Gonzales V. Climax Mining Ltd.

Facts:
The case is a consolidation of two petitions rooted in the same disputed Addendum Contract entered by
the parties. In GR No. 161957, the Court had held that the DENR Panel of Arbitrators had no jurisdiction
over the complaint for the annulment of the Addendum contract on the 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 averred that the DENR Panel of Arbitrators has jurisdiction because the case involves a mining
dispute that properly falls within the ambit of the Panel’s authority. On the other hand, Climax Mining
Ltd. Citing American Jurisprudence and the UNCITRAL Model Law, argued that the arbitration clause in
the Addendum Contract should be treated as an agreement independent of the other terms of the
contract, and that a claimed rescission of the main contract does not avoid the duty to arbitrate.

In GR No. 167994, Gonzales challenged the order of the RTC requiring him to proceed with the
arbitration proceedings which was sought by Climax-Arimco while the complaint for the nullification of
the Addendum Contract was pending before the DENR Panel of Arbitrators. Gonzales argued that the
Addendum Contract was void, thus the arbitration clause contained therein was likewise void ab initio.
He contends that any issue as to the nullity, inoperativeness, or incapability of performance of the
arbitration clause/agreement raised by one of the parties to the alleged arbitration agreement must be
determined by the court prior to referring them to arbitration.

Climax-Arimco countered that Gonzales’ attack on or repudiation of the Addendum Contract is not a
ground to deny effect to the arbitration clause in the Contract. Section 2, par. 1 of RA 876 itself
considers the arbitration stipulation an independent contract in its own right whose enforcement may
be prevented only on grounds which legally make the arbitration agreement itself revocable. Likewise,
Climax-Arimco emphasized that in Sec. 24 of RA 9285, the court, instead of trying the case, may, on
request of either or both parties, refer the parties to arbitration, unless it finds that the arbitration
agreement is null and void, inoperative or incapable of being performed. Arbitration may even be
ordered in the same suit brought upon a matter covered by an arbitration agreement even without
waiting for the outcome of the issue of the validity of the arbitration agreement. Under Art. 8 of the
UNCITRAL Model Law, it states that where a court before which an action is brought in a matter which is
subject of an arbitration agreement refers the parties to arbitration, the arbitral proceedings may
proceed even while the action is pending.

Issue:
Whether the question of validity of the Addendum Contract affects the applicability or enforceability of
the arbitration clause contained therein.

Held:
No. The doctrine of separability, or severability enunciates that an arbitration agreement is independent
of the main contract. The arbitration agreement is to be treated as a separate agreement and the
arbitration agreement does not automatically terminate when the contract of which it is part comes to
an end. The 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 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 SC held in Manila Electric Co. V. Pasay Transportation Co. that a submission to arbitration is a
contract. A clause in a contract providing that all matters in dispute between the parties shall be
referred to arbitration is a contract, and in Del Monte Corporation-USA V. Court of Appeals. That “the
provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is
part of that contract and is itself a contract. Contracts are respected as the law between the contracting
parties and produce effect as between them, their assigns and heirs.

Korea Technologies Co. V Lerma

Facts:
PGSMC and KT executed a Contract whereby KOGIES would set up an LPG Cylinder Manufacturing Plant
in Carmona, Cavite.

Puromines Inc. V. CA
Facts:
Puromines Inc. and Makati Agro Trading Inc. entered into a contract with private respondents Phillip
Brothers Oceanic Inc. for the sale of prilled Urea in bulk. The Sales Contract provided, among others an
arbitration clause which states, thus: “9. Arbitration – Any disputes arising under this contract shall be
settled by arbitration in London in accordance with the Arbitration Act of 1950 and any statutory
amendment or modification thereof. The shipment covered by 3 bills of lading was loaded on MV Liliana
Dimitrova with Philipp Brothers as charterer of said vessel. When the shipment covered by Bill of Lading
1 and 3 were discharged in Manila, it was found to be in bad order and condition, caked, hardened and
lumpy, discoloured and contaminated with rush and dirt. Puromines filed a complaint with the Trial
Court for breach of contract of carriage against Maritime, as ship-agent and Philipp Brothers, as
charterer. Philipp filed a motion to dismiss on the ground that Petitioner should comply with the
arbitration clause in the sales contract. Puromines opposed contending that the sales contract does not
include contract of carriage, therefore, the latter is not covered by the agreement on arbitration.

Issue:
W/N the arbitration clause in the sales contract covers claim for violation of contract of carriage.

Held:
Yes. The sales contract is comprehensive enough to include claims for damages arising from carriage and
delivery of the goods. Puromines derives its right to the cargo form the bill of lading which is the
contract of affreightment together with the sales contract. Consequently, it is bound by the provisions
and terms of the said bill of lading and of the arbitration clause incorporated in the sales contract.
Responsibility to third persons for goods shipped on board a vessel follows the vessel’s possession and
employment. Assuming the cause of action is based on contract of carriage, it must be first determined
what kind of charter party had with the ship owner to determine liability. If it is a contract of
affreightment, the charterer is not liable as possession is still with the owner. If it is a charter of demise
or bareboat, then the charterer is liable as it is considered the owner and therefore would be liable for
damage or loss. In any case, whether the liability of respondent should be based on the same contract
or that of the bill of lading, the parties are nevertheless obligated to respect the arbitration provisions
on the sales contract and/or the bill of lading. Petitioner being a signatory and party to the sales
contract cannot escape from his obligation under the arbitration clause as stated therein. Arbitration
has been held valid and constitutional. The rule now is that unless the agreement is such as absolutely to
close the doors of the courts against the parties, which agreement would be void, the courts will look
with favor upon such amicable arrangements and will only interfere with great reluctance to anticipate
or nullify the action of the arbitrator.

Toyota Motors Philippines V. CA

Facts:
This case involves a boundary dispute between petitioner Toyota and private respondent Sun Valley.
Both Toyota and Sun Valley are registered owners of two adjoining parcels of land which they purchased
from the Asset Privatization Trust. The properties in question formerly belonged to Delta Motors
Corporation which were foreclosed by the Philippine National Bank and later transferred to the national
government through the APT for disposition. APT then proceeded to classify the DMC properties, called
the GC III-Delta Motors Corporation, and divided into Delta I, II, and III.

Part of the duly parceled Delta I property was sold to Toyota through public bidding. After its purchase,
Toyota constructed a concrete hollow block perimeter fence around its property. Another part of the
parceled Delta I was purchased by Sun Valley from APT. Petitioner then filed a case against APT for the
reformation of the Deed of Sale executed between them alleging that the instrument failed to reflect
the true intention of the parties as the title failed to include 723 square meters strip of land. On the
other hand, Sun Valley, filed a case for recovery of possession of the disputed 723 square meters relying
upon the title description of its property and the surveys it has commissioned. Through legal maneuvers,
the parties have succeeded in muddling up the vital issues of the case and getting the lower courts
embroiled in numerous appeals over technicalities. Hence, the three appellate decision/resolutions
before the Court for review and conflicting orders issued by lower courts as a result of the separate
cases filed by the parties.

Issue:
Whether or not Judge Tensuan had jurisdiction to take cognizance of the case for reformation of
instrument.

Ruling:
Attention must first be brought to the fact that the contract of sale executed between APT and Toyota
provides an arbitration clause which states that:

In case of disagreement or conflict arising out of this Contract, the parties hereby undertake to submit
the matter for determination by a committee of experts, acting as arbitrators, the composition of which
shall be as follows: 1) one member to be appointed by the VENDOR; 2) One member, to be appointed by
the VENDEE; 3) One member, who shall be a lawyer, to be appointed by both of the parties.
Toyota filed an action for reformation of its contract with APT, the purpose of which is to look into the
real intentions/agreement of the parties to the contract and to determine if there was really a mistake
in the designation of the boundaries of the property as alleged by Toyota. Such questions can only be
answered by the parties to the contract themselves. This is a controversy which clearly arose from the
contract entered into by APT and Toyota themselves, the arbitration committee is therefore the proper
and convenient forum to settle the matter as clearly provided in the deed of sale. Having been apprised
of the presence of the arbitration clause in the motion to dismiss filed by APT, Judge Tensuan should
have at least suspended the proceedings and directed the parties to settle their dispute by arbitration.
Judge Tensuan should have not taken cognizance of the case. Therefore, the petition is dismissed for
failure on the part of the respondent court.

Home Bankers Savings and Trust Company V. CA

Facts:
Victor Tancuan issued Home Bankers Savings and Trust Company a check while Eugene Arriesgado
issued Private Respondent Far East Bank and Trust Company three checks. Both checks totaling the
amount of P25,250,000.00. Tancuan and Arriesgado exchanged each other’s checks and deposited them
with their respective banks for collection. When FETBC presented Tancuan’s HBSTC check for clearing, it
was dishonored for being DAIF. Meanwhile, HBSTC sent Arriesgado’s 3 FEBTC checks through the
Philippine Clearing House Corporation to FEBTC but was returned for being DAIF. HBSTC receive the
notice of dishonor but refused to accept the checks and returned them to FEBTC through the PCHC for
the reason “Beyond Reglementary Period” implying that HBSTC already treated the 3 checks as cleared
and allowed the proceeds thereof to be withdrawn. FEBTC demanded reimbursement for the returned
checks and inquired from HBSTC whether it had permitted any withdrawal of funds against the
unfunded checks. HBSTC, however refused to make any reimbursement and to provide FEBTC with the
needed information. Thus, FEBTC submitted the dispute for arbitration before the PCHC Arbitration
Committee, under its supplementary Rules on Regional Clearing to which FEBTC and HBSTC are bound as
participants in the regional clearing operations administered by the PCHC. While the arbitration
proceeding was still pending, FEBTC filed an action for sum of money and damages with preliminary
attachment against HBSTC. HBSTC moved to dismiss on the ground that there is no cause of action and
because it seeks to enforce an arbitral award which as yet does not exist. The trial court denied the
motion to dismiss and the motion for reconsideration. Petitioner then filed a petition for certiorari with
respondent CA to which it had dismissed.

Issue:
Whether or not private respondent which commenced an arbitration proceeding under the auspices of
the PCHC may subsequently file a separate case in court over the same subject matter despite the
pendency of that arbitration, simply to obtain the provisional remedy of attachment against the adverse
party in the arbitration proceeding.

Held:
The Court finds no merit in the petition. Section 14 of RA 876, otherwise known as the Arbitration Law,
allows any party to the arbitration proceeding to petition the court to take measures to safeguard
and/or conserve any matter which is the subject of the dispute in arbitration.
Petitioner’s exposition of the foregoing provision deserves scant consideration. Section 14 simply grants
an arbitrator the power to issue subpoena and subpoena duces tecum at any time before rendering the
award. The exercise of such power is without prejudice to the right of a party to file a petition in court to
safeguard any matter which is the subject of the dispute in arbitration. In the case at bar, private
respondent filed an action for a sum of money with prayer for a writ of preliminary attachment.
Undoubtedly, such action involved the same subject matter as that in arbitration, the sum of
25,200,000.00 which was allegedly deprived from private respondent in what is known in banking as a
kiting scheme. However, the civil action was not a simple case of a money claim since private
respondent has included a prayer for a writ of preliminary attachment, which is sanctioned by Section 14
of the Arbitration Law.

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

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

encouraged by this Court. Aside from unclogging judicial dockets, it also hastens solutions especially of
commercial disputes. The Court looks with favor upon such amicable arrangement and will only
interfere with great reluctance to anticipate or nullify the action of the arbitrator. Wherefore, premises
considered, the petition is hereby dismissed and the decision of the court is affirmed.

Adamson V. CA
Facts:
On June 15, 1990, the parties in this case namely Adamson Management Corporation and Lucas
Adamson on one hand and APAC Holdings Limited on the other, had entered into a contract whereby
the former sold 99.97% of outstanding common shares of stocks of Adamson and Adamson, Inc. to the
latter for Php 24,384,600.00 plus the Net Asset Value of Adamson and Adamson, Inc. as of June 19,
1990. But the parties failed to agree on a reasonable Net Asset Value. This prompted them to submit the
ease for arbitration in accordance with RA 876, otherwise known as the Arbitration Law.

The Arbitral Tribunal rendered the award in favor of APAC Holdings Ltd. Thereafter, APAC Holdings Ltd.
Filed a petition for confirmation of the arbitration award before the RTC of Makati. Herein Petitioners
opposed the petition and prayed for the nullification, modification and/or correction of the same,
alleging that the arbitrators committed evident partiality and grave abuse of discretion. The RTC
rendered a decision vacating the arbitration award.

Thereafter, the CA in reversing the trial court’s decision held that the nullification of the decision of the
Arbitration Committee was not based on the ground provided by the Arbitration Law and that private
respondents have failed to substantiate with any evidence their claim of partiality. Significantly, even as
respondent judge ruled against the arbitrators award, he could not find fault with their impartiality and
integrity. Evidently, the nullification of the award rendered at the case at bar was made not on the basis
of any of the grounds provided by law.

Issue:
W/N the CA erred in affirming the arbitration award and in reversing the decision of the trial court.

Held:
No. Section 24 of the Arbitration Law provides as follows:
Sec. 24 Grounds for vacating award. -In any one of the following cases, the court must make an order
vacating the award upon the petition of any party to the controversy when such party proves
affirmatively that in the arbitration proceedings: B) That there was evident partiality or corruption in the
arbitrators or any of them.

Petitioners herein failed to prove their allegation of partiality on the part of the arbitrators. Proofs other
than mere interferences are needed to establish evident partiality. That they were disadvantaged by the
decision of the Arbitration Committee does not prove evident partiality. Too much reliance has been
accorded by petitioners on the decision of the trial court. However, we find that the same is but an
adaptation of the arguments of petitioners to defeat the petition for confirmation of the arbitral award
in the trial court by herein private respondent.

It is clear therefore, that the award was vacated not because of evident partiality of the arbitrators but
because the latter interpreted the contract in a way which was not favourable to herein petitioners and
because it is considered that herein private respondents, by submitting the controversy to arbitration,
was seeking to renege on its obligations under the contract. That the award was unfavourable to
petitioners herein did not prove evident partiality. That the arbitrators resorted to contract
interpretation neither constituted a ground for vacating the award because under the cirumstances, the
same was necessary to settle the controversy between the parties regarding the amount of NAV. In any
case, this Court finds that the interpretation made by the arbitrators did not create a new contract, as
alleged by herein petitioners but was a faithful application of the provisions of the Agreement. Neither
was the award arbitrary for it was based on the statements prepared by the SGV which was chosen by
both parties to be the auditors.

Tuna Processing, Inc. V. Philippine Kingford, Inc.

Facts:
Philippine Kingford, Inc. is a corporation under the laws of the Philippines while Tuna Processing, Inc. is a
foreign corporation not licensed to do business in the Philippines. Due to circumstances not mentioned
in the case, Kingford withdrew from petitioner TPI and correspondingly, reneged on their obligations.
Petitioners then submitted the dispute for arbitration before the International Centre for Dispute
Resolution in the State of California, United States and won the case against respondent. To enforce the
award, petitioner TPI filed a Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral
Award before the RTC of Makati City. The RTC dismissed the petition on the ground that the petitioner
lacked legal capacity to sue in the Philippines.
Issue: Can a foreign corporation not licensed to do business in the Philippines, but which collects
royalties from entities in the Philippines, sue here to enforce a foreign arbitral award?

Held:
RTC decision is reversed. The Alternative Dispute Resolution Act of 2004 shall apply in this case as the
Act, as its title – would suggest, that a law especially enacted to actively promote party autonomy in the
resolution of disputes or the freedom of the party to make their own arrangements to resolve their
disputes. It specifically provides exclusive grounds available to the party opposing an application for
recognition and enforcement of the arbitral award. The Corporation Code is the general law providing
for the formation, organization and regulation of private corporations. As between a general and special
law, the latter shall prevail generalia specialibus non derogat.

The Special Rules of Court on Alternative Dispute Resolution provides that any party to a foreign arbitral
award. Indeed, it is in the best interest of justice that in the enforcement of a foreign arbitral award, the
losing party cannot avail of the rule that bars foreign corporations not licensed to do business in the
Philippines from maintaining a suit in our courts. When a party enters into a contract containing a
foreign arbitration clause and, as in this case, in fact submits itself to arbitration, it becomes bound by
the contract, by the arbitration and by the result of arbitration, conceding thereby the capacity of the
other party to enter into the contract, participate in the arbitration and cause the implementation of the
result.

Cargill Philippines V. San Fernando Regala Trading

Facts:
Respondent San Fernando Regala Trading filed with the RTC of Makati a complaint for Rescission of
Contract with Damages against petitioner Cargill. It alleged that it agreed that it would purchase from
Cargill 12,000 metric tons of Thailand origin cane blackstrap molasses and that the payment would be by
an Irrevocable Letter of Credit payable at sight. The parties agreed that the delivery would be made in
April/May. Cargill failed to comply with its obligations despite demands from respondent. The
respondent then filed for rescission.

The petitioner filed a motion to dismiss/suspend proceeding, arguing that they must first resort to
arbitration as stated in their agreement before going to court. However, the RTC ruled in favor of the
respondent. The CA affirmed the RTC decision, adding that the case cannot be brought under the
Arbitration Law for the purpose of suspending the proceedings before the RTC, since in its Motion to
Dismiss/Suspend proceedings, petitioner alleged, as one of the grounds thereof, that the subject
contract between the parties did not exist or it was invalid; that the said contract bearing the arbitration
clause was never consummated by the parties, thus, it was proper that such issue be first resolved by
the court through an appropriate trial; that the issue involved a question of fact that the RTC should first
resolve.

Issue: Whether the CA erred in finding that this case cannot be brought under the arbitration law for the
purpose of suspending the proceedings in the RTC.

Held:
Yes. Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in
our jurisdiction. RA No. 876 authorizes arbitration of domestic disputes. Foreign arbitration, as a system
of settling commercial disputes of an international character, is likewise recognized. The enactment of
RA 9285 further institutionalized the use of alternative dispute resolution systems, including arbitration,
in the settlement of disputes.

A contract is required for arbitration to take place and to be binding. Submission to arbitration is a
contract and a clause in a contract providing that all matters in dispute between the parties shall be
referred to arbitration is a contract. The provision to submit to arbitration any dispute arising therefrom
and the relationship of the parties is part of the contract and is itself a contract.

The validity of the contract containing the agreement to submit to arbitration does not affect the
applicability of the arbitration clause itself. A contrary ruling would suggest that a party’s mere
repudiation of the main contract is sufficient to avoid arbitration. That is exactly the situation that the
separability doctrine, as well as jurisprudence applying it, seeks to avoid.

China Chan Jian Energy Corporation V. Rosal Infrastructure Builders

Facts: