(1) LA NAVAL DRUG CORPORATION vs.
COURT OF additionally hear and decide in the summary proceedings Yao's
APPEALS and WILSON C. YAO
G.R. No. 103200 August 31, 1994
VITUG, J.:
FACTS:
Respondent Yao was the owner of a commercial building, a
portion of which is leased to herein petitioner. However, the two
disagreed on the rental rate so they submitted their disagreement
to arbitration pursuant to Sec. 6 of RA 876 (Arbitration Law) and
par. 7 of their lease contract. Alamarez and Atty. Sabile has been
appointed by each of the parties as arbitrator while the
appointment of Tupang as the third one was held in abeyance
because La Naval Drug defer the same until its Board of
Directors could convene and approve it. Yao contended that is
only a dilatory tactics, hence, he prayed that a summary hearing
be conducted and direct the 2 arbitrators to proceed by
appointing and confirming the appointment of the Third Arbitrator
and immediately convene and resolve the controversy before it.
La Naval Drug averred that Yao has no cause of action
against it as the 2 arbiters have the free hand in choosing the
third member; hence, it included a counterclaim. Consequently,
Yao filed an amendment for payment of unpaid rents and
damages which was admitted. La Naval Drug argued that the
amended petition must be dismissed as Yao's proposition for a
summary hearing of the arbitration issue and separate trial for his
claim for damages is procedurally untenable and implausible.
In its assailed Order, the CA held that Yao’s claim is
predicated on the alleged interference and dilatory tactics, thus,
compelled the herein respondent to ask the CA for redress and
the counterclaim may be entertained in a hearing, not summary,
for the purpose. A preliminary hearing of the special and
affirmative defense to show that Yao has no cause of action is
denied.
On MR, petitioner argued that the respondent court sits
as a special court exercising limited jurisdiction and is not
competent to act on Yao's claim for damages, which poses an
issue litigable in an ordinary civil action. However, CA denied the
MR. Although the CA agreed that under Sec 6 of RA 876, a
court, acting within the limits of its special jurisdiction, may in this
case solely determine the issue of whether the litigants should
proceed or not to arbitration, it, however, considered La Naval
Drug in estoppel from questioning the competence of the court to
claim for damages, it having itself filed similarly its own
counterclaim with the court a quo.
ISSUES:
1. WON the court a quo has jurisdiction to decide the claim on
damages in summary proceeding involving an arbitration
controversy.
HELD:
No, the court a quo has no jurisdiction.
Jurisdiction over the person must be seasonably raised,
i.e., that it is pleaded in a motion to dismiss or by way of an
affirmative defense in an answer. Voluntary appearance shall be
deemed a waiver of this defense. The assertion, however, of
affirmative defenses shall not be constructed as an estoppel or
as a waiver of such
defense.
Where the court itself clearly has no jurisdiction over the
subject matter or the nature of the action, the invocation of this
defense may be done at any time. It is neither for the courts nor
the parties to violate or disregard that rule, let alone to confer that
jurisdiction, this matter being legislative in character. Barring
highly meritorious and exceptional circumstances, such as
hereinbefore exemplified, neither estoppel nor waiver shall apply.
In the case at bench, the want of jurisdiction by the court is
indisputable, given the nature of the controversy. The arbitration
law explicitly confines the court's authority only to pass
upon the issue of whether there is or there is no agreement
in writing providing for arbitration. In the affirmative, the
statute ordains that the court shall issue an order
"summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof." If the
court, upon the other hand, finds that no such agreement
exists, "the proceeding shall be dismissed." The
proceedings are summary in nature.
All considered, the court a quo must then refrain from
taking up the claims of the contending parties for damages,
which, upon the other hand, may be ventilated in separate
regular proceedings at an opportune time and venue. The
circumstances obtaining in this case are far, we hold, from
justifying the application of estoppel against either party.
 (2) ORMOC SUGARCANE PLANTERS' ASSOCIATION, INC.
(OSPA), ET. AL. vs. COURT OF APPEALS, ET. AL.
G.R. NO. 156660 : August 24, 2009
LEONARDO-DE CASTRO, J.:
FACTS:
Petitioners (OSPA, OLFAMCA, UNIFARM, and ONDIMCO) are
associations organized by and whose members are individual
sugar planters. Respondents Hideco Sugar Milling Co., Inc.
(Hideco) and Ormoc Sugar Milling Co, Inc. (OSCO) are sugar
centrals, who may or may not be members of an association
such as petitioners.
Petitioners assert that the relationship between
respondents and the individual sugar planters is governed by
milling contracts which provides sharing ratio of 34:65:1 for
centrals, planters, and planter’s association, respectively. If the
Planter was not a member of any association, then the said 1%
shall revert to the centrals. The said contract also provides for
arbitration in case of disagreement between the parties thereto.
In 1999, petitioners, without impleading any of their
individual members, filed twin petitions with the RTC for
Arbitration under RA 876 against HIDECO and OSCO for
violating the Milling Contract when the latter gave to independent
planters who do not belong to any association the 1% share,
instead of reverting said share to the centrals.
Respondents filed a motion to dismiss on ground of lack
of cause of action as it was the individual Planters, and not
petitioners, who were the signatories of the milling contract and
had legal standing to invoke the arbitration clause therein.
RTC denied the motion to dismiss. MR also denied. On
appeal, the CA set aside the Orders of the lower court and held
that petitioners neither had an existing contract with respondents
nor were they privy to the milling contracts between respondents
and the individual Planters. With their MR denied, petitioners
elevated the case before the SC via special civil action for
certiorari.
ISSUE: WON the petitioners have legal personality to file a suit
against, or demand arbitration from, respondents in their own
name without impleading the individual Planters.
HELD:
No, petitioners have no legal standing.
Except where a compulsory arbitration is provided by
statute, the first step toward the settlement of a difference by
arbitration is the entry by the parties into a valid agreement to
arbitrate. An agreement to arbitrate is a contract, the relation of
the parties is contractual, and the rights and liabilities of the
parties are controlled by the law of contracts. In an agreement for
arbitration, the ordinary elements of a valid contract must appear,
including an agreement to arbitrate some specific thing, and an
agreement to abide by the award, either in express language or
by implication. The requirements that an arbitration agreement
must be written and subscribed by the parties thereto were
enunciated by the Court in B.F. Corporation v. CA
Sec 2 of RA 786 speaks of two modes of arbitration: (a)
an agreement to submit to arbitration some future dispute,
usually stipulated upon in a civil contract between the parties,
and (b) an agreement submitting an existing matter of difference
to arbitrators, termed the submission agreement. Except where
a compulsory arbitration is provided by statute, the first step
toward the settlement of a difference by arbitration is the entry by
the parties into a valid agreement to arbitrate.
In the case at bar, Article XX of the milling contract is an
agreement to submit to arbitration because it was made in
anticipation of a dispute that might arise between the parties after
the contract's execution. Yet, there is no legal basis for
petitioners' purported right to demand arbitration when they are
not parties to the milling contracts, especially when the arbitration
clause expressly grants the right to demand arbitration only to the
parties to the contract.
Sec 4 of RA 786 requires that an arbitration agreement
must be in writing and subscribed by the party sought to be
charged, or by his lawful agent. In this case, the individual
Planter and the appropriate central were the only signatories to
the contracts and there is no provision in the milling contracts
that the individual Planter is authorizing the association to
represent him/her in a legal action in case of a dispute over the
milling contracts.
Petitioners could not initiate arbitration proceedings in
their own name. As mere agents, they should have brought the
suit in the name of the principals that they purportedly represent.
Even if Sec 4 of RA 876 allows the agreement to arbitrate to be
signed by a representative, the principal, being the real-party-in-
interest, is still the one who has the right to demand arbitration.
More so, they need a power-of-attorney to represent the Planters
whether in the lawsuit or to demand arbitration.
(3) KOREA TECHNOLOGIES CO., LTD vs. HON. ALBERTO LERMA
& PACIFIC GENERAL STEEL MANUFACTURING CORP
G.R. No. 143581: January 7, 2008
VELASCO, JR., J.:
FACTS:
KOGIES and PGSMC executed a contract whereby the
former would set up an LPG Cylinder Manufacturing Plant in
Carmona, Cavite. The contract and its subsequent amendment
stipulated a total contract price of $1.53M. Then, the
machineries, equipment and facilities for the manufacturing were
delivered and installed in the Carmona plant and PGSMC paid
$1.224M to KOGIES. However, the initial operation did not push
through because of PGSMC’ financial difficulties. For the
remaining balance of the contract, it issued 2 post-dated checks
but they were dishonoured for reason payment stopped. KOGIES
sent a demand letter with a threat of litigation under BP 22 in
case of non-payment. PGSMC replied that the payment was
stopped due to the cancellation of the contract as the quantity
and quality of the equipment delivered was altered, a reason that
was made known to KOGIES. PGSMC further said that those
equipment will be dismantled and transferred from the plant.
PGSMC filed an Affidavit-Complaint for Estafa against the
President of KOGIES. The latter averred that PGSMC cannot
unilaterally rescind and insisted that they settle their dispute by
arbitration pursuant to Article 15 of their contract but to no avail.
Hence, KOGIES filed an application for arbitration before the
Korean Commercial Abitration Board (KCAB) in Seoul, Korea
and filed a complaint for specific performance against PGSMC
before the RTC-Muntinlupa. The RTC issued a TRO and PGSMC
opposed the same on the argument that the arbitration clause in
the contract was null and void for being contrary to public policy.
Later, the RTC ruled in favour of PGSMC and denied the
application for a writ of prelim injunction as KOGIES was already
paid $1.2M and no longer has proprietary rights over the
equipment. It also ruled that the arbitration clause in the contract
is void as it tended to oust the trial court jurisdiction over any
dispute that may arise between the parties. The same was
affirmed by the CA. Hence, a review on certiorari was filed.
ISSUE: WON the arbitration clause is valid.
HELD:
No, the arbitration clause is valid and not contrary to public
policy.
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 xxx.”
In this case, it has not been shown that the agreement is
against law, moral, good customs, public order or public policy.
The mutually agreed stipulation that the arbitration must be done
in Seoul, Korea in accordance with Commercial Arbitration Rules
of the KCAB and that the arbitral award if final and binding is not
contrary to public policy. After all, foreign arbitral awards while
mutually stipulated by the parties in the arbitration clause to be
final and binding are not immediately enforceable or cannot be
implemented immediately. Sec. 35 of the UNCITRAL Model Law
stipulates the requirement for the arbitral award to be recognized
by a competent court for enforcement, which court may refuse
recognition or enforcement.
Foreign arbitral awards when confirmed by the RTC are
deemed not as a judgment of a foreign court but as a foreign
arbitral award, and when confirmed, are enforced as final and
executory decisions of our courts of law. 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 NLRC 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.
 (4) KOPPEL, INC. v MAKATI ROTARY CLUB FOUNDATION, INC.
G.R. No. 198075. September 4, 2013.
PEREZ, J.:
FACTS:
Fedders Koppel, Incorporated (FKI) was owner of a
parcel of land in Parañaque City. In 1975, it donated the same to
herein respondent subject to the condition that it will be leased
back to FKI under the terms specified in the Deed of Donation.
The Deed provides that the lease is for 25 years, renewable for
another 25 years upon mutual agreement.
2 days before expiration of the lease, FKI and the
respondent entered into a 5-year lease (2000 Lease Contract),
and subsequently, agreed for another 5 years under the 2005
Lease Contract. The 2005 contract provides that aside from the
rentals, FKI will be giving donations to respondent ranging from
3M-3.9M and that any disagreement as to the interpretation,
application or execution of the same shall be arbitrated and the
decision thereupon shall be binding among the parties.
In 2008, petitioner Koppel, Inc. bought FKI and became
the assignee of the lease and donation with Makati Rotary. The
following year, Koppel discontinued the payment of rent and
donation under the 2005 Lease Contract on the argument that
the said lease contract, as well as the 2000 Lease Contract,
violated material conditions of the donation providing for a 25-yr
lease, renewable for another 25 yr-lease. More so, the donation
also provided for rules and limitations for the fixing of rentals
which was allegedly not followed. Despite 2 demand letters from
Makati Rotary, Koppel refused to pay and instead filed a
complaint for rescission or cancellation of the Deed of Donation
and the Amended Deed of Donation with the RTC-Parañaque.
Meanwhile, Makati Rotary filed and ejectment case before
the MeTC- Parañaque. The MeTC ruled in favour of Koppel for
insufficiency of respondent’s demand and the nullity of the 2005
Lease Contract. On appeal, the RTC reversed the same. CA
affirmed the RTC. Hence, this appeal was filed.
ISSUE: WON the case should be subjected to arbitration.
HELD:
Yes, the MeTC, RTC, and CA overlooked the significance
of arbitration clause in the 2005 Lease Contract.
Contrary to argument that the invalidity of contract is per
se non-arbitrable, the Court held that the ruling in Gonzales v.
Climax Mining, Ltd was taken out of context. “Arbitration before
the Panel of Arbitrators is proper only when there is a
disagreement between the parties as to some provisions of the
contract between them, which needs the interpretation and the
application of that particular knowledge and expertise possessed
by members of that Panel. It is not proper when one of the
parties repudiates the existence or validity of such contract or
agreement on the ground of fraud or oppression as in this case.
XXX Allegations of fraud and duress in the execution of a
contract are matters within the jurisdiction of the ordinary courts
of law. These questions are legal in nature and require the
application and interpretation of laws and jurisprudence which is
necessarily a judicial function.”
Under the doctrine of separability, an arbitration
agreement is considered as independent of the main contract.
Being a separate contract in itself, the arbitration agreement may
thus be invoked regardless of the possible nullity or invalidity of
the main contract. In Cargill Philippines v. San Fernando
Regal Trading Inc, the SC held that even the very party who
repudiates the main contract may invoke its arbitration clause.
Hence, even Koppel Inc. who assails the validity of the lease
contract may invoke the arbitration clause thereunder.
A, the arbitration clause is not defeated by the failure to
file a formal request or application with the MeTC. The filing of
request under Sec 2 of RA 9285 is not the sole means of
invoking arbitration as the provision uses the word “may”. Non-
compliance with an arbitration agreement is a valid defense to
any offending suit and, as such, may even be raised in an
answer as provided in our ordinary rules of procedure. Thus,
Koppel’s invocation in the Answer with Counterclaim is enough.
The fact that a JDR proceeding before the RTC was done
will not render the subsequent arbitration between the parties
unnecessary. The JDR framework is based on the processes of
mediation, conciliation or early neutral evaluation which entails
the submission of a dispute before a “JDR judge” who shall
merely “facilitate settlement” between the parties in conflict or
make a “non-binding evaluation or assessment of the chances of
each party’s case.” Thus in JDR, the JDR judge lacks the
authority to render a resolution of the dispute that is binding upon
the parties in conflict. In arbitration, on the other hand, the
dispute is submitted to an arbitrator/s — a neutral third person or
a group of thereof — who shall have the authority to render a
resolution binding upon the parties.