and 2.3 Million to the unrecouped down payment or overpayment made to
Mabunay. Mabunay’s answer alleged that the delay was caused by retrofitting and other revision
works ordered by Joo Han Lee. The surety on the other hand filed a MTD for lack of cause of
action. The surety argued that the performance bond merely guaranteed the 20% down payment
and not the entire obligation of Mabunay. THE CIAC ruled in favor of JPLUS ASIA. THE CA
ruled that Mabunay has not yet incurred delay and that obligation was not yet demandable
because the contract was terminated prior to completion date.

Issue:

Whether the ADR Act and the Special rules on ADR have stripped the Court of Appeals of
jurisdiction to review arbitral awards, and whether the CA erred in reversing the arbitral award
on an issue that was not raised in the answer or argued in any of the pleadings filed before the
court.

Ruling:

No, the CA was not divested of jurisdiction to review the decisions or  awards of the CIAC.
Petitioner erroneously relied on the provision in the ADR Act of 2004 allowing any party to a
domestic arbitration to file in the Regional Trial Court (RTC) a  petition either to confirm,
correct or vacate a domestic arbitral award. 

R.A. No. 9285 did not confer on regional trial courts the jurisdiction to review  awards or
decisions of the CIAC in construction disputes. In fact, Section 40 expressly  declares that
confirmation by the RTC is not required. A CIAC arbitral award need not be  confirmed by the
regional trial court to be executory as provided under E.O. No. 1008. 

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. 
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As to the alleged error committed by the CA in deciding the case upon an issue  not raised or
litigated before the CIAC, this assertion has no basis. Whether or not Mabunay  had incurred
delay in the performance of his obligations under the Construction  Agreement was the very first
issue stipulated in the Terms of Reference (TOR), which is  distinct from the issue of the extent
of respondent’s liability under the Performance Bond. 

Default or mora on the part of the debtor is the delay in the fulfillment of the  prestation by
reason of a cause imputable to the former. It is the non-fulfillment of an  obligation with respect
to time.1 It is a general rule that one who contracts to complete  certain work within a certain time
is liable for the damage for not completing it within such  time, unless the delay is excused or
waived. 

In this jurisdiction, the following requisites must be present in order that the debtor  may be in
default: (1) that the obligation be demandable and already liquidated; (2) that  the debtor delays
performance; and (3) that the creditor requires the performance  judicially or extrajudicially. 

Within four months after Mabunay commenced work activities, the project was  already behind
schedule for reasons not attributable to petitioner. In the succeeding  months, Mabunay was still
unable to catch up with his accomplishment even as petitioner  constantly advised him of the
delays. Instead of doubling his efforts as the scheduled  completion date approached, Mabunay
did nothing to remedy the delays and even reduced  the deployment of workers at the project site.
Neither did Mabunay, at anytime, ask for an extension to complete the project.

The contractor’s default in this case pertains to his failure to substantially perform the work on
account of tremendous delays in executing the scheduled work activities. Where a party to a
building construction contract fails to comply with the duty imposed by the terms of the
contract, a breach results for which an action may be maintained to recover the damages
sustained thereby, and of course, a breach occurs where the contractor inexcusably fails to
perform substantially in accordance with the terms of the contract. The Writ of Execution dated
November 24, 2010 issued by the CIAC Arbitral Tribunal in CIAC Case No. 03-2009 is hereby
REINSTATED and UPHELD.

3. Puromines, Inc. v. CA

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 G.R. No. 91228, 1993

Facts:

Petitioner, Puromines, Inc. and Makati Agro Trading, Inc. entered into a contract with private
respondents Philipp Brothers Oceanic, Inc. for the sale of prilled Urea in bulk. The Sales
Contract No. S151.8.01018 provided, among others an arbitration clause which states, thus:

"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 22, 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 petitioner. Three bills of lading
were issued by the ship-agent in the Philippines, Maritime Factors Inc., namely: Bill of Lading
No. dated May 12, 1988 covering 10,000 metric tons for discharge Manila; Bill of Lading No. 2
of even date covering 4,000 metric tons for unloading in Iloilo City; and Bill of Lading No. 3,
also dated May 12, 1988, covering 1,500 metric tons likewise for discharged in Manila

The shipment covered by Bill of Lading No. 2 was discharged in Iloilo City complete and in
good order and condition. However, the shipments covered by Bill of Lading Nos. 1 and 3 were
discharged in Manila in bad order and condition, caked, hardened and lumpy, discolored and
contaminated with rust and dirt. Damages were valued at P683, 056. 29 including additional
discharging expenses.

Consequently, petitioner filed a complaint 3 with the trial court 4 for breach of contract of
carriage against Maritime Factors Inc. as ship-agent in the Philippines for the owners of the
vessel MV "Liliana Dimitrova," while private respondent, Philipp Brothers Oceanic Inc., was
impleaded as charterer of the said vessel and proper party to accord petitioner complete relief.
Maritime Factors, Inc. filed its Answer  to the complaint, while private respondent filed a motion

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to dismiss, dated February 9, 1989, on the grounds that the complaint states no cause of action;
that it was prematurely filed; and that petitioner should comply with the arbitration clause in the
sales contract. 

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. On April
26, 1989, 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 . . "A perusal of the facts alleged in the complaint upon which the question
of sufficiency of 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, Inc. Thus, 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.

On appeal, the Court of Appeals, dismissed petitioner's complaint. The appellate court found that
the arbitration provision in the sales contract and/or the bills of lading is applicable in the present
case stating that:

"An examination of the sales contract No. S151.8.01018 shows that it is broad enough to include
the claim for damages arising from the carriage and delivery of the goods subject-matter thereof.
It is also noted that the bills of lading attached as Annexes 'A', 'B' and 'C' to the complaint state,
in part, '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, 6
Kuibyshevskaia Str., Moscow, USSR, in accordance with the rules of procedure of said
commission.'

Considering that the private respondent was one of the signatories to the sales contract . . . all
parties are obliged o respect the terms and conditions of the said sales contract, including the
provision thereof on 'arbitration.' "

Issue:

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

Ruling:

Yes. The SC agreed with the CA that 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. 

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. Petition is
DISMISSED and decision of the CA is AFFIRMED.

4. Chung Fu Industries, Inc. v. CA

G.R. No. 96283, 1992

Facts:

Petitioner Chung Fu entered into a construction agreement with Roblecor Phil. Inc. for the
corporation’s industrial factory with a total consideration of P42,000,000.00. Also, said
companies entered into 2 other ancillary construction contracts amounting to P3,875,285.00 and
P12,100,000.00. The said construction agreement contained a stipulation that in the event of

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disputes arising from the performance of the contract, such issue shall be submitted for
resolution before a single arbitrator chosen by the parties.

However, Roblecor failed to complete the work despite the extension of time provided by Chung
Fu, which later on had to take over the said construction. Roblecor then claimed for the
unsatisfied account of P10,500,000 and unpaid progress billings of P2,370,179.23 and filed a
petition for the compulsory arbitration with a prayer for a TRO, while Chung Fu prayed for the
dismissal of such petition.

The RTC approved the arbitration agreement and Engr. Asuncion was latter appointed as the sole
arbitrator. He then ordered the petitioners to pay the respondent contractor P16,108,801.00 and
declared such award as final and unappealable.

Chung Fu moved to remand the case for further hearing but the lower court denied the motion
and granted the Confirmation of the award in favor of Roblecor. Chung Fu elevated the case to
the CA via a petition for certiorari but the CA only assailed the resolution of the lower court
assailing that the signatories of the Arbitration Agreement are bound to observe the stipulations
thereof for the finality of the award.

Issue:

Whether the decision of the arbitrator shall be deemed final and unappealable and beyond the
ambit of the court’s power of judicial review.

Ruling:

No. As per Art 2044 of the Civil Code, the finality of the arbitrators award is not absolute and
without exceptions. It is also stated in Sections 24, 25 of the Arbitration Law (R.A. 876, year
1953) that 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.

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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.

5. California and Hawaiian Sugar Company, et al. v. Pioneer Insurance and Surety
Corporation
G.R. No. 139273, 2000

Facts:

The vessel MV "SUGAR ISLANDER" arrived at the port of Manila carrying a cargo of soybean
meal in bulk consigned to several consignees, one of which was the Metro Manila Feed Millers
Association (Metro). Respondent claims that when the cargo was weighed on a licensed truck
scale a shortage of 255.051 metric tons was discovered. The abovementioned shipment was
insured with private respondent against all risk. Due to the alleged refusal of petitioners to settle
their respective liabilities, respondent, as insurer, paid the consignee Metro Manila Feed Miller's
Association.

As alleged subrogee of Metro, private respondent filed a complaint for damages against herein
petitioners. Within the reglementary period to file an Answer, petitioners filed a Motion to
Dismiss the complaint on the ground that respondent's claim is premature, the same being
arbitrable.

Private respondent filed its Opposition thereto and petitioners filed their Reply to Opposition.
The RTC issued an Order deferring the hearing on the Motion to Dismiss until the trial and
directing petitioners to file their Answer. Petitioners then moved to reconsider said Order which
was, however, denied.

Petitioners filed their Answer with Counterclaim and Crossclaim alleging therein that plaintiff,
herein respondent, did not comply with the arbitration clause of the charter party; hence, the

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complaint was allegedly prematurely filed. The trial court set the case for pre-trial. Petitioners
filed a Motion to Defer PreTrial and Motion to Set for Preliminary Hearing the Affirmative
Defense of Lack of Cause of Action for Failure to comply with Arbitration Clause, respectively.

The RTC issued an Order denying the Motion to Set for Preliminary Hearing. Petitioners filed a
Motion for Reconsideration of the Order which was, however, denied.

The CA affirmed the trial court, and held that petitioners cannot rely on Section 5, Rule 16 of the
pre-1997 Rules of Court because a Motion to Dismiss had previously been filed. Further, it ruled
that the arbitration clause provided in the charter party did not bind respondent.

Issue:

Whether the CA also erred when it held that the arbitration clause was not binding on
respondent.

Ruling:

Yes. We reiterate that the crux of this case is whether the trial court committed grave abuse of
discretion in denying the aforecited Motion. There was neither need nor reason to rule on the
applicability of the arbitration clause. Be that as it may, we find the CA's reasoning on this point
faulty. Citing Pan Malayan Insurance Corporation v. CA it ruled that the right of respondent
insurance company as subrogee was not based on the charter party or any other contract; rather,
it accrued upon the payment of the insurance claim by private respondent to the insured
consignee. There was nothing in Pan Malayan, however, that prohibited the applicability of the
arbitration clause to the subrogee. That case merely discussed, inter alia, the accrual of the right
of subrogation and the legal basis therefor. This issue is completely different from that of the
consequences of such subrogation; that is, the rights that the insurer acquires from the insured
upon payment of the indemnity.

6. Asset Privatization Trust v. CA

G.R. No. 121171, 1998

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Facts:

Pursuant to a Mortgage Trust Agreement, the Development Bank of the Philippines and the
Philippine National Bank foreclosed the assets of the Marinduque Mining and Industrial
Corporation. The assets were sold to Philippine National Bank and later transferred to the Asset
Privatization Trust (APT).

In February 1985, Jesus Cabarrus, Sr., together with other stockholders of Marinduque Mining
and Industrial Corporation, filed a derivative suit against Development Bank of the Philippines
and Philippine National Bank before the Regional Trial Court of Makati for Annulment of
Foreclosures, Specific Performance and Damages. In the course of the trial, Marinduque Mining
and Industrial Corporation and Asset Privatization Trust as successor in interest of Development
Bank of the Philippines and Philippine National Bank, agreed to submit the case to arbitration by
entering into a Compromise and Arbitration Agreement. This agreement was approved by the
trial court and the complaint was corollary dismissed.

Thereafter, the Arbitration Committee rendered a decision ordering Asset Privatization Trust to
pay Marinduque Mining and Industrial Corporation damages and arbitration costs in the amount
of P2.5 Billion, P13,000,000.00 of which is for moral and exemplary damages.

On motion of Cabarrus and the other stockholders of Marinduque Mining and Industrial
Corporation, the trial court confirmed the Arbitration Committee’s award. Its motion for
reconsideration having been denied, Asset Privatization Trust filed a special civil action for
certiorari with the Court of Appeals. It was likewise denied. Hence, this petition for review on
certiorari.

Issue:

Whether the award granted to Cabarrus was proper.

Ruling:

No. Civil case no. 9900 filed before the RTC being a derivative suit, MMIC should have been
impleaded as a party. It was not joined as a part plaintiff or party defendant at any stage before of

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the proceedings as it is, the award for damages to MMIC, which was not party before the
arbitration committee is a complete nullity.

Settled is the doctrine that in a derivative suit, the corporation is the real party in interest while
the stockholder filing suit for the corporation’s behalf is only a nominal party. The corporation
should be included is a party in the suit.

An individual stockholder is permitted to institute a derivative suit on behalf of the corporation

wherein he holds stock in order to protect or vindicate corporate rights, whenever the officials of
the corporation refuse to sue, or are the ones to be sued or hold the control of the corporation. In
such actions, the suing stockholder is regarded as a nominal party, with the corporation as the
real part in interest.

It is a condition sine qua non that the corporation be impleaded as a party because – not only is
the corporation an indispensable party, but it is also the present rule that it must be served with
process. The reason given is that the judgement must be made binding upon the corporation in
order that the corporation may get the benefit of the suit and may not bring a subsequent suit
against the same defendants for the same cause of action. In other words the corporation must be
joined as a party because it is its cause of action that is being litigated and because judgement
must be a res judicata against it.

7. Agan, Jr., et al. v. Philippine International Air Terminals Co., Inc., et al.
G.R. No. 155001, 2003

Facts:

In 1993, six business leaders, John Gokongwei, Andrew Gotianun, Henry Sy, Sr., Lucio Tan,
George Ty and Alfonso Yuchengco, explored the possibility of investing in a new airport
terminal for NAIA forming the ASians Emerging Dragon Corp. They submitted proposals to the
government to develop NAIA IPT III. NEDA approved the project. Bidders were invited to such
and among all of them Paircargo was chosen as the best bidder.

AEDC protested to such preference but the project was still awarded to the Paircargo
Consortium. Paircargo incorporated into PIATCO. The DOTC and PIATCO entered into a

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concession agreement in 1997 to franchise and operate NAIA 3 for 21 years. In 1998, the
concesssion agreement was amended in matters of the obligations given to concessionaires,
development of the facilities and proceeds, fees, charges etc. MIAA onn the other hand
maintains and operates NAIA 1 and 2 in which it has several contract service providers. The
workers filed the petition for prohibition as going through with the agreement would oust them
their jobs.

A group of congressmen filed their petition to prevent the agreement from happening as it was
unconstitutional. Pres. Arryo declared in a speech that she will not honor the PIATCO contracts
for it being null and void. PIATCO claims that the court had no jurisdiction over the case at it
had entered into an arbitration agreement with the government.

Issue:

Whether the Arbitration Agreement divests the court of its jurisdiction.

Ruling:

No. In Del Monte Corporation-USA v. Court of Appeals, even after finding that the arbitration
clause in the Distributorship Agreement in question is valid and the dispute between the parties
is arbitrable, this Court affirmed the trial court's decision denying petitioner's Motion to Suspend
Proceedings pursuant to the arbitration clause under the contract.

In so ruling, this Court held that 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. This Court ruled that arbitration proceedings
could be called for but only with respect to the parties to the contract in question. Considering
that there are parties to the case who are neither parties to the Distributorship Agreement nor
heirs or assigns of the parties thereto, this Court, citing its previous ruling in Salas, Jr. v. Laperal
Realty Corporation, held that 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.

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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. It is established that 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.

8. Associated Bank v. CA
G.R. No. 107918, 1994

Facts:

In a complaint for Violation of the Negotiable Instrument Law and Damages, Visitacion and
Asuncion Flores seek the recovery of the amount of Php900,913.6 which petitioner charged
against their current account by virtue of the 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.

Petitioner claimed that the subject checks appeared to have been regularly issued and free from
any irregularity which would excite or arouse any suspicion or warrant their dishonor when the
same were negotiated and honored by it.

Petitioner filed a TPC against PCIB, Far East Bank and City Trust for reimbursement,
contribution, indemnity for being the collecting banks of the subject checks and by virtue of their
bank guarantee for all checks sent for clearing to the Philippine Clearing House Corporation
(PCHC), as provided for in Section 17, (PCHC), as provided for in Section 17, PCHC Clearing
House Rules and Regulations.

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Citytrust and PCIB claimed that the checks were complete and regular on their face. A motion to
dismiss was filed by Security Bank on the grounds that petitioner failed to resort to arbitration as
provided for in Section 36 of the Clearing House Rules and Regulation of the Philippine
Clearing House Corporation.

Petitioner maintains that this Court has jurisdiction over the suit as the provision of the Clearing
House Rules and Regulations are applicable only if the suit or action is between participating
members banks, whereas the Floreses are private persons and the third-party complaint between
participating members banks is only a consequence of the original action initiated by the
plaintiffs.

The trial court dismissed the TPC for lack of jurisdiction citing Section 36 of the Clearing House
Rules and Regulations of the PCHC providing for settlement of disputes and controversies
involving any check or item cleared through the body with the PCHC. It ruled – citing the
Arbitration Rules of Procedure – that the decision or award of the PCHC through its arbitration
committee/arbitrator is appealable only on questions of law to any of the Regional Trial Courts
in the National Capital Region where the head office of any of the parties is located.

The CA affirmed.

Issue:

Whether the case should be dismissed for failure to arbitrate.

Ruling:

Yes, The Clearing House Rules and Regulations on Arbitration of the Philippine Clearing House
Corporation are clearly applicable to petitioner and private respondents.

Petitioner’s third party complain in the trial court was one for reimbursement, contribution and
indemnity against PCIB, FarEast, Security Bank, and CityTrust, in connection with petitioner’s
having honored sixteen checks which said banks supposedly endorsed to the former for
collection in 1989. Under the rules and regulations of the PCHC, the mere act of participation of

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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, having voluntarily bound itself
to abide by such rules and regulations, is estopped from seeking relief from the RTC 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 RTC.

Pursuant to PCHC’s function involving the clearing of the checks and other clearing items, the
PCHC has adopted rules and regulations designed to provide member banks with a procedure
whereby disputes involving the clearance of checks and other negotiable instruments undergo a
process of arbitration prior to submission to the courts below. This procedure: 1. Ensure a
uniformity of rulings relating to factual disputes involving checks and other negotiable
instruments 2. Provides a mechanism for setting minor disputes among participating member
banks which would otherwise go directly to the trial courts.

While the PCHC Rules and Regulations allow appeal to the Regional Trial Courts only on
questions of law, this does not preclude our lower courts from dealing with questions of fact
already decided by the PCHC arbitration when warranted and appropriate. In Banco De Oro
Savings and Mortgage Banks vs. Equitable Banking Corporations this Court had the occasion to
rule on the validity of these rules as well as the jurisdiction of the PCHC as a forum for resolving
disputes and controversies involving checks and other clearing items when it held that “the
participation of two banks… In 36.6 The fact that a bank participates in the clearing operations
of PCHC shall be deemed its written and subscribed consent to the biding effect of this
arbitration agreement as if it had done so in accordance with Section 4 of the Republic Act No.
876 otherwise known as the Arbitration Law. Jurisdiction missed the fundamental point about

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such pleading. A third party complaint is a mere procedural device which under the Rules of
Court is allowed only with the court’s permission.

It is an action “actually independent of, separate and distinct from the plaintiffs’ complaint such
that, were it not for the Rules of Court, it would necessary to file the action separately from the
original complaint by the defendant against the third party.

9. Heirs of Augusto L. Salas Jr. v. Laperal Realty Corporation, et al.

G.R. No. 135362, 1999

Facts:

Salas Jr. and Laperal Realty Corporation entered into an Owner-Contractor agreement for the
latter to develop and provide complete construction services on Salas Jr.’s land.

Salas, Jr. executed a Special Power of Attorney in favor of respondent Laperal Realty to exercise
general control, supervision and management of the sale of his land.

Salas later left his home for a business trip in Nueva Ecija but never returned again. Salas’ wife
filed a petition for presumptive death of her husband after seven years of absence. The trial court
granted her petition.

Meantime, Laperal already subdivided the property owned by Salas Jr. to different lot buyers.
The heirs of Salas Jr. filed in the RTC of Lipa City a Complaint for nullity of sale, reconveyance,
cancellation of contract and damages against Laperal Realty Corporation and lot buyers.

Laperal Realty Corporation filed a motion to dismiss on the ground that the heirs of Salas Jr.
failed to submit their grievance to arbitration as stated in the agreement executed by Salas Jr. and
Laperal Realty Corporation. The lot buyers also filed a motion to dismiss based on the same
ground.

Issues:

Whether arbitration was necessary before the suit could be filed in court.

Whether the lot buyers are bound to the arbitration clause.

18
Ruling:

The Court granted the petition by petitioners regarding the dismissal of the latter’s complaint for
rescission of several sale transactions.

The court held that rescission is an arbitrable issue, thus arbitration was necessary before a suit
could be filed in court. The Court likewise held that the respondents other than Laperal Realty
Corporation were not bound by the Agreement (Owner-Contractor Agreement), the respondent
lot buyers not being those contemplated as assignees of the rights of respondent Laperal Realty.
The respondent lot buyers where therefore not vested with the right to arbitrate. However, to
impose that arbitration be had between petitioners and Laperal Realty and a trial for respondent
lot buyers would result in multiplicity of suits, duplicitous procedure and unnecessary delay.

The Court therefore set aside the dismissal of the petitioner’s complaint and directed that the
case proceed in the interest of justice.

10. Coca-Cola Bottlers Philippines, Inc. Sales Force Union-PTGWO-BALAIS v. Coca-Cola

Bottlers Ph., Inc.
G.R. No. 155651, 2005

Facts:

The Coca-Cola Bottlers Philippines, Inc. Sales Force Union-PTGWO is a legitimate labor
organization duly registered with the Department of Labor and Employment and the sole and
exclusive bargaining representative of all regular route salesmen, lead helpers, route helpers and
order-taker collectors who are assigned in various sales offices. On the other hand, the
respondent company is a domestic corporation and is engaged in the manufacture and
distribution of its soft drink products.

1989, the UNION filed a Notice of Strike with the National Conciliation and Mediation Board
raising certain issues for conciliation which results for the UNION to stage a strike.
Subsequently, Board succeeded in making the parties agree to a voluntary settlement of the case
via Memorandum of Agreement. The petitioner and the respondent agreed, as follows:

19
The Company shall grant to all those covered by the Bargaining Unit represented by the Union
an amount equivalent to fifty (50%) percent of their average commission for the last six (6)
months. The union acknowledges that the granting of a Christmas bonus is purely a Management
prerogative and in determining the amount thereof is solely a discretion of Management.

Since then, every December, the employees got their basic salary and a 50% of their average
commission. However, on December 1999 the company granted a fix amount of 4,000 to the
employees eliminating the 50% commission. Petitioner claims that it was a violation of the MOA
they had agreed thus submitted their grievance to the Respondents. However, no settlement was
reached and the case were referred to the Panel of Voluntary Arbitrators.

The Union asseverates that the grant of the additional 50% of the average commission has
become a practice since 1989 and has ripened into a contractual obligation. However, the
respondent countered that its President already explained to its employees that their company
suffered worst financial loss in 1999 and decided not to grant bonuses for that year. And that the
Company will grant special ex gratia the amount of 4,000 to all its permanent employees.

After hearing and the submission of evidence and position papers, the Arbitration Panel denied
petitioner's claim and declared that the P4,000.00 given as ex gratia is not a bonus. However one
of the Panel Arbitrators dissented the decision. A copy of the decision was received by
petitioners counsel on Feb 20, 2001. Thus, on 22 February 2001, petitioner filed an "Urgent Ex-
Parte Manifestation with Motion" questioning the validity of the decision, opining that "the
Panel's decision without such dissenting and separate opinion attached thereto makes the
decision

incomplete and prematurely issued. The Panel did not directly act on this motion. Thus, on 12
March 2001, petitioner filed a motion for reconsideration of the 21 January 2001 Decision. On
30 May 2001, the Panel denied petitioner's motion for reconsideration. The union, filed a petition
for review before the CA on July 2001, but the CA dismissed the petition as well as the
subsequent MR for being filed out of time.

Issue:

20
Whether the decision of Panel Arbitrators attained its finality even without the dissenting opinion
of one of its members.

Ruling:

Yes. Panel of Arbitrators decision will attain its finality even without the dissenting opinion of
one of its members.

As pointed out by the CA, a dissenting opinion is not binding on the parties as it is mere
expression of the individual view of the dissenting member from the conclusion held by the
majority of the Court. Section 1 of Rule VII of the Procedural Guidelines in the conduct of
Voluntary Arbitration Proceedings provides that “The final arbitral disposition of the issue/s
submitted to voluntary arbitration is the Decision. The dispositive may take the form of a
dismissal of a claim or grant of specific remedy, either by way of prohibition of particular acts or
specific performance of particular acts. In the herein case, the Decision of the Panel was in the
form a dismissal of petitioner’s complaint. Thus, under Section 6, Rule VII of the same
guidelines implementing Article 262-A of the Labor Code, this Decision, as a matter of course,
would become final and executory after ten (10) calendar days from receipt of copies of the
decision by the parties even without receipt of the dissenting opinion unless, in the meantime, a
motion for reconsideration or a petition for review to the Court of Appeals under Rule 43 of the
Rules of Court is filed within the same 10-day period. The seasonable filing of motion for
reconsideration following the receipt of the copy of award or decision is a mandatory
requirement to forestall the finality of such decision or award.

Wherefore, the Court of Appeals Decision dated May 22, 2002 and its Resolution are hereby
AFFIRMED.

11. National Steel Corporation v. RTC Lanao Del Norte Branch 2, Iligan City
G.R. No. 127004, 1999

Facts:

21
Wilkom Enterprises (EWEI) together with Ramiro Construction and National Steel executed a
contract whereby Ramiro jointly undertook a Contract for Site Development for petitioner’s
Integrated Iron and Steel Mills Complex to be established at Iligan City.

EWEI filed a civil case before the RTC of Lanao Del Norte against National Steel and NS filed
an answer with a counterclaim.

However, the presiding Judge (Salazar) issued an order dismissing the complaint and
counterclaim in view of the desire of both parties to implement Sec. 19 of the contract, providing
for a resolution of any conflict by arbitration. Pursuant to such arbitration clause, a Board of
Arbitrators was created.

The RTC of Lanao rendered a judgment declaring the award of the Board of Arbitrators to be
duly affirmed and an entry of judgment be entered and the petition to vacate the award be
dismissed. National Steel filed a MR but it was denied. Thus, petitioner filed the present case
through a petition for certiorari.

Petitioner argues that (a) there was evident partiality in the assailed decision of the Arbitrators in
favor of the respondent; and (b) that there was a mistake in the appreciation of the facts and
application of the law by the Arbitrators.

Issue:

Whether the lower court acted with grave abuse of discretion in dismissing the petition to vacate
the award.

Ruling:

Petitioner's allegation that there was evident partiality is untenable. As held in the case of
Adamson vs. CA, the fact that a party was disadvantaged by the decision of the Arbitration
Committee does not prove evident partiality. Proofs other than mere inference are needed to
establish evident partiality. Here, petitioner merely averred evident partiality without any proof
to back it up. Petitioner was never deprived of the right to present evidence nor was there any
showing that the Board showed signs of any bias in favor of EWEI.

22
In a Petition to Vacate an 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 in Section 24
of the Arbitration Law.

12. Del Monte Corporation-USA v. CA

G.R. No. 136154, 2001

Facts:

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

USA) appointed private respondent Montebueno Marketing, Inc. (MMI) as the sole and
exclusive distributor of its Del Monte products in the Philippines for a period of five (5) years.

The Distribution agreement comes with an arbitration agreement 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
x x…”

On 3 October 1996 private respondents MMI, SFI and MMI's Managing Director Liong Liong
C. Sy (LILY SY) filed a Complaint against petitioners DMC-USA, Paul E. Derby, Jr., Daniel
Collins and Luis Hidalgo, and Dewey Ltd. before the Regional Trial Court of Malabon, Metro

23
Manila. Private respondents predicated their complaint on the alleged violations by petitioners
of Arts. 20, 21, and 23 of the Civil Code.

According to private respondents, DMC-USA products continued to be brought into the country
by parallel importers despite the appointment of private respondent MMI as the sole and
exclusive distributor of Del Monte products thereby causing them great embarrassment and
substantial damage.

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

On appeal, the Court of appeals affirmed the decision of the trial court. It held that the alleged
damaging acts recited in the Complaint, constituting petitioners' causes of action, required the
interpretation of Art. 21 of the Civil Code 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.

Ruling:

The Court ruled the validity of the arbitration clause in the Contract between the contracting
parties. However, the Court held that provisions in a contract are binding only between the
contracting parties, their assigns and heirs. In the present case, arbitration as provided in the
contract can therefore be called for only as to petitioners DMC-USA, Paul Derby and
respondents MMI and Lily Sy, and not to other parties. Only the assigns and heirs can have the
right to arbitrate.

24
Citing the case of Salas Jr. vs. Laperal Realty Corporation, the splitting of the proceedings to
arbitration as to some of the parties on one hand and trial for the others cannot be allowed.
Otherwise, it would result in a multiplicity of suits, duplicitous procedure and unnecessary delay.

To effect a speedy and efficient resolution of the issues and claims of the parties, a full blown
trial must be had. Only then can the interest of justice be served.

13. George Gonzalez and Panel of Arbitrators v. Climax Mining Ltd., et al.
G.R. No. 161957, 2007

Facts:

This is a consolidation of two petitions rooted in the same disputed Addendum Contract entered
into by the parties. In G.R. No. 161957, the Court in its Decision of 28 February 2005 denied the
Rule 45 petition of petitioner Jorge Gonzales (Gonzales).

It 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.
Both parties filed separate motions for reconsideration. Gonzales avers in his Motion for
Reconsideration that the Court erred in holding that the DENR Panel of Arbitrators was bereft of
jurisdiction, reiterating its argument that the case involves a mining dispute that properly falls
within the ambit of the Panels authority.

Gonzales adds that the Court failed to rule on other issues he raised relating to the sufficiency of
his complaint before the DENR Panel of Arbitrators and the timeliness of its filing. Respondents
Climax Mining Ltd., et al., (respondents) filed their Motion for Partial Reconsideration and/or
Clarification seeking reconsideration of that part of the Decision holding that the case should not
be brought for arbitration under Republic Act (R.A.) No. 876, also known as the Arbitration
Law.

25
Respondents, citing American jurisprudence and the UNCITRAL Model Law, argue 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. Respondents add that Gonzales argument relating to the alleged invalidity
of the Addendum Contract still has to be proven and adjudicated on in a proper proceeding; that
is, an action separate from the motion to compel arbitration. Pending judgment in such separate
action, the Addendum Contract remains valid and binding and so does the arbitration clause
therein.

Respondents add that the holding in the Decision that the case should not be brought under the
ambit of the Arbitration Law appears to be premised on Gonzales having impugn[ed] the
existence or validity of the addendum contract. If so, it supposedly conveys the idea that
Gonzales unilateral repudiation of the contract or mere allegation of its invalidity is all it takes to
avoid arbitration. Hence, respondents submit that the courts holding that the case should not be
brought under the ambit of the Arbitration Law be understood or clarified as operative only
where the challenge to the arbitration agreement has been sustained by final judgment.

Issue:

Whether it was proper for the RTC, in the proceeding to compel arbitration under R.A. No. 876,
to order the parties to arbitrate even though the defendant therein has raised the twin issues of
validity and nullity of the Addendum Contract and, consequently, of the arbitration clause
therein as well.

Ruling:

Yes. Disputes do not go to arbitration unless and until the parties have agreed to abide by the
arbitrators decision. Necessarily, a contract is required for arbitration to take place and to be
binding. R.A. No. 876 recognizes the contractual nature of the arbitration agreement.

26
The doctrine of separability, or severability as other writers call it, enunciates that an arbitration
agreement is independent of the main contract. The arbitration agreement is to be treated as a
separate agreement and the arbitration agreement does not automatically terminate when the
contract of which it is part comes to an end.

The separability of the arbitration agreement is especially significant to the determination of

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

The separability of the arbitration clause is confirmed in Art. 16(1) of the UNCITRAL Model
Law and Art. 21(2) of the UNCITRAL Arbitration Rules. The proceeding in a petition for
arbitration under R.A. No. 876 is limited only to the resolution of the question of whether the
arbitration agreement exists. Second, the separability of the arbitration clause from the
Addendum Contract means that validity or invalidity of the Addendum Contract will not affect
the enforceability of the agreement to arbitrate. Thus, Gonzales petition for certiorari should be
dismissed.

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

14. Oil And Natural Gas Commission v. CA and Pacific Cement Company, Inc.
G.R. No. 114323, 1998

27
Facts:

The petitioner 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.

The present conflict between the petitioner and the private respondent has its roots in a contract
entered into by and between both parties on February 26, 1983 whereby the private respondent
undertook to supply the petitioner FOUR THOUSAND THREE HUNDRED (4,300) metric tons
of oil well cement. In consideration therefor, the petitioner bound itself to pay the private
respondent the amount of FOUR HUNDRED SEVENTY-SEVEN THOUSAND THREE
HUNDRED U.S. DOLLARS ($477,300.00) by opening an irrevocable, divisible, and confirmed
letter of credit in favor of the latter. The oil well cement was loaded on board the ship MV
SURUTANA NAVA at the port of 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. Notwithstanding the fact that the private
respondent had already received payment and despite several demands made by the petitioner,
the private respondent failed to deliver the oil well cement.

Thereafter, negotiations ensued between the parties and they agreed that the private respondent
will replace 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. The petitioner then informed the private respondent that it was
referring its claim to an arbitrator pursuant to Clause 16 of their contract.

On July 23, 1988, the chosen arbitrator, one Shri N.N. Malhotra, resolved the dispute in
petitioner’s favor setting forth the arbitral award. Without responding to the above
communication, the foreign court refused to admit the private respondent’s objections for failure
to pay the required filing fees, and thereafter issued an Order on February 7, 1990.

Issue:

28
Whether the foreign judgement may be enforced within the Philippines.

Ruling:

Yes. Furthermore, the recognition to be accorded a foreign judgment is not necessarily affected
by the fact that the procedure in the courts of the country in which such judgment was rendered
differs from that of the courts of the country in which the judgment is relied on. This Court has
held that matters of remedy and procedure are governed by the lex fori or the internal law of the
forum. Thus, if under the procedural rules of the Civil Court of Dehra Dun, India, a valid
judgment may be rendered by adopting the arbitrator’s findings, then the same must be accorded
respect. In the same vein, if the procedure in the foreign court mandates that an Order of the
Court becomes final and executory upon failure to pay the necessary docket fees, then the courts
in this jurisdiction cannot invalidate the order of the foreign court simply because our rules
provide otherwise.

The private respondent claims that its right to due process had been blatantly violated, first by
reason of the fact that the foreign court never answered its queries as to the amount of docket
fees to be paid then refused to admit its objections for failure to pay the same, and second,
because of the presumed bias on the part of the arbitrator who was a former employee of the
petitioner.

Time and again this Court has held that the essence of due process is to be found in the
reasonable opportunity to be heard and submit any evidence one may have in support of one’s
defense or stated otherwise, what is repugnant to due process is the denial of opportunity to be
heard. Thus, there is no violation of due process even if no hearing was conducted, where the
party was given a chance to explain his side of the controversy and he waived his right to do so.

In the instant case, the private respondent does not deny the fact that it was notified by the
foreign court to file its objections to the petition, and subsequently, to pay legal fees in order for
its objections to be given consideration. Instead of paying the legal fees, however, the private
respondent sent a communication to the foreign court inquiring about the correct amount of fees
to be paid. On the pretext that it was yet awaiting the foreign court’s reply, almost a year passed
without the private respondent paying the legal fees. Thus, on February 2, 1990, the foreign court

29
rejected the objections of the private respondent and proceeded to adjudicate upon the
petitioner’s claims. We cannot subscribe to the private respondent’s claim that the foreign court
violated its right to due process when it failed to reply to its queries nor when the latter rejected
its objections for a clearly meritorious ground. The private respondent was afforded sufficient
opportunity to be heard. It was not incumbent upon the foreign court to reply to the private
respondent’s written communication. On the contrary, a genuine concern for its cause should
have prompted the private respondent to ascertain with all due diligence the correct amount of
legal fees to be paid. The private respondent did not act with prudence and diligence thus its plea
that they were not accorded the right to procedural due process cannot elicit either approval or
sympathy from this Court.

The foreign judgment being valid, there is nothing else left to be done than to order its
enforcement, despite the fact that the petitioner merely prays for the remand of the case to the
RTC for further proceedings. As this Court has ruled on the validity and enforceability of the
said foreign judgment in this jurisdiction, further proceedings in the RTC for the reception of
evidence to prove otherwise are no longer necessary.

15. DFA and BSP v. Hon. Franco T. Falcon, Presiding Judge of RTC Branch 71 of Pasig
City
G.R. No. 176657, 2010

Facts:

For the implementation of Machine Readable Passport and Visa Project, the Department of
Foreign Affairs published an invitation to bid for the supply of the needed machine readable
passports and visas. Throughout the process, BCA International Corporation (BCA) emerged as
the sole qualified bidder.

Eventually, negotiation proceedings commenced and an agreement was drafted. The

implementation of the agreement turned sour, thereafter, the DFA drafter another agreement with
the Bangko Sentral ng Pilipinas (BSP) for the supply, delivery, installation and commissioning
of a system for the production of Electronic Passport Booklets or e-Passports. Due to this
recourse by the DFA, the BCA filed a Petition for Interim Relief before the RTC, praying for a

30
temporary restraining order and a preliminary injunction with regard to the courses of action that
DFA took, which the court granted on different occasions.

The DFA and the BSP filed a petition for certiorari with the Court imputing grave abuse of
discretion on the part of the trial court when it granted interim relief to BCA. The BCA objects
on the ground that the DFA et al., petitioners, did not follow the hierarchy of courts by filing
their petition directly with the Court.

Issue:

Whether DFA may file a petition directly with the Supreme Court.

Ruling:

Although the direct filing of petitions for certiorari with the Supreme Court is discouraged when
litigants may still resort to remedies with the lower courts, we have in the past overlooked the
failure of a party to strictly adhere to the hierarchy of courts on highly meritorious grounds.

Most recently, we relaxed the rule on court hierarchy in the case of Roque, Jr. v. Commission on
Elections, 599 SCRA 69 (2009), wherein we held: The policy on the hierarchy of courts, which
petitioners indeed failed to observe, is not an iron-clad rule. For indeed the Court has full
discretionary power to take cognizance and assume jurisdiction of special civil actions for
certiorari and mandamus filed directly with it for exceptionally compelling reasons or if
warranted by the nature of the issues clearly and specifically raised in the petition. In sum, BCA
failed to successfully rebut the presumption that the official acts (of Mr. Custodio and Mr.
Zuniga) were done in good faith and in the regular performance of official duty. Even assuming
the verifications of the petition suffered from some defect, we have time and again ruled that
“[t]he ends of justice are better served when cases are determined on the merits—after all parties
are given full opportunity to ventilate their causes and defenses—rather than on technicality or
some procedural imperfections.” In other words, the Court may suspend or even disregard rules
when the demands of justice so require.

16. Korea Technologies Co. LTD. (KOGIES) v. Hon. Alberto A. Lerma, Presiding Judge of
Branch 256 RTC Muntinlupa
G.R. No. 143581, 2008

31
Facts:

Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in
the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants,
while private respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic
corporation.

On March 5, 1997, PGSMC and KOGIES executed a Contract whereby KOGIES would set up
an LPG Cylinder Manufacturing Plant in Carmona, Cavite. The contract was executed in the
Philippines. On April 7, 1997, the parties executed, in Korea, an Amendment for Contract No.
KLP-970301 dated March 5, 1997 amending the terms of payment. The contract and its
amendment stipulated that KOGIES will ship the machinery and facilities necessary for
manufacturing LPG cylinders for which PGSMC would pay USD 1,224,000.

KOGIES would install and initiate the operation of the plant for which PGSMC bound itself to
pay USD 306,000 upon the plants production of the 11-kg. LPG cylinder samples. Thus, the total
contract price amounted to USD 1,530,000. On October 14, 1997, PGSMC entered into a
Contract of Lease with Worth Properties, Inc. (Worth) for use of Worths 5,079-square meter
property with a 4,032-square meter warehouse building to house the LPG manufacturing plant.
The monthly rental was PhP 322,560 commencing on January 1, 1998 with a 10% annual
increment clause. Subsequently, the machineries, equipment, and facilities for the manufacture
of LPG cylinders were shipped, delivered, and installed in the Carmona plant. PGSMC paid
KOGIES USD 1,224,000.

However, gleaned from the Certificate executed by the parties on January 22, 1998, after the
installation of the plant, the initial operation could not be conducted as PGSMC encountered
financial difficulties affecting the supply of materials, thus forcing the parties to agree that
KOGIES would be deemed to have completely complied with the terms and conditions of the
March 5, 1997 contract.

For the remaining balance of USD306,000 for the installation and initial operation of the plant,
PGSMC issued two postdated checks: (1) BPI Check No. 0316412 dated January 30, 1998 for
PhP 4,500,000; and (2) BPI Check No. 0316413 dated March 30, 1998 for PhP 4,500,000.

32
When KOGIES deposited the checks, these were dishonored for the reason PAYMENT
STOPPED. Thus, on May 8, 1998, KOGIES sent a demand letter to PGSMC threatening
criminal action for violation of Batas Pambansa Blg. 22 in case of nonpayment.

On the same date, the wife of PGSMCs President faxed a letter dated May 7, 1998 to KOGIES
President who was then staying at a Makati City hotel. She complained that not only did
KOGIES deliver a different brand of hydraulic press from that agreed upon but it had not
delivered several equipment parts already paid for.

Issue:

Whether the arbitration clause in the contract of the parties should govern.

Ruling:

Yes. Established in this jurisdiction is the rule that the law of the place where the contract is
made governs. Lex loci contractus. The contract in this case was perfected here in the
Philippines. Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the Civil Code
sanctions the validity of mutually agreed arbitral clause or the finality and binding effect of an
arbitral award. Art. 2044 provides, Any stipulation that the arbitrators award or decision shall be
final, is valid, without prejudice to Articles 2038, 2039 and 2040.

The arbitration clause was mutually and voluntarily agreed upon by the parties. It has not been
shown to be contrary to any law, or against morals, good customs, public order, or public policy.
There has been no showing that the parties have not dealt with each other on equal footing. We
find no reason why the arbitration clause should not be respected and complied with by both
parties. In Gonzales v. Climax Mining Ltd., we held that submission to arbitration is a contract
and that a clause in a contract providing that all matters in dispute between the parties shall be
referred to arbitration is a contract. Again in Del Monte Corporation-USA v. Court of Appeals,
we likewise ruled that [t]he 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.

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

33
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.

Thus, it can be gleaned that the concept of a final and binding arbitral award is similar to
judgments or awards given by some of our quasi-judicial bodies, like the National Labor
Relations Commission and Mines Adjudication Board, whose final judgments are stipulated to
be final and binding, but not immediately executory in the sense that they may still be judicially
reviewed, upon the instance of any party. Therefore, the final foreign arbitral awards are
similarly situated in that they need first to be confirmed by the RTC.

17. MCC Industrial Sales Corporation v. Ssangyong Corporation

G.R. No. 170633, 2007

Facts:

Petitioner MCC Industrial Sales (MCC), a domestic corporation with office at Binondo, Manila,
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 with head
office in Seoul, South Korea and regional headquarters in Makati City, Philippines. The two
corporations conducted business through telephone calls and facsimile or telecopy transmissions.
Ssangyong would send the pro forma invoices containing the details of the steel product order to
MCC; if the latter conforms thereto, its representative affixes his signature on the faxed copy and
sends it back to Ssangyong, again by fax.

Following the failure of MCC to open a letters of credit to facilitate the payment of imported
stainless steel products, Ssangyong through counsel wrote a letter to MCC, on September 11,
2000, canceling the sales contract under ST2-POSTS0401-1 /ST2-POSTS0401-2, and
demanding payment of US$97,317.37 representing losses, warehousing expenses, interests and
charges.

Ssangyong then filed, on November 16, 2001, 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. In its complaint, Ssangyong alleged that defendants breached their contract

34
when they refused to open the L/C in the amount of US$170,000.00 for the remaining 100MT of
steel under Pro Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2.

After Ssangyong rested its case, 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. In an Order dated April 24, 2003, the court denied the demurrer, ruling that the
documentary evidence presented had already been admitted in the December 16, 2002 Orde and
their admissibility finds support in Republic Act (R.A.) No. 8792, otherwise known as the
Electronic Commerce Act of 2000. According to the aforesaid Order, considering that both
testimonial and documentary evidence tended to substantiate the material allegations in the
complaint, Ssangyong's evidence sufficed for purposes of a prima facie case.

Issue:

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

Ruling:

Electronic document shall be regarded as the equivalent of an original document under the Best
Evidence Rule, as long as it is a printout or output readable by sight or other means, showing 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.

The Implementing Rules and Regulations (IRR) of R.A. No. 8792 defines the “Electronic Data
Message” refers to information generated, sent, received or stored by electronic, optical or
similar means, but not limited to, electronic data interchange (EDI), electronic mail, telegram,
telex or telecopy.

The phrase “but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex
or telecopy” in the IRR’s definition of “electronic data message” is copied from the Model Law
on Electronic Commerce adopted by the United Nations Commission on International Trade Law
35
(UNCITRAL), from which majority of the provisions of R.A. No. 8792 were taken. While
Congress deleted this phrase in the Electronic Commerce Act of 2000, the drafters of the IRR
reinstated it. The deletion by Congress of the said phrase is significant and pivotal.

18. Magellan Capital Management Corporation (MCMC) and Magellan Capital Holdings
Corporation (MCHC) v. Rolando M. Zosa and Hon. Jose P. Soberano, Jr.
G.R. No. 129916, 2001

Facts:

Under a management agreement entered into, MCHC appointed 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. Respondent Zosa then was elected to a new position 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 communicated its non-acceptance to the resignation and advised respondent that the
agreement is terminated on account of the latter’s breach thereof. Respondent invoked the
Arbitration Clause of the agreement and both parties designated their arbitrators in the panel.
However, instead of submitting the dispute to arbitration, respondent filed an action for damages
against petitioners before the RTC. Petitioners’s motion to dismiss was denied. 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 valid and binding.

Ruling:

36
No. From the foregoing arbitration clause, it appears that the two (2) defendants [petitioners]
(MCMC and MCHC) have one (1) arbitrator each to compose the panel of three (3) arbitrators.
As the defendant MCMC is the Manager of defendant MCHC, its decision or vote in the
arbitration proceeding would naturally and certainly be in favor of its employer and the
defendant MCHC would have to protect and preserve its own interest; hence, the two (2) votes of
both defendants (MCMC and MCHC) would certainly be against the lone arbitrator for the
plaintiff [herein defendant].

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

19. Transfield Ph. Inc. (TPI) v. Luzon Hydro Corp. (LHC), Australia and New Zealand
Banking Group Limited and Security Bank Corporation
G.R. No. 146717, 2006

Facts:

Transfield Philippines (Transfield) entered into a turn-key contract with Luzon Hydro Corp.
(LHC).Under the contract, Transfield were to construct a hydro-electric plants in Benguet and
Ilocos. Transfield was given the sole responsibility for the design, construction, commissioning,
testing and completion of the Project. 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
typhoon and various disputes delaying the construction. LHC did not give due course to the
extension of the period prayed for but referred the matter to arbitration committee. Because of
the delay in the construction of the plant, LHC called on the stand-by letters of credit because of
default. However, the demand was objected by Transfield on the ground that there is still
pending arbitration on their request for extension of time.

37
Issue:

Whether LHC can collect from the letters of credit despite the pending arbitration case.

Ruling:

Transfield’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.

The independent nature of the letter of credit may be: (a) independence in toto where the credit is
independent from the justification aspect and is a separate obligation from the underlying
agreement like for instance a typical standby; or (b) independence may be only as to the
justification aspect like in a commercial letter of credit or repayment standby, which is identical
with the same obligations under the underlying agreement. In both cases the payment may be
enjoined if in the light of the purpose of the credit the payment of the credit would constitute
fraudulent abuse of the credit.

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.

The engagement of the issuing bank is to pay the seller or beneficiary of the credit once the draft
and the required documents are presented to it. The so-called “independence principle” assures
the seller or the beneficiary of prompt payment independent of any breach of the main contract
and precludes the issuing bank from determining whether the main contract is actually
accomplished or not. Under this principle, banks assume no liability or responsibility for the
form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the
general and/or particular conditions stipulated in the documents or superimposed thereon, nor do
they assume any liability or responsibility for the description, quantity, weight, quality,
condition, packing, delivery, value or existence of the goods represented by any documents, or

38
for the good faith or acts and/or omissions, solvency, performance or standing of the consignor,
the carriers, or the insurers of the goods, or any other person whomsoever.

20. HUTAMA-RSEA Joint Operations, Inc. v. Citra Metro Manila Tollways Corporation
G.R. No.180640, 2009

Facts:

Petitioner HUTAMA-RSEA Joint Operations Incorporation and respondent Citra Metro Manila
Tollways Corporation are corporations organized and existing under Philippine laws.

Petitioner and respondent entered into an Engineering Procurement Construction Contract

(EPCC) whereby petitioner would undertake the construction of Stage 1 of the Skyway Project.

During the construction of the Skyway Project, petitioner wrote respondent on several occasions
requesting payment of the former’s interim billings, pursuant to the provisions of the EPCC.
Respondent only partially paid the said interim billings, thus, prompting petitioner to demand
that respondent pay the outstanding balance thereon, but respondent still failed to do so.

Petitioner, through counsel, sent a letter to respondent demanding payment. Thereafter, petitioner
and respondent, through their respective officers and representatives, 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, petitioner and respondent failed to reach an
amicable settlement.

Petitioner finally 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, respondent averred that the CIAC had no jurisdiction.

Issue:

Whether the CIAC has jurisdiction over the dispute.

Ruling:

39
Based on Section 4 of EO 1008 and Section 1, Article III of the CIAC Rules of Procedure, the
CIAC shall have jurisdiction over a dispute involving a construction contract if said contract
contains an arbitration clause (notwithstanding 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.

Hence, the bare fact that the parties herein incorporated an arbitration clause in the EPCC is
sufficient to vest the CIAC with jurisdiction over any construction controversy or claim between
the parties.23 The arbitration clause in the construction contract ipso facto vested the CIAC with
jurisdiction.24 This rule applies, regardless of whether the parties specifically choose another
forum or make reference to another arbitral body.

21. Hi-Precision Steel Center, Inc. v. Lim Kim Steelbuilders, Inc. and CIAC
G.R. No. 110434, 1993

Facts:

Hi-Precision (Petitioner) entered into a contract with Steel Builders (Private Respondent) 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,
however, when the date came, only 75.8674% of the project was actually completed. Petitioner
attributed this non-completion to Steel Builders which allegedly incurred delays both during the
original contract and period of extension. On the other hand, the Steel Builders claimed that the

40
said non-completion of the project was either excusable or was due to HiPrecision’s own fault
and issuance of change orders.

The said project was taken over and completed by Hi-Precision. Steel Builders requested for an
adjudication with CIAC (Public Respondent) and sought payment of its unpaid billings, alleged
unearned profits and other receivables. Hi-Precision on the other hand claimed for damages and
reimbursement of alleged additional costs. The CIAC formed an Arbitral Tribunal with 3
members and such tribunal rendered a decision in favor of Steel Builders Inc ordering Hi-
Precision to pay Steel Builders their claim. Hi-Precision then asks the court to set aside the
award on the basis of misapprehension of facts.

Issue:

Whether it was correct should set aside the ruling of the Arbitral Tribunal.

Ruling:

No. The court said that it will not assist one or the other or even both parties in an effort to
subvert or defeat the objective for their private purposes and also, that it will not review the
factual findings of an arbitral tribunal upon the allegation that such body misapprehended facts.
The court will not, therefore, permit the parties to relitigate before it the issues of facts
previously presented and argued before the Arbitral Tribunal, save only where a vey clear
showing is made that, in reaching its factual conclusions, the Arbitral Tribunal committed an
error so hurtful to one party as to constitute a grave abuse of discretion resulting on lack or loss
of jurisdiction.

22. Ruben N. Barrameda, et al. v. Romeo Atienza, et al.

G.R. No. 129175, 2001

Facts:

Camarines Norte Electric Cooperative (CANORECO) is an electric cooperative organized under

the provisions of the National Electrification Administration (NEA).

41
Subsequently, the Cooperative Development Authority (CDA) certified that CANORECO is
registered as a full-fledged cooperative under the laws. The Cooperative Code created the CDA.
The CDA is vested with the power to register cooperatives.

On 1988, the NEA and CANORECO entered into a contract of loan and mortgage. The General
Manager (GM) at that time was Abundo, one of the petitioners in this case. A provision in the
loan contract provides that in case of default the NEA may assign or appoint a project supervisor
and/or general manager, and to takeover with the management.

During the incumbency of Abundo, he failed to pay CANORECO’s loan obligations with NEA.
NEA then enforced the provisions of the contract and designated an acting GM of CANORECO
to protect state funds invested by the NEA.

On May 1995, during the annual general membership assembly of CANORECO, the members
elected a new set of members of the board of directors. Thereafter, NEA appointed a new GM,
Zaldua, and declared former GM Abundo as pesona non grata.

Shortly, the group of Abundo contested the authority of NEA to supervise and control
CANORECO, they filed several cases with the CDA. The CDA then declared the 1995 board
meeting as void.

On December 1996, President 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 new board members and GM. This is why this case surfaces as
the group of Barrameda filed a petition for quo warranto.

However, there is a provision in the Cooperative Code which provides on how intra-cooperative
disputes should be resolved. The law states that disputes including an intra-cooperative dispute
should be settled amicably in accordance with the conciliation or mediation mechanisms
42
embodied in the by-laws of the cooperative, and in applicable laws, and if the proceedings failed,
the matter shall now be settled in a court of competent jurisdiction.

Issue:

Whether the filing of several cases by the petitioners to the CDA and Memorandum Order No.
49 are the proper remedies to resolve the dispute.

Ruling:

No, CANORECO is registered with the CDA under the Cooperative Code, thus, it is under the
coverage of the said laws.

As there is a clear-case of intra-cooperative dispute here, the provisions of the Cooperative Code
should be controlling. The parties should have employed conciliation or mediation mechanisms
embodied in the by-laws of the cooperative, and in applicable laws before submitting the matter
to the court.

23. Eduardo J. Marino, Jr., et al. v. Gil Gamilla, et al.

G.R. No. 132400, 2005

Facts:

In 1986, the UST Faculty Union (USTFU) entered into an initial collective bargaining agreement
with the University of Santo Tomas (UST) wherein UST undertook to provide USTFU with a
free office space at Room 302 of its Health Center Building. On 21 September 1996, the officers
and directors of USTFU scheduled a general membership meeting on 5 October 1996 for the
election of the union officers.

However, respondent Gamilla and some faculty members filed a Petition with the Med-
Arbitration Unit of the DOLE seeking to stop the holding of the USTFU election. Meanwhile, on
2 October 1996, Rev. Fr. Aligan, O.P., Secretary General of the UST, issued a Memorandum
regarding the holding of a faculty convocation on 4 October 1996. On 4 October 1996, Med-
Arbiter Falconitin issued a TRO enjoining the holding of the election of the USTFU officers and
directors.

43
However, denying the TRO they themselves sought, Gamilla and some of the faculty members
present in the 4 October 1996 faculty convocation proceeded with the election of the USTFU
officers. In the succeeding week, petitioners filed with the DOLE a petition for prohibition,
injunction, with prayer for preliminary injunction and TRO, seeking to invalidate the election
held on 4 October 1996. On 27 January 1997, respondents Gamilla, Cardenas and Aseron, with
some other persons, served a letter demanding that the latter vacate the premises located at Room
302, Health Center Building, UST—the Office of USTFU. However, only the office messenger
was in the office at the time. After coercing the office messenger to step out of the office,
Gamilla and company padlocked the door leading to the union’s office. Petitioners filed with the
RTC a Complaint for injunction and damages with a prayer for preliminary injunction and TRO
over the use of the USTFU office.

The Med-Arbiter Falconitin rendered a decision, declaring the 4 October 1996 election and its
results null and void ab initio. The decision was appealed to the Bureau of Labor Relations
which affirmed the same. Respondents brought the matter to this Court via a special civil action
for certiorari. The Court promulgated its dismissing the petition on 16 November 1999.

On 3 March 1997, the RTC issued the assailed order granting the writ of preliminary injunction.
The respondents filed a Petition for Certiorari. The Court of Appeals stated that the basic issue of
the case was whether the RTC of Manila had jurisdiction over the subject matter. It agreed with
respondents’ disquisition that petitioners’ cause of action in the complaint before the trial court is
inextricably linked and intertwined with the issue of who are the legitimate officers of the
USTFU, which issue was then being litigated before the DOLE. The appellate court held that
civil case merely "grew out" from the labor case. It also cited the prohibition against the issuance
of injunction in any case involving or growing out of a labor dispute, unless otherwise provided
by law. Hence, this petition.

Issue:

Whether the case is a labor dispute cognizable by the DOLE.

Ruling:

44
The case is neither a labor nor an inter-union dispute. It is clearly an intra-union dispute. Labor
dispute includes any controversy or matter concerning terms or conditions of employment or the
association or representation of persons in negotiating, fixing, maintaining, changing or
arranging the terms and conditions of employment, regardless of whether the disputants stand in
the proximate relation of employer and employee.

Jurisdiction over labor disputes, including claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations is vested in Labor Arbiters and the
National Labor Relations Commission (NLRC).

On the other hand, an intra-union dispute refers to any conflict between and among union
members. It encompasses all disputes or grievances arising from any violation of or
disagreement over any provision of the constitution and by-laws of a union, not excepting cases
arising from chartering or affiliation of labor organizations or from any violation of the rights
and conditions of union membership provided for in the Labor Code.

In contrast, an inter-union dispute refers to any conflict between and among legitimate labor
organizations involving questions of representation for purposes of collective bargaining; it
includes all other conflicts which legitimate labor organizations may have against each other
based on any violations of their rights as labor organizations.48 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.

24. A.D. Gothong Manufacturing Corp. Employees Union–ALU (THE UNION) v. Hon.
Nieves Confessor, Secretary of Dole and A.D. Gothong Manufacturing Corp. (THE
COMPANY)
G.R. No. 113638, 1999

Facts:

45
Petitioner 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 respondent A.D. Gothong Manufacturing Corporation ("Company") excluding
its office staff and personnel. Romulo Plaza and Paul Michael Yap were included in the list of
eligible voters, however, their votes are considered challenged on the ground that they were
supervisory employees.

Respondent Company opposed the petition arguing that the two are rank and file employees.
Petitioner Union presented several documentary evidences to support its claim that both Plaza
and Yap are supervisors who are disqualified to join the proposed bargaining unit for rank-and-
file employees.

The Med-Arbiter declared that the challenged voters Yap and Plaza are rank-and-file employees.
Petitioner Union appealed to the Secretary of Labor insisting that Yap and Plaza are supervisory
employees. Respondent company presented its evidence countering the argument of the
petitioner Union. Respondent Secretary of Labor affirmed the finding of the Med-Arbiter
denying the motion for reconsideration, hence this petition.

Issue:

Whether the decision of the Med-Arbiter affirmed by the SOLE is reversible.

Ruling:

The petition has failed to show reversible error in the findings of the MedArbiter and the
Secretary of the Department of Labor. It has also been established that in the determination of
whether or not certain employees are managerial employees, this Court accords due respect and
therefore sustains the findings of fact made by quasi-judicial agencies which are supported by
substantial evidence considering their expertise in their respective fields.

46
The test of supervisory or managerial status depends on whether a person possess authority to act
in the interest of his employer and whether such authority is not merely routinary or clerical in
nature, but requires the use of independent judgment. Thus, where such recommendatory powers
as in the case at bar, are subject to evaluation, review and final action by the department heads
and other higher executives of the company, the same, although present, are not exercise of
independent judgment as required by law. This Court is not a trier of facts.

As earlier stated, 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.

25. Capitol Medical Center, Inc. v. NLRC, et al.

G.R. No. 147080, 2005

Facts:

The petitioner’s refusal to negotiate for a collective bargaining agreement (CBA) resulted in a
union-led strike. The Sec. of Labor and Employment rendered a decision Directing the
management of the Capitol Medical Center to negotiate a CBA with the Capitol Medical Center
Employees Association-Alliance of Filipino Workers, the certified bargaining agent of the
rankand-file employees. Pursuant thereto, the Union requested for a meeting to discuss matters
pertaining to a negotiation for a CBA but was refused.

Instead of filing a motion with the SOLE for the enforcement of the resolutions of
Undersecretary Laguesma as affirmed by this Court, the Union filed a Notice of Strike on

47
October 29, 1997 with the National Conciliation and Mediation Board (NCMB), serving a copy
thereof to the petitioner. The Union alleged as grounds for the projected strike the following acts
of the petitioner: (a) refusal to bargain; (b) coercion on employees; and (c) interference/ restraint
to self-organization.

Petitioner asserted that the strike was illegal that no voting had taken place on November 10,
1997; moreover, no notice of such voting was furnished to the NCMB at least twenty-four (24)
hours prior to the intended holding of the strike vote.

Issue:

Whether it is required to notify the NCMB of an impending dispute.

Ruling:

Yes. A union is mandated to notify the NCMB of an impending dispute in a particular bargaining
unit via a notice of strike. Thereafter, the NCMB, through its conciliator mediators, shall call the
parties to a conference at the soonest possible time in order to actively assist them in exploring
all possibilities for amicable settlement. In the event of the failure in the conciliation/mediation
proceedings, the parties shall be encouraged to submit their dispute for voluntary arbitration.
However, if the parties refuse, the union may hold a strike vote, and if the requisite number of
votes is obtained, a strike may ensue.

48