Compilation of Case Digests in

Alternative Dispute Resolution Law

Set 1 Prepared By:
Angala, Kenn
Salenga, Kimberly
Atitiw, Joshua
Frianeza, Grace
Jao, Christian
Laurencio, John
Maggonga, Maine
Terrado, Jessica

Set 2 Prepared By:

Aydinan, Mariano
Cosalan, Elijah
Fuchadcha, Gretchen
Humilde, Helen
Ignacio, Delight
Lay-at, Maridith
Sta. Cruz, Monalie
Villanueva, Irish

Set 3 Prepared By:

Aguilar, Nicholas
Cabulang, Margelene
Gayumma, Kezia
Manuel, Joyce
Millares, Charlene
Palcon, Eyzen
Pamplona, Val
Torio, Victoriano

1
 Table of Contents
Set 1........................................................................................................................................................................ 4
Magbanua et. al. v. Uy G.R. No. 161003, 06 May 2005 ............................................................................ 4
Viesca v. Gilinsky G.R. No. 171698, 04 July 2007 ...................................................................................... 6
Gadrinab v. Salamanca et. al. G.R. No. 194560, 11 June 2014 .............................................................. 8
Diu v. CA G.R. No. 115213, 19 December 1995 ...................................................................................... 10
Miguela v. Montanez G.R. No. 191336, 25 January 2012 .................................................................... 12
Uniwide Sales Realty and Resources Corporation v. Titan-Ikeda Construction and
Development Corporation G.R. No. 126619, 20 December 2006 .................................................... 14
Benguet Corporation vs. DENR G.R. No. 163101, 13 February 2008 ............................................ 16
Korean Technologies Co., LTD., v. Lerma G.R. No. 143581, 7 January 2008 ............................... 19
Ormoc Sugarcane Planters' Association, Inc. (OSPA) vs. CA G.R. No. 156660, 24 August 2009
................................................................................................................................................................................... 21
Cargill Philippines, Inc. vs. San Fernando Regala Trading, Inc. G.R. No. 175404, 31 January
2011 ........................................................................................................................................................................ 23
Gonzales vs. Climax Mining Ltd. G.R. No. 161957, 28 February 2005. .......................................... 25
Equitable PCI Bank, Inc v. RCBC ................................................................................................................... 27
G.R. No. 182248, 18 December 2008 .......................................................................................................... 27
Philrock Inc. v. CIAC 359 SCRA 697 (2001) ............................................................................................. 29
ABS-CBN Broadcasting Corp. v. World Interactive Network Systems (WINS) Japan Co. Ltd.
544 SCRA 308 (2009) ....................................................................................................................................... 30
Gonzales v. Climax Mining Ltd. GR Nos. 162957 and 167994, 22 January 2007 ...................... 32
Romago, Inc. v. Siemens Building Technologies, Inc. GR No. 181969, 2 October 2009 .......... 34
Heunghwa Industry Co., LTD., Petitioner v. DJ Builders Corporation G.R. NO. 169095, 8
December 2008................................................................................................................................................... 36
Licomcen, Inc. v. Foundation Specialists, Inc. G.R. No. 167022, 4 April 2011 ............................ 39
Hutama-rsea Joint Operations, Inc. v. Citra Metro Manila Tollways Corp. G.R. No. 180640, 24
April 2009 ............................................................................................................................................................. 42
Maria Luisa Park v. Almendras G.R. no. 171763 5 june 2009 .......................................................... 45
Republic of the Philippines v. Far East Enterprises G.R. No. 176487, 25 August 2009 .......... 48
First Leapanto Ceramics v. CA G.R. No. 110571, 10 March 1994 .................................................... 50
Shinryo v. RRN, Inc. G.R. No. 172525 20 October 2010 ...................................................................... 52
Set 2..................................................................................................................................................................... 54
Koppel, Inc. V. Makati Rotary Club G.R. No. 198075, 4 September 2013 ..................................... 54
J Plus Asia Development Corporation v. Utility Assurance Corporation G.R. No. 199650, 26
June 2013 .............................................................................................................................................................. 57

2
Puromines, Inc. v. CA G.R. No. 91228, 22 March 1993......................................................................... 59
Chung Fu v. CA G.R. No. 96283, 25 February1992 ................................................................................ 61
California and Hawaiian Sugar Company et. al. v. Pioneer Insurance and Surety Corp. G.R.
No. 139273, 28 November 2000 .................................................................................................................. 64
Asset Privatization Trust v. CA G.R. No. 121171, 29 December 1998 ........................................... 65
Agan v. PIATCO G.R. No. 155001, 5 May 2003 ........................................................................................ 68
Associated Bank v. CA G.R. No. 107918, 14 June 1994 ........................................................................ 71
Salas v. Laparel G.R. No. 135362, 13 December 1999 ......................................................................... 74
Coca-Cola Bottlers Philippines, Inc. v. Coca-Cola Bottlers, Philippines, Inc., GR No. 155651,
28 July 2005 ......................................................................................................................................................... 76
National SteelCorp. V. RTC Branch 2, Iligan City G.R. No. 127004, 11 March 1999 ................. 79
Del Monte v. CA G.R. No. 136154, 7 February 2001 ............................................................................. 84
Set 3..................................................................................................................................................................... 86
Oil and Natural Gas Commission v. CA, G.R. No. 114323, 23 July 1998 ........................................ 86
DFA v. Falcon G.R. No. 176657, 1 September 2010 .............................................................................. 91
MCC Industrial SALES Corporation vs. Ssangyong Corporation G.R. No. 170633, 17 October
2007 ........................................................................................................................................................................ 93
Magellan Capital Management Corp. (MCMC) vs. Zosa GR No. 129916, 26 March 2001 ....... 95
Transfield Philippines vs Luzon Hydro Electric Corp. GR No 146717, 22 November 2004 97
Hi- Precision v. Lim Kim Steel G.R. No. 110434, 13 December 1993 ............................................ 99
Barrameda v. Atienza G.R. No. 129175, November 19, 2001.......................................................... 102
Mariño v. Gamilla G.R. No. 132400, 31 January 2005 ........................................................................ 104
A.D. Gothong Manufacturing Corporation Employees Union-ALU v. Confesor, et. al. G.R. No.
113638, 16 November 1999 ........................................................................................................................ 107
Capitol Medical Center v. NLRC G.R. No. 147080, 26 April 2005 .................................................. 109

3
Set 1

Magbanua et. al. v. Uy

G.R. No. 161003, 06 May 2005

Facts:

On February 3, 1997, petitioners filed a Motion for Issuance of Writ of Execution, as

a final consequence of the final and executory decision of the Supreme Court in Rizalino P.
Uy v. National Labor Relations Commission, et. al. Respondent Rizalino Uy filed a
Manifestation requesting that the cases be terminated and closed, stating that the judgment
award as computed had been complied with to the satisfaction of petitioners. In their
Reply, petitioners claimed that they received only partial payments of the judgment award.

Hereinafter, six (6) of the eight (8) petitioners filed a Manifestation requesting that
the cases be considered closed and terminated as they are already satisfied of what they
have received a total of P320,000 from respondent. Together with said Manifestation is a
Joint Affidavit of the six (6) petitioners attesting that they have no more collectible amount
from respondent and if there is any, they are abandoning and waiving the same. Thus, the
Labor Arbiter issued an order denying the motion for issuance of writ of execution and
considered the cases closed and terminated.

The Court of Appeals held that compromise agreements may be entered into even
after a final judgment. Thus, petitioners validly released respondent from any claims, upon
the voluntary execution of a waiver pursuant to the compromise agreement.

The appellate court denied petitioners' motion for reconsideration for having been
filed out of time.

Issues:

1. Whether or not the final and executory judgment of the Supreme Court could be
subject to compromise settlement.

2. Whether or not the petitioners' affidavit waiving their awards in the labor case
executed without the assistance of their counsel and labor arbiter is valid

Ruling:

1. A compromise agreement is a contract whereby the parties make reciprocal

concessions in order to resolve their differences and thus avoid or put an end to a

4
 lawsuit. They adjust their difficulties in the manner they have agreed upon,
disregarding the possible gain in litigation and keeping in mind that such gain is
balanced by the danger of losing. Verily, the compromise may be either extrajudicial
(to prevent litigation) or judicial (to end a litigation). A compromise must not be
contrary to law, morals, good customs and public policy; and must have been freely
and intelligently executed by and between the parties. To have the force of law
between the parties, it must comply with the requisites and principles of contracts.
Upon the parties, it has the effect and the authority of res judicata, once entered
into.

When a compromise agreement is given judicial approval, it becomes more

than a contract binding upon the parties. Having been sanctioned by the court, it is
entered as a determination of a controversy and has the force and effect of a
judgment. It is immediately executory and not appealable, except for vices of
consent or forgery. The nonfulfillment of its terms and conditions justifies the
issuance of a writ of execution; in such an instance, execution becomes a ministerial
duty of the court.

Following these basic principles, apparently unnecessary is a compromise

agreement after final judgment has been entered. Indeed, once the case is
terminated by final judgment, the rights of the parties are settled. There are no more
disputes that can be compromised.

2. The presence or the absence of counsel when a waiver is executed does not
determine its validity. There is no law requiring the presence of a counsel to validate
a waiver. The test is whether it was executed voluntarily, freely and intelligently;
and whether the consideration for it was credible and reasonable. Where there is
clear proof that a waiver was wangled from an unsuspecting or a gullible person, the
law must step in to annul such transaction. In the present case, petitioners failed to
present any evidence to show that their consent had been vitiated.

5
 Viesca v. Gilinsky
G.R. No. 171698, 04 July 2007

Facts:

Petitioner and respondent, a Canadian citizen, met sometime in January 1999 at the
Makati Shangri-La Hotel where the former worked as a hotel manager. After a few months,
a relationship blossomed between the two. On 22 October 2001, their son Louis Maxwell
was born. Respondent executed an Affidavit of Acknowledgment/Admission of Paternity of
the child. Subsequently, the Civil Registrar of Makati City issued a Certification granting the
change of Louis Maxwell's surname from "Viesca" to "Gilinsky."

Unfortunately, the relationship between petitioner and respondent soured and they
parted ways during the early part of 2003. Thus, respondent filed a Petition praying that he
be entitled to the company of Louis Maxwell at any time of any given day; he be entitled to
enjoy the company of Louis Maxwell during weekends and on such occasions the child shall
be allowed to spend the night with his father; and he be entitled to enjoy a yearly three-
week vacation in any destination with his child.

During the pendency of respondent's petition, the parties arrived at a compromise

agreement. This compromise agreement was submitted before the trial court and became
the basis of the Compromise Judgment issued on 12 May 2004.

Issue:

Whether or not the Compromise agreement executed by the parties is valid and in
accordance to law despite vagueness of the provision of the compromise agreement.

Ruling:

The petition is partly meritorious.

A compromise agreement has been described as a contract whereby the parties, by

making reciprocal concessions, avoid a litigation or put an end to one already commenced.
A compromise agreement that is intended to resolve a matter already under litigation is
normally called a judicial compromise. Once it is stamped with judicial imprimatur, it
becomes more than a mere contract binding upon the parties. Having the sanction of the
court and entered as its determination of the controversy, it has the force and effect of any
other judgment. Such agreement has the force of law and is conclusive between the parties.
It transcends its identity as a mere contract binding only upon the parties thereto, for it
becomes a judgment that is subject to execution in accordance with the Rules. Thus, a
compromise agreement that has been made and duly approved by the court attains the
effect and authority of res judicata, although no execution may be issued unless the

6
agreement receives the approval of the court where the litigation is pending and
compliance with the terms of the agreement is decreed.

The settlement of disputes brought before the courts is encouraged. In fact, in the
Civil Code and in the Revised Rules of Court, courts are directed to persuade the litigants in
civil cases to agree upon some fair compromise.

To obviate further discord between them and to preclude their recourse to the trial
court every time one of them perceives a violation committed by the other of Clause II(b) of
the Compromise Judgment, we direct the trial court to be on guard and ensure that the
parties would lay out in concrete, specific details the terms of their agreement as to this
specific matter as well of the appointment of Louis Maxwell's accompanying guardian.

7
 Gadrinab v. Salamanca et. al.
G.R. No. 194560, 11 June 2014

Facts:

Respondents, together with Adoracion Gadrinab and Arsenia Talao, are siblings and
heirs of the late Spouses Talao, Nicolas and Aurelia. The Spouses Talao died intestate,
leaving a parcel of land in Sta. Ana, Manila. The five Talao children divided the property
among themselves through an extrajudicial settlement. Subsequently, Arsenia Talao
waived her share over the property in favor of her siblings.

All parties claimed their respective shares in the property. They also claimed shares
in the rentals collected from one of the units of a duplex apartment on the property. The
total amount of rental collection in the possession of Jose Lopez was P528,623.00. The
amount, according to Jose’s counsel, was ready for distribution.

Upon being referred to mediation, the parties entered into a compromise

agreement. Thereafter, the Regional Trial Court approved the compromise agreement.
Based on the entry of judgment, the case became final and executory.

Because of the attitude of her co-heirs, respondent Salamanca moved for the
physical partition of the property before the Regional Trial Court of Manila. She prayed for
the physical partition of the property instead of having it sold. Nestor and Francisco
Gadrinab opposed the motion. They contended that the judgment on the compromise
agreement had already become final and executory and had the effect of res judicata.
Antonio Talao and Jose Lopez did not object to the motion for physical partition.

The Regional Trial Court of Manila granted the motion for physical partition.

Nestor and Francisco Gadrinab appealed to the Court of Appeals. They assailed the
grant of Salamanca’s motion for physical partition after the issuance of the judgment on
compromise agreement.

The Court of Appeals dismissed the appeal. The CA ruled that the exception to the
immutability of judgments, that is, “whenever circumstances transpire after the finality of
the decision rendering its execution unjust and inequitable,” applies in this case.

Issue:

Whether or not the Court of Appeals erred in affirming the Regional Trial Court’s
decision allowing the physical partition of the property despite finality of a previous
judgment on compromise agreement involving the division of the same property.
Ruling:

8
Ruling:

Yes. The Court of Appeals erred in affirming the Regional Trial Court’s decision
allowing the physical partition of the property.

In a compromise agreement, the parties freely enter into stipulations. “[A] judgment based
on a compromise agreement is a judgment on the merits” of the case. It has the effect of res
judicata. These principles are impressed both in our law and jurisprudence.

Thus, Article 2037 of the Civil Code provides: Article 2037. A compromise has upon
the parties the effect and authority of res judicata; but there shall be no execution except in
compliance with a judicial compromise.

Doctrines on bar by prior judgment and immutability of judgment apply whether

judgment is rendered after a full-blown trial or after the parties voluntarily execute a
compromise agreement duly approved by the court. Because a judicial compromise
agreement is in the nature of both an agreement between the parties and a judgment on the
merits, it is covered by the Civil Code provisions on contracts. It can be avoided on grounds
that may avoid an ordinary contract, e.g., it is not in accord with the law; lack of consent by
a party; and existence of fraud or duress. Further, the pertinent Civil Code provisions on
compromise agreements provide:

Article 2038. A compromise in which there is mistake, fraud, violence, intimidation,

undue influence, or falsity of documents is subject to the provisions of Article 1330 of this
Code.

In this case, there was no issue as to the fact that the parties freely entered into the
compromise agreement. There was also no dispute about the clarity of its terms. Some of
the parties simply do not wish to abide by the compromise agreement’s terms.

This court does not see how substantial justice will be served by disturbing a
previous final judgment on compromise when failure of its execution was caused by the
parties themselves.

9
 Diu v. CA
G.R. No. 115213, 19 December 1995

Facts:

It appears that on several occasions from January 8, 1988 up to and until April 18,
1989, private respondent Patricia Pagba purchased on credit various articles of
merchandise from petitioners’ store at Naval, Biliran, all valued at P7,862.55, as evidenced
by receipts of goods. Private respondents failed to pay despite repeated demands.

Petitioners brought the matter before the Barangay Chairman of Naval and the
latter set the case for hearing, but private respondents failed to appear. When the case was
again set for hearing, the parties appeared but they failed to reach an amicable settlement.
Accordingly, the barangay chairman issued a Certification to File Action. Petitioners then
filed their complaint for a sum of money before the Municipal Trial Court of Naval.

Private respondents, in their Answer, 4 while admitting the indebtedness to

petitioner, interposed two counterclaims, namely, (1) one for P6,227.00 as alleged
expenses for maintenance and repair of the boat belonging to petitioners, and (b) another
for P12,000.00 representing the cost of the two tires which petitioners allegedly
misappropriated. Private respondents likewise alleged that despite the confrontations
before the barangay chairman, petitioners refused to pay their just and valid obligations to
private respondent and her husband.

On private respondents’ counterclaims, said trial court also ruled that the same had
been settled when the contending parties entered into a compromise agreement which was
approved on January 9, 1989 by the Regional Trial Court of Naval.

Respondent Court of Appeals set aside the judgment of the Regional Trial Court, on
the ground that there had been no compliance with Presidential Decree No. 1508.

Issue:

Whether or not the confrontations before the Barangay Chairman of Naval satisfied
the requirement therefor in Presidential Decree No. 1508. This Court finds, for Petitioners.

Ruling:

It must be noted that Presidential Decree No. 1508 has been repealed by
codification in the Local Government Code of 1991 12 which took effect on January 1, 1992.
The basic complaint was filed by petitioners before the trial court on July 10, 1991 before
the effectivity of the Local Government Code. Nevertheless, Sections 4 and 6 of the former

10
law have been substantially reproduced in Sections 410(b) and 412, respectively, of the
latter law. The pertinent provisions read as follows:

"SEC. 410. PROCEDURE FOR AMICABLE SETTLEMENT. — (b) . . . . If he (lupon

chairman) fails in his mediation effort within fifteen (15) days from the first meeting of the
parties before him, he shall forthwith set a date for the constitution of the pangkat in
accordance with the provisions of this chapter.”

SEC. 412. CONCILIATION. — (a) Precondition to filing of Complaint in Court. -- No

complaint . . . shall be filed or instituted in court . . . unless there has been a confrontation of
the parties before the lupon chairman or the pangkat, and that no conciliation or
settlement has been reached as certified by the lupon secretary or pangkat secretary as
attested to by the lupon or pangkat chairman . . .."

In the case at bar, it is admitted that the parties did have confrontations before the
Barangay Chairman although they were sent to the pangkat as the same was not
constituted. Their meetings with said barangay chairman were not fruitful as no amicable
settlement was reached This prompted the issuance of the following Certification to File
Action.

While no pangkat was constituted, it is not denied that the parties met at the office
of the barangay chairman for possible settlement. The efforts of the barangay chairman,
however, proved futile as no agreement was reached. Although no pangkat was formed, we
believe that there was substantial compliance with the law. It is noteworthy that under
Section 412 of the Local Government Code aforequoted, the confrontation before the lupon
chairman OR the pangkat is sufficient compliance with the pre-condition for filing the case
in court.

This is true notwithstanding the mandate of Section 410(b) of the same law that the
barangay chairman shall constitute a pangkat if he fails in his mediation efforts. Section
410(b) should be construed together with Section 412, as well as the circumstances
obtaining in and peculiar to the case. On this score, it is significant that the barangay
chairman or punong barangay is himself the chairman of the lupon under the Local
Government Code.

From the foregoing facts, it is undeniable that there was substantial compliance with
Presidential Decree No. 1508 which does not require strict technical compliance with its
procedural requirements. Under the factual antecedents, it cannot be said that the failure of
the parties to appear before the pangkat caused any prejudice to the case for private
respondents considering that they already refused conciliation before the barangay
chairman and, as will hereafter be discussed, their sham insistence for a meeting before the
pangkat is merely a ploy for further delay. We are thus forced to remind them that
technicalities should not be made to desert their true role in our justice system, and should
not be used as obstructions therein.

11
 Miguela v. Montanez
G.R. No. 191336, 25 January 2012

Facts:

Respondent Jerry Montanez (Montanez) secured a loan of One Hundred Forty-Three

Thousand Eight Hundred Sixty-Four Pesos (₱143,864.00), payable in one (1) year, or until
February 1, 2002, from the petitioner. The respondent gave as collateral therefor his house
and lot located at Block 39 Lot 39 Phase 3, Palmera Spring, Bagumbong, Caloocan City.

Due to the respondent’s failure to pay the loan, the petitioner filed a complaint
against the respondent before the Lupong Tagapamayapa of Barangay San Jose, Rodriguez,
Rizal. The parties entered into a Kasunduang Pag-aayos wherein the respondent agreed to
pay his loan in installments in the amount of Two Thousand Pesos (₱2,000.00) per month,
and in the event the house and lot given as collateral is sold, the respondent would settle
the balance of the loan in full. However, the respondent still failed to pay, and on December
13, 2004, the Lupong Tagapamayapa issued a certification to file action in court in favor of
the petitioner.

Issue:

Is a complaint for sum of money the proper remedy for the petitioner,
notwithstanding the Kasunduang Pag-aayos?

Ruling:

Yes, as stated in the case of Chavez v. Court of Appeals, a party's non-compliance

with the amicable settlement paved the way for the application of Article 2041 under
which the other party may either enforce the compromise, following the procedure laid out
in the Revised Katarungang Pambarangay Law, or consider it as rescinded and insist upon
his original demand. To quote:

“the case at bar, the Revised Katarungang Pambarangay Law provides for a two-
tiered mode of enforcement of an amicable settlement, to wit: (a) by execution by the
Punong Barangay which is quasi-judicial and summary in nature on mere motion of the
party entitled thereto; and (b) an action in regular form, which remedy is judicial. However,
the mode of enforcement does not rule out the right of rescission under Art. 2041 of the
Civil Code. The availability of the right of rescission is apparent from the wording of Sec.
417 itself which provides that the amicable settlement "may" be enforced by execution by
the lupon within six (6) months from its date or by action in the appropriate city or
municipal court, if beyond that period. The use of the word "may" clearly makes the
procedure provided in the Revised Katarungang Pambarangay Law directory or merely
optional in nature.”

12
 Thus, although the "Kasunduan" executed by petitioner and respondent before the
Office of the Barangay Captain had the force and effect of a final judgment of a court,
petitioner's non-compliance paved the way for the application of Art. 2041 under which
respondent may either enforce the compromise, following the procedure laid out in the
Revised Katarungang Pambarangay Law, or regard it as rescinded and insist upon his
original demand. Respondent chose the latter option when he instituted Civil Case No.
5139-V-97 for recovery of unrealized profits and reimbursement of advance rentals, moral
and exemplary damages, and attorney's fees. Respondent was not limited to claiming
₱150,000.00 because although he agreed to the amount in the "Kasunduan," it is axiomatic
that a compromise settlement is not an admission of liability but merely a recognition that
there is a dispute and an impending litigation which the parties hope to prevent by making
reciprocal concessions, adjusting their respective positions in the hope of gaining balanced
by the danger of losing. Under the "Kasunduan," respondent was only required to execute a
waiver of all possible claims arising from the lease contract if petitioner fully complies with
his obligations thereunder. It is undisputed that herein petitioner did not.

In the instant case, the respondent did not comply with the terms and conditions of
the Kasunduang Pag-aayos. Such non-compliance may be construed as repudiation because
it denotes that the respondent did not intend to be bound by the terms thereof, thereby
negating the very purpose for which it was executed. Perforce, the petitioner has the option
either to enforce the Kasunduang Pag-aayos, or to regard it as rescinded and insist upon his
original demand, in accordance with the provision of Article 2041 of the Civil Code. Having
instituted an action for collection of sum of money, the petitioner obviously chose to
rescind the Kasunduang Pag-aayos.

13
 Uniwide Sales Realty and Resources Corporation v. Titan-Ikeda Construction and
Development Corporation G.R. No. 126619, 20 December 2006

Facts:

This case involved Titan-Ikeda who entered into 3 construction agreement/contract

/project with Uniwide. Later Titan-Ikeda filed an action for sum of money against Uniwide
with the RTCbecause Uniwide allegedly failed to pay certain claims billed by Titan after the
completion of the 3 projects. Uniwide moved for the dismissal/suspension of the
proceeding for them to first undergo arbitration. The arbitrators issued terms of
referencewhich was signed by the parties,
(Uniwide did not attempt to modify the TOR toaccommodate its belated counterclaim on de
adlines for liquidated damages). Titan then refiled the case with CIAC.

The decision of CIA was that in Project 1 Uniwide is absolved of any liability while
Project 2 Uniwide is absolved of any liability for VAT payment and for the account of Titan,
and Titan is absolved from liability for detective construction ans with regard to Project 3,
Uniwide is held liable for unpaid balance (5,158,364.63) plus 12% interest/annum and to
pay the full VAT for the additional work where no written authorization was presented.

CIAC likewise rejected the claim on liquidated damages.

Issues:

1. Should the CIAC apply the Rules of Court in the arbitration proceedings?

2. Should the Court review the final judgement of CIAC?

Ruling:

1. No, The Rules of Procedure Governing Construction Arbitration promulgated by the

CIAC contains no provision on the application of the Rules of Court to arbitration
proceedings, even in a suppletory capacity. Such importation of the Rules of Court
provision on amendment to conform to evidence would contravene the spirit, if not
the letter of the CIAC rules. This is for the reason that the formulation of the Terms
of Reference is done with the active participation of the parties and their counsel
themselves. The TOR is further required to be signed by all the parties and their
counsel and all the members of the Arbitral Tribunal. Unless the issues thus
carefully formulated in the Terms of Reference were expressly showed to be
amended, issues outside thereof may not be resolved. As already noted in the
Decision, “no attempt was ever made by the Uniwide to modify the TOR in order to
accommodate the issue related to its belated counterclaim” on this issue.

Arbitration has been defined as “an arrangement for taking and abiding by
the judgment of selected persons in some disputed matter, instead of carrying it to

14
 established tribunals for justice, and is intended to avoid the formalities, the delay,
the expenses and vexation o ordinary litigation.

2. No, as a rule, findings of fact of administrative agencies and quasi-judicial bodies,

which have acquired expertise because their jurisdiction is confined to specific
matters, are generally accorded not only respect, but also finality, especially when
affirmed by the Court of Appeals. In particular, factual findings of construction
arbitrators are final and conclusive and not reviewable by this Court on appeal. This
rule, however admits of certain exceptions.

In David v. Construction Industry and Arbitration Commission, we ruled that,

as exceptions, factual findings of construction arbitrators may be reviewed by this
Court when the petitioner proves affirmatively that: (1) the award was procured by
corruption, fraud or other undue means; (2) there was evident partiality or
corruption of the arbitrators or of any of them; (3) the arbitrators were guilty of
misconduct in refusing to hear evidence pertinent and material to the controversy;
(4) one or more of the arbitrators were disqualified to act as such under Section
nine of Republic Act No. 876 and willfully refrained from disclosing such
disqualifications or of any other misbehavior by which the rights of any party have
been materially prejudiced; or (5) the arbitrators exceeded their powers, or so
imperfectly executed them, that a mutual, final and definite award upon the subject
matter submitted to them was not made.

Other recognized exceptions are as follows: (1) when there is a very clear
showing of grave abuse of discretion resulting in lack or loss of jurisdiction as when
a party was deprived of a fair opportunity to present its position before the Arbitral
Tribunal or when an award is obtained through fraud or the corruption of
arbitrators,(2) when the findings of the Court of Appeals are contrary to those of the
CIAC, and (3) when a party is deprived of administrative due process.

15
 Benguet Corporation vs. DENR
G.R. No. 163101, 13 February 2008

Facts:

Benguet and J.G. Realty entered into a RAWOP, wherein J.G. Realty was
acknowledged as the owner of four mining claims respectively named as Bonito-I, Bonito-
II, Bonito-III, and Bonito-IV, with a total area of 288.8656 hectares, situated in Barangay
Luklukam, Sitio Bagong Bayan, Municipality of Jose Panganiban, Camarines Norte. The
parties also executed a Supplemental Agreement5 dated June 1, 1987. The mining claims
were covered by MPSA Application No. APSA-V-0009 jointly filed by J.G. Realty as
claimowner and Benguet as operator.

In the RAWOP, Benguet obligated itself to perfect the rights to the mining claims
and/or otherwise acquire the mining rights to the mineral claims. Within 24 months from
the execution of the RAWOP, Benguet should also cause the examination of the mining
claims for the purpose of determining whether or not they are worth developing with
reasonable probability of profitable production. Benguet undertook also to furnish J.G.
Realty with a report on the examination, within a reasonable time after the completion of
the examination. Moreover, also within the examination period, Benguet shall conduct all
necessary exploration in accordance with a prepared exploration program. If it chooses to
do so and before the expiration of the examination period, Benguet may undertake to
develop the mining claims upon written notice to J.G. Realty. Benguet must then place the
mining claims into commercial productive stage within 24 months from the written
notice. It is also provided in the RAWOP that if the mining claims were placed in
commercial production by Benguet, J.G. Realty should be entitled to a royalty of five
percent (5%) of net realizable value, and to royalty for any production done by Benguet
whether during the examination or development periods.

Thus, the Executive Vice-President of Benguet, Antonio N. Tachuling, issued a letter

informing J.G. Realty of its intention to develop the mining claims. However, on February 9,
1999, J.G. Realty, through its President, Johnny L. Tan, then sent a letter to the President of
Benguet informing the latter that it was terminating the RAWOP on the following grounds:
(a). The fact that your company has failed to perform the obligations set forth in the
RAWOP, i.e., to undertake development works within 2 years from the execution of the
Agreement; (b). Violation of the Contract by allowing high graders to operate on our claim;
(c). No stipulation was provided with respect to the term limit of the RAWOP; (d). Non-
payment of the royalties thereon as provided in the RAWOP.

In response, Benguet’s Manager for Legal Services, Reynaldo P. Mendoza, wrote J.G.
Realty a letter dated March 8, 1999,therein alleging that Benguet complied with its
obligations under the RAWOP by investing PhP 42.4 million to rehabilitate the mines, and
that the commercial operation was hampered by the non-issuance of a Mines Temporary
Permit by the Mines and Geosciences Bureau (MGB) which must be considered as force
majeure, entitling Benguet to an extension of time to prosecute such permit. Benguet

16
further claimed that the high graders mentioned by J.G. Realty were already operating prior
to Benguet’s taking over of the premises, and that J.G. Realty had the obligation of ejecting
such small scale miners. Benguet also alleged that the nature of the mining business made
it difficult to specify a time limit for the RAWOP. Benguet then argued that the royalties due
to J.G. Realty were in fact in its office and ready to be picked up at any time. It appeared
that, previously, the practice by J.G. Realty was to pick-up checks from Benguet
representing such royalties. However, starting August 1994, J.G. Realty allegedly refused to
collect such checks from Benguet. Thus, Benguet posited that there was no valid ground for
the termination of the RAWOP. It also reminded J.G. Realty that it should submit the
disagreement to arbitration rather than unilaterally terminating the RAWOP.

Issue:

Is there a need for the controversy to be first submitted to arbitration before the
POA?

Ruling:

No. Sec. 2 of RA 876 elucidates the scope of arbitration that two or more persons or
parties may submit to the arbitration of one or more arbitrators any controversy existing
between them at the time of the submission and which may be the subject of an action, or
the parties to any contract may in such contract agree to settle by arbitration a controversy
thereafter arising between them. Such submission or contract shall be valid, enforceable
and irrevocable, save upon such grounds as exist at law for the revocation of any contract.

In RA 9285 or the "Alternative Dispute Resolution Act of 2004," the Congress

reiterated the efficacy of arbitration as an alternative mode of dispute resolution by stating
in Sec. 32 thereof that domestic arbitration shall still be governed by RA 876. Clearly, a
contractual stipulation that requires prior resort to voluntary arbitration before the parties
can go directly to court is not illegal and is in fact promoted by the State. Thus, petitioner
correctly cites several cases whereby arbitration clauses have been upheld by this Court.

Moreover, the contention that RA 7942 prevails over RA 876 presupposes a conflict
between the two laws. Such is not the case here. To reiterate, availment of voluntary
arbitration before resort is made to the courts or quasi-judicial agencies of the government
is a valid contractual stipulation that must be adhered to by the parties.

In other words, in the event a case that should properly be the subject of voluntary
arbitration is erroneously filed with the courts or quasi-judicial agencies, on motion of the
defendant, the court or quasi-judicial agency shall determine whether such contractual
provision for arbitration is sufficient and effective. If in affirmative, the court or quasi-
judicial agency shall then order the enforcement of said provision.

There is a clear distinction between compulsory and voluntary arbitration. The

arbitration provided by the POA is compulsory, while the nature of the arbitration
provision in the RAWOP is voluntary, not involving any government agency. Thus, there
17
can be no quibbling that POA is a quasi-judicial body which forms part of the DENR, an
administrative agency. Hence, the provision on mandatory resort to arbitration, freely
entered into by the parties, must be held binding against them.

In sum, on the issue of whether POA should have referred the case to voluntary
arbitration, we find that, indeed, POA has no jurisdiction over the dispute which is
governed by RA 876, the arbitration law.

However, we find that Benguet is already estopped from questioning the POA’s
jurisdiction. As it were, when J.G. Realty filed DENR Case No. 2000-01, Benguet filed its
answer and participated in the proceedings before the POA, Region V. Secondly, when the
adverse March 19, 2001 POA Decision was rendered, it filed an appeal with the MAB in
Mines Administrative Case No. R-M-2000-01 and again participated in the MAB
proceedings.

18
 Korean Technologies Co., LTD., v. Lerma
G.R. No. 143581, 7 January 2008

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.

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 while the parties executed, in Korea, an Amendment for Contract No. KLP-
970301 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 plant’s
production of the 11-kg. LPG cylinder samples. Thus, the total contract price amounted to
USD 1,530,000.

The plant, after completion of installation, could not be operated by Pacific General
due to its financial difficulties affecting the supply of material. The last payments made by
Pacific General to Korea Tech consisted of postdated checks which were dishonored upon
presentment. According to Pacific General, it stooped payment because Korea Tech had
delivered a hydraulic press which was different in kind and of lower quality than that
agreed upon. Korea Tech also failed to deliver equipment parts already paid for by it. It
threatened to cancel the contract with Korea Tech and dismantle the Carmona plant.

Pacific General filed before the Office of the Prosecutor a Complaint-affidavit for
estafa against Mr. Dae Hyun Kang, President of Korea Tech. Korea Tech informed PGSMC
that it could not unilaterally rescind the contract. Of greater importance to the present
article, KOGIES also insisted that their dispute be settled by arbitration as provided by
Article 15 of their contract – the arbitration clause.

Korea Tech initiated arbitration before the Korea Commercial Arbitration Board in
Korea and, at the same time, commenced a civil action before the RTC where it prayed that
Pacific General be restrained from dismantling the plant and equipment. Pacific General
opposed the application and argued that the arbitration clause was null and void, being
contrary to public policy as it ousts the local court of jurisdiction.

Issue:

Is the arbitration clause valid?

19
Ruling:

Yes, the arbitration clause was valid. It 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."

Moreover, the arbitration clause which stipulates that the arbitration must be done
in Seoul, Korea in accordance with the Commercial Arbitration Rules of the KCAB, and that
the arbitral award is final and binding, is not contrary to public policy. This Court has
sanctioned the validity of arbitration clauses in a catena of cases. In the 1957 case
of Eastboard Navigation Ltd. v. Juan Ysmael and Co., Inc., this Court had occasion to rule
that an arbitration clause to resolve differences and breaches of mutually agreed
contractual terms is valid. In BF Corporation v. Court of Appeals, we held that "[i]n this
jurisdiction, arbitration has been held valid and constitutional. Even before the approval on
June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement of
disputes through arbitration. Republic Act No. 876 was adopted to supplement the New
Civil Code’s provisions on arbitration." And in LM Power Engineering Corporation v.
Capitol Industrial Construction Groups, Inc., we declared that:

Being an inexpensive, speedy and amicable method of settling disputes, arbitration–

–along with mediation, conciliation and negotiation––is encouraged by the Supreme Court.
Aside from unclogging judicial dockets, arbitration also hastens the resolution of disputes,
especially of the commercial kind. It is thus regarded as the "wave of the future" in
international civil and commercial disputes. Brushing aside a contractual agreement calling
for arbitration between the parties would be a step backward.

Consistent with the above-mentioned policy of encouraging alternative dispute

resolution methods, courts should liberally construe arbitration clauses. Provided such
clause is susceptible of an interpretation that covers the asserted dispute, an order to
arbitrate should be granted. Any doubt should be resolved in favor of arbitration.

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

20
 Ormoc Sugarcane Planters' Association, Inc. (OSPA) vs. CA
G.R. No. 156660, 24 August 2009

Facts:

Petitioners are associations organized by and whose members are individual sugar
planters. Petitioners assert that the relationship between respondents and the individual
sugar planters is governed by milling contracts. To buttress this claim, petitioners
presented representative samples of the milling contracts.

“Article XX of the contract provides that all differences and controversies which may
arise between the parties concerning the agreement shall be submitted for discussion to a
Board of Arbitration, consisting of five (5) members two (2) of which shall be appointed by the
centrals, two (2) by the Planter and the fifth to be appointed by the four appointed by the
parties.”

Petitioners, without impleading any of their individual members, filed twin petitions
with the RTC for Arbitration under R.A. 876, Recovery of Equal Additional Benefits, Attorneys
Fees and Damages, against HIDECO and OSCO, respectively.

Respondents filed a motion to dismiss on ground of lack of cause of action because

petitioners had no milling contract with respondents. According to respondents, only some
eighty (80) Planters who were members of OSPA, one of the petitioners, executed milling
contracts. Respondents and these 80 Planters were the signatories of the milling
contracts. Thus, it was the individual Planters, and not petitioners, who had legal standing
to invoke the arbitration clause in the milling contracts. Petitioners, not being privy to the
milling contracts, had no legal standing whatsoever to demand or sue for arbitration.

Issue:

Are petitioners clothed with legal personality to file a suit against, or demand
arbitration from, respondents in their own name without impleading the individual
Planters?

Ruling:

No. By their own allegation, petitioners are associations duly existing and organized
under Philippine law, i.e. they have juridical personalities separate and distinct from that of
their member Planters. It is likewise undisputed that the eighty (80) milling contracts that
were presented were signed only by the member Planter concerned and one of the Centrals
as parties. In other words, none of the petitioners were parties or signatories to the milling
contracts. This circumstance is fatal to petitioners’ cause since they anchor their right to
demand arbitration from the respondent sugar centrals upon the arbitration clause found
in the milling contracts. There is no legal basis for petitioners’ purported right to demand
arbitration when they are not parties to the milling contracts, especially when the language

21
of the arbitration clause expressly grants the right to demand arbitration only to the parties
to the contract.

22
 Cargill Philippines, Inc. vs. San Fernando Regala Trading, Inc.
G.R. No. 175404, 31 January 2011

Facts:

San Fernando Regala Trading filed before the trial court a complaint for rescission
of contract with damages against Cargill Philippines, Inc. In its complaint, San Fernando
Regala Trading alleged that it was engaged in buying and selling molasses and that Cargill
was one of its suppliers. San Fernando Regala Trading alleged that it purchased from
Cargill, and the latter had agreed to sell, 12,000 tons of cane blackstrap molasses
originating from Thailand at the price of $192 per metric ton, and that delivery would be
made in April or May 1997. After San Fernando Regala Trading delivered the letter of
credit, it claimed that Cargill failed to comply with its obligations under the contract, which
included an arbitration clause as follows:

"Any dispute which the Buyer and Seller may not be able to settle by mutual
agreement shall be settled by arbitration in the City of New York before the American
Arbitration Association. The Arbitration Award shall be final and binding on both parties."

Cargill moved to dismiss and/or suspend the court proceedings citing the
arbitration clause. San Fernando Regala Trading argued that since it was seeking rescission
of the contract, it was in effect repudiating the contract which included the arbitration
clause. Further, it argued that rescission constitutes a judicial issue, which requires the
exercise of judicial function and cannot be the subject of arbitration.
Issue:
Is Cargill’s contention proper?

Ruling:
No, the Supreme Court held that the provision to submit to arbitration any dispute
arising between the parties is part of the contract and is itself a contract. The arbitration
agreement is to be treated as a separate agreement and does not automatically terminate
when the contract of which it is a part comes to an end. To reiterate 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 seeks to avoid.
San Fernando Regala Trading filed a complaint for rescission of contract and
damages with the trial court. In so doing, it alleged that a contract existed. It was that
contract which provided for an arbitration clause which expressed the parties' intention
that any dispute to arise between them, as buyer and seller, should be referred to
arbitration. It is for the arbitrator and not the court to decide whether a contract between

23
the parties exists or is valid. Under the circumstances, the argument that rescission is
judicial in nature is misplaced.

24
 Gonzales vs. Climax Mining Ltd.
G.R. No. 161957, 28 February 2005.

Facts:

This is a consolidation of two petitions rooted in the same disputed Addendum

Contract entered into by the parties. In one case, the Court held that the DENR Panel of
Arbitrators had no jurisdiction over the complaint for the annulment of the Addendum
Contract on grounds of fraud and violation of the Constitution and that the action should
have been brought before the regular courts as it involved judicial issues. Gonzales averred
that the DENR Panel of Arbitrators Has jurisdiction because the case involves a mining
dispute that properly falls within the ambit of the Panel’s authority.

Respondents Climax Mining Ltd., et al., on the other hand, seek

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

Issue:

Are respondents guilty of forum shopping?

Ruling:

No. There is no forum shopping where one is a petition for certiorari which raises
the issue of whether or not there was grave abuse of discretion while the other is a Petition
to Compel for Arbitration seeking the implementation of the arbitration clause in the
agreement between the parties.

Petitioner claims that respondents are guilty of forum-shopping for failing to

disclose before this Court that they had filed a Petition to Compel for Arbitration before the
RTC of Makati City. However, it cannot be determined from petitioner’s mere allegations in
the Petition that the Petition to Compel for Arbitration instituted by respondent Climax-
Arimco, involves related causes of action and the grant of the same or substantially the

25
same reliefs as those involved in the instant case. Petitioner did not attach copies of
the Petition to Compel for Arbitration or any order or resolution of the RTC of Makati City
related to that case. Furthermore, it can be gleaned from the nature of the two actions that
the issues in the case before the RTC of Makati City and in the petition for certiorari before
the Court of Appeals are different. A petition for certiorari raises the issue of whether or
not there was grave abuse of discretion, while the Petition to Compel for Arbitration seeks
the implementation of the arbitration clause in the agreement between the parties.

26
 Equitable PCI Bank, Inc v. RCBC

G.R. No. 182248, 18 December 2008

Facts:
RCBC claimed that petitioners violated their warranty, as sellers, embodied in Sec.
5(g) of the SPA (Sec. 5[g] hereinafter). RCBC, in accordance with Sec. 10 of the SPA, filed a
Request for Arbitration dated May 12, 2004 with the ICC-ICA. In the request, RCBC charged
Bankard with deviating from, contravening and not following generally accepted
accounting principles and practices in maintaining their books. Arbitration in the ICC-ICA
proceeded after the formation of the arbitration tribunal consisting of retired Justice
Santiago M. Kapunan, nominated by petitioners; Neil Kaplan, RCBC’s nominee; an d Sir Ian
Barker, appointed by the ICC-ICA. After drawn out proceedings with each party alleging
deviation and non-compliance by the other with arbitration rules, the tribunal, with Justice
Kapunan dissenting, rendered a Partial Award. Notably, the tribunal considered the
rescission of the SPA and ASPA as impracticable and "totally out of the question." RCBC
filed with the RTC a Motion to Confirm Partial Award. The RTC issued the first assailed
order confirming the Partial Award and denying the adverted separate motions to vacate
and to suspend and inhibit. From this order, petitioners sought reconsideration, but their
motion was denied by the RTC.
Issue:

Were the petitioners denied of due process?

Ruling:

No. Petitioners assert that "the arbitrators’ partial award admitted and used the
Summaries as evidence, and held on the basis of the ‘information’ contained in them that
petitioners were in breach of their warranty in GAAP compliance." Petitioners’ position is
bereft of merit. The petitioners afforded the opportunity to refute the summaries and
pieces of evidence submitted by RCBC which became the bases of the experts’ opinion.
Petitioners’ right to due process was not breached. Sec. 15 of RA 876 or the Arbitration Law
provides that:

Section 15. Hearing by arbitrators. – Arbitrators may, at the commencement of the

hearing, ask both parties for brief statements of the issues in controversy and/or an agreed
statement of facts. Thereafter the parties may offer such evidence as they desire, and shall
produce such additional evidence as the arbitrators shall require or deem necessary to an
understanding and determination of the dispute. The arbitrators shall be the sole judge of
the relevancy and materiality of the evidence offered or produced, and shall not be bound
to conform to the Rules of Court pertaining to evidence. Arbitrators shall receive as exhibits

27
in evidence any document which the parties may wish to submit and the exhibits shall be
properly identified at the time of submission. All exhibits shall remain in the custody of the
Clerk of Court during the course of the arbitration and shall be returned to the parties at
the time the award is made. The arbitrators may make an ocular inspection of any matter
or premises which are in dispute, but such inspection shall be made only in the presence of
all parties to the arbitration, unless any party who shall have received notice thereof fails to
appear, in which event such inspection shall be made in the absence of such party.

The well-settled rule is that administrative agencies exercising quasi-judicial

powers shall not be fettered by the rigid technicalities of procedure, albeit they are, at all
times required, to adhere to the basic concepts of fair play. The right to cross-examine is
not an indispensable aspect of due process. The requirement of notice and hearing
does not connote full adversarial proceedings. Submission of position papers may be
sufficient for as long as the parties thereto are given the opportunity to be heard. In
administrative proceedings, the essence of due process is simply an opportunity to be
heard, or an opportunity to explain one’s side or opportunity to seek a reconsideration of
the action or ruling complained of. This constitutional mandate is deemed satisfied if a
person is granted an opportunity to seek reconsideration of an action or a ruling. It does
not require trial-type proceedings similar to those in the courts of justice. Where
opportunity to be heard either through oral arguments or through pleadings is accorded,
there is no denial of procedural due process.

28
 Philrock Inc. v. CIAC
359 SCRA 697 (2001)

Facts:

The Cid spouses as private respondents purchased a ready mix concrete from
Philrock, however only a substantial quality was delivered and the structures built cracked
and had developed honey combs. Respondents filed a complaint for damages which was
dismissed by the RTC and referred the same to CIAC as they have filed an agreement to
arbitrate.

Since no settlement was reached, they required that the case be remanded back to
court. The court declared that it no longer conferred them jurisdiction hence it was
referred again to the CIAC.

The CIAC rendered a decision in favour of the spouses, then a petition for review
was filed before the Court of Appeals

Issue:

Whether or not the CIAC could take jurisdiction over the case of respondent
spouses.

Ruling:

Section 4 of EO 1008 expressly vests in the CIAC original and exclusive jurisdiction
over disputes arising from or connected with construction contracts entered into by parties
that have agreed to submit their disputes to voluntary arbitration.

The Court will not countenance any effort of any party to defeat the objective of
voluntary arbitration for its own private motives.

29
 ABS-CBN Broadcasting Corp. v. World Interactive Network Systems (WINS) Japan Co. Ltd.
544 SCRA 308 (2009)

Facts:

Petitioner ABS-CBN entered into an agreement with respondent World Interactive

Network Systems (WINS). Under the agreement, respondent was granted the exclusive
license to distribute and sublicense the distribution of the television service known as “the
Filipino Channel” (TFC) in Japan.

A dispute arose when petitioner accused respondent of inserting nine episode of

WINS WEEKLY, into the TFC programming from March to May 2002, claiming that such
insertions were unauthorized thus constituting a material breach of their agreement. As a
result, petitioner notified respondent of its intention to terminate their licensing
agreement.

Thereafter, respondent filed an arbitration suit pursuant to the arbitration clause of

its agreement with petitioner and contended that the airing of WINS WEEKLY was made
with petitioner’s prior approval. It also alleged that petitioner only threatened to terminate
their agreement because I wanted to renegotiate the terms thereof to allow it to demand
higher fees. Respondent also prayed for damages for petitioner’s alleged grant of an
exclusive distribution license to another entity, NHK (Japan Broadcasting Corporation).

The parties appointed a sole arbitrator in the person of Professor Alfredo F. Tadiar
and the latter reached a decision in favour of respondent.

Petitioner filed in the CA a petition for review under Rule 43 of the Rules of Court or
, in the alternative, a petition for certiorari under Rule 65 of the same Rules, with
application for temporary restraining order and writ of preliminary jurisdiction.

The CA rendered the assailed decision dismissing ABS-CBN’s petition for lack of
jurisdiction. It ruled that it is the RTC which has jurisdiction over questions relating to
arbitration. It held that the only instance it can exercise jurisdiction over an arbitral award
is an appeal from the trial court’s decision confirming, vacating or modifying the arbitral
award. It further stated that a petition for certiorari under Rule 65 of the Rules of Court is
proper in arbitration cases only if the courts refuse or neglect to inquire into the facts of an
arbitrator’s award.

Issue:

Whether or not an aggrieved party in a voluntary arbitration dispute may avail of,
directly in the CA, a petition for review under Rule 43 or a petition for certiorari under Rule
65 of the Rules of Court, instead a filing a petition to vacate the award.

30
Ruling:

The CA’s decision is sound. A petition for review under Rule 43 or a petition for
certiorari under Rule 65 directly in the CA is not the proper remedy.

RA 876 itself mandates that it is the Court of First Instance, now the RTC, which has
jurisdiction over questions relating to arbitration, such as a petition to vacate an arbitral
award.

As RA 876 did not expressly provide that errors of fact and/or law and grave abuse
of discretion, which is the proper grounds for a petition for review under Rule 43 and a
petition for certiorari under Rule 65. This means that such ground is not acceptable for
maintaining a petition to vacate an arbitral award in the RTC. Thus, it follows that a party
may not avail of the remedies under Rule 43 and Rule 65 on the grounds of errors of fact
and/or law or grave abuse of discretion to overturn an arbitral award.

31
 Gonzales v. Climax Mining Ltd.
GR Nos. 162957 and 167994, 22 January 2007

Facts:

The case consists of two petitions that such issue arose from the same addendum
contract into by the parties.

In the first case, the court held that the DENR Panel of arbitrators that no
jurisdiction over the complaint for the annulment of the addendum contract on the
grounds of fraud and violation of the constitution and that action should have been brought
before the regular courts as it involved judicial issues. Gonzales contends that the DENR
Panel of arbitrators have jurisdiction because the case involved a mining dispute that
properly falls within the ambit of the Panel’s authority. Respondent on the other hand has
sought for reconsideration or clarification on the decision holding that the case should not
be brought for arbitration pursuant to RA 876. They argued that the arbitration clause in
the addendum contract should be treated as an agreement independent of the other terms
of the contract, and that a claimed rescission of the main contract does not avoid the duty
to arbitrate.

On the second case, petitioner challenged that order of the RTC requiring him to
proceed with the arbitration proceeding while the complaint for the nullification of the
addendum contract was pending before DENR Panel of arbitrators. He contended that any
issue as to the nullity, inoperativeness, or incapability of performance of the arbitration
clause/agreement raised by one of the parties to the alleged arbitration agreement must be
determined by the court prior to referring them to arbitration. While Climax also argues
that the application to compel arbitration under RA 876 confers the trial court only a
limited and special jurisdiction, including a jurisdiction solely to determine whether or not
the parties have a written contract to arbitrate, and if the defendant has failed to comply
with the contract.

Issue:

Whether or not the case is subject to arbitration although the issues involved are
question of the validity and nullity of the addendum contract.

Ruling:

The Court stated that such issue is a judicial question. The panel of arbitrators does
not have jurisdiction over such an issue since it does not involve the exercise and
application of technical knowledge and expertise related to mining. An arbitration before
the Panel is proper only when there exists disagreements between the parties as to some
provisions of the contract, which needs the interpretation and application of that particular
knowledge and expertise possessed by the members of the Panel.

32
 The validity of the contract cannot be subject of arbitration proceedings as such
questions are legal in nature and require the application and interpretations of laws and
jurisprudence which is necessarily a judicial function.

33
 Romago, Inc. v. Siemens Building Technologies, Inc.
GR No. 181969, 2 October 2009

Facts:

Romago was awarded the Sub-contract for the Building Services-Electrical Package
for the Insular Life Corporate Center. Under the consortium agreement and Equipment
Supply Sub-Contract Agreement (ESSA), Siemens Building Technologies Inc. undertook to
deliver the needed electrical equipment for the project for Romago. SBTI made deliveries
but Romago failed to pay in full. The former made demands, but they were not paid.
Romago refused to pay its obligation which amounted P16, 937, 612.68, unless SBTI
compensates Romago for the total expenses it allegedly incurred in taking over SBTI’s
contractual obligations when the earlier demands to pay were unheeded.

SBTI filed a Request for Arbitration with the Philippine Dispute Resolution Center,
Inc. (PDRCI) which was agreed to by Romago. After due proceedings, the arbitrator
awarded to SBTI its claim of the amount above mentioned plus legal interest, attorney’s
fees and costs.

SBTI file a petition for Confirmation of the Arbitrator’s Decision, and instead of filing
a Motion to Vacate the Award, Romago filed an Answer. The RTC granted the petition,
confirmed the award and issued a Writ of Execution. This had become final and executor.
Despite receipt of the Order on July 3, 2006, Romago did not interpose an appeal. It was
only later on August 22, 2006 when Atty. Barrios withdrew his appearance and the law
office of Mutia Venadas entered appearance that Romago sought for a petition for relief
from judgment. Claiming that Atty. Barrios was sick for three weeks and only later were
they aware of the orders of the court.

SBTI opposed, and the RTC denied it. MR was denied. And upon petition for
certiorari to the CA, Romago raised the issue that the PDRCI had no jurisdiction over the
dispute since the contract with SBTI was a construction contract and was within the
jurisdiction of the CIAC. However, the CA also denied this.

Issue:

Was the contract between the parties a construction contract that would place it in
the jurisdiction of the CIAC?

Ruling

No. it was a supply contract, not within the jurisdiction of the CIAC. By no stretch of
the imagination can the ESSA be characterized as a construction contract. Crystal clear
from provisions of the ESSA is that SBTI’s role was merely to supply the needed equipment
for the Insular Life Corporate Center project. The ESSA is, therefore, a mere supply contract
that does not fall within the original and exclusive jurisdiction of CIAC.

34
 We also note that the Consortium Agreement between Romago and SBTI contained
an arbitration clause wherein the parties agreed to submit any dispute between them for
arbitration under the Philippine Chamber of Commerce and Industry (PCCI), such as the
PDRCI.

Furthermore, the issue of jurisdiction was rendered moot by Romago’s active

participation in the proceedings before the PDRCI and the RTC. In fact, during the
proceedings for the confirmation of the Arbitrator’s award, Romago’s opposition zeroed in
on the alleged bias and partiality of the Arbitrator in rendering their decision. Even in its
petition for relief from judgment filed with the RTC, the PDRCI’s alleged lack of jurisdiction
was never raised as an issue. It was only in its petition for certiorari with the CA, and after a
writ of execution had been issued, that Romago raised the issue of lack of jurisdiction.

Romago attempted to avid this final and executory judgment by filing a petition for
relief from judgment with the RTC. However, under the rules, the equitable remedy is
allowed only under exceptional circumstances of fraud, accident, mistake or excusable
negligence, which is not applicable in this case.

35
 Heunghwa Industry Co., LTD., Petitioner v. DJ Builders Corporation
G.R. NO. 169095, 8 December 2008

Facts:

Heunghwa Industry Co., Ltd. (petitioner) is a Korean corporation doing business in

the Philippines, while DJ Builders Corporation (respondent) is a corporation duly
organized under the laws of the Philippines.

Petitioner was able to secure a contract with the Department of Public Works and
Highways (DPWH) to construct the Roxas-Langogan Road in Palawan. Petitioner entered
into a subcontract agreement with respondent to do earthwork, sub base course and box
culvert of said project in the amount of Php113, 228, 918.00. The agreement contained an
arbitration clause.

The agreed price was not fully paid; hence, on January 19, 2000, respondent filed
before the Regional Trial Court of Puerto Prinsesa, a complaint for Breach of Contract,
Collection of Sum of Money with Application for Preliminary Injunction, Preliminary
Attachment, and Prayer for Temporary Restraining Order and Damages. On September 27,
2000, parties through their respective counsels, filed a Joint Motion to Submit Specific
Issues to the Construction Industry Arbitration Commission. On the same day, the RTC
issued an Order granting the motion. On October 24, 2000, respondent filed with CIAC a
Request for Adjudication accompanied by a Complaint.

CIAC then issued an Order dated November 27, 2000 ordering respondent to move
for the dismissal of Civil Case No. 3421 pending before the RTC of Palawan and directing
petitioner to file anew its answer.

On January 8, 2000, CIAC issued an Order setting aside its Order of November 27,
2000 by directing the dismissal of Civil Case No. 3421 only insofar as the five issues
referred to it were concerned. It also directed respondent to file a request for adjudication.

On February 22 2001, petitioner, through its new counsel, filed with the RTC a
motion to withdraw the Order dated September 27, 2000 which referred the case to the
CIAC, claiming it never authorized the referral. Respondent opposed the motion contending
that petitioner was already estopped from asking for the recall of the Order.

Petitioner filed in the CIAC its opposition to the second motion to declare it in
default, with a motion to dismiss informing the CIAC that it was abandoning the submission

36
of the case to it and asserting that the RTC had original and exclusive jurisdiction over Civil
Case No. 3421, including the five issues referred to the CIAC.
On March 5, 2001, the CIAC denied petitioner's motion to dismiss on the ground that
the November 27, 2000 Order had already been superseded by its Order of January 8, 2001.
On March 13, 2001, the CIAC issued an Order setting the preliminary conference on April
10, 2001. On March 23, 2001 petitioner filed with the CIAC a motion for reconsideration of
the March 5, 2001 Order.

Issue:

Did the denial by the CIAC of the motion to dismiss constitute a patent grave abuse
of discretion?

Ruling:

The CIAC did not commit any patent grave abuse of discretion, nor did it act without
jurisdiction when it issued the assailed Order denying petitioner's motion to dismiss.
Accordingly, there is no compelling reason for this Court to deviate from the rule that a
denial of a motion to dismiss, absent a showing of lack of jurisdiction or grave abuse of
discretion amounting to lack of or excess jurisdiction, being an interlocutory order, is not
the proper subject of a Petition for Certiorari.

Executive Order 1008 grants to the CIAC original and exclusive jurisdiction over
disputes arising from, or connected with, contracts entered into by parties involved in
construction in the Philippines. In the case at the bar, it is undeniable that the controversy
involves a construction dispute as can be seen from the issues referred to the CIAC.

There are two acts which may vest the CIAC with jurisdiction over a construction
dispute. One is the presence of an arbitration clause in a construction contract, and the
other is the agreement by the parties to submit the dispute to the CIAC.

The first act is applicable to the case at bar. The bare fact that the parties
incorporated an arbitration clause in their contract is sufficient to vest the CIAC with
jurisdiction over any construction controversy or claim between the parties. The rule is
explicit that the CIAC has jurisdiction notwithstanding any reference made to another
arbitral body.

It must be noted however that the reliance of the CIAC in its assailed Order
on Philrock is inaccurate. In Philrock, the Court ruled that the CIAC had jurisdiction over the
case because of the agreement of the parties to refer the case to arbitration.

37
 In the case at bar, the agreement to refer specific issues to the CIAC is disputed by
petitioner on the ground that such agreement was entered into by its counsel who was not
authorized to do so. In addition, in Philrock, the petitioner therein had actively participated
in the arbitration proceedings, while in the case at bar there were only two instances
wherein petitioner participated, to wit: 1) the referral of five specific issues to the CIAC;
and 2) the subsequent manifestation that additional matters be referred to the CIAC.

The foregoing notwithstanding, CIAC has jurisdiction over the construction dispute
because of the mere presence of the arbitration clause in the subcontract agreement.

38
 Licomcen, Inc. v. Foundation Specialists, Inc.
G.R. No. 167022, 4 April 2011

Facts:

The petitioner, LICOMCEN Incorporated (LICOMCEN), is a domestic corporation

engaged in the business of operating shopping malls in the country.

In March 1997, the City Government of Legaspi awarded to LICOMCEN, after a

public bidding, a lease contract over a lot located in the central business district of the city.
Under the contract, LICOMCEN was obliged to finance the construction of a commercial
complex/mall to be known as the LCC Citimall (Citimall). It was also granted the right to
operate and manage Citimall for 50 years, and was, thereafter, required to turn over the
ownership and operation to the City Government.

For the Citimall project, LICOMCEN hired E.S. de Castro and Associates (ESCA) to act
as its engineering consultant. Since the Citimall was envisioned to be a high-rise structure,
LICOMCEN contracted respondent Foundation Specialists, Inc. (FSI) to do initial
construction works, specifically, the construction and installation of bored piles foundation.

LICOMCEN and FSI signed the Construction Agreement, and the accompanying Bid
Documents and General Conditions of Contract (GCC) on September 1, 1997. Immediately
thereafter, FSI purchased the materials needed for the Citimall project and began working
in order to meet the 90-day deadline set by LICOMCEN.

On January 15, 1998, LICOMCEN instructed FSI to "hold all construction activities on
the project," in view of a pending administrative case against the officials of the City
Government of Legaspi and LICOMCEN filed before the Ombudsman.

On January 19, 1998, ESCA formalized the suspension of construction activities and
ordered the construction’s demobilization until the case was resolved.

In response, FSI sent ESCA a letter, dated February 3, 1998, requesting payment of
costs incurred on account of the suspension which totaled ₱22,667,026.97. FSI repeated its
demand for payment on March 3, 1998.

ESCA replied to FSI’s demands for payment on March 24, 1998, objecting to some of
the claims. It denied the claim for the cost of the steel bars that were delivered, since the
delivery was done in complete disregard of its instructions. It further disclaimed liability

39
for the other FSI claims based on the suspension, as its cause was not due to LICOMCEN’s
fault. FSI rejected ESCA’s evaluation of its claims in its April 15, 1998 letter.

On March 14, 2001, FSI sent a final demand letter to LICOMCEN for payment of
₱29,232,672.83. Since LICOMCEN took no positive action on FSI’s demand for payment, FSI
filed a petition for arbitration with the Construction Industry Arbitration Commission
(CIAC) on October 2, 2002.

Issue:

Does the CIAC have jurisdiction to resolve the dispute between LICOMCEN and FSI?

Ruling:

The jurisdiction of the CIAC to resolve the dispute between LICOMCEN and FSI is
affirmed.

The mere existence of an arbitration clause in the construction contract is

considered by law as an agreement by the parties to submit existing or future
controversies between them to CIAC jurisdiction, without any qualification or condition
precedent.

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

The jurisdiction of courts and quasi-judicial bodies is determined by the

Constitution and the law. It cannot be fixed by the will of the parties to a dispute; the
parties can neither expand nor diminish a tribunal’s jurisdiction by stipulation or
agreement.

To affirm a condition precedent in the construction contract, which would

effectively suspend the jurisdiction of the CIAC until compliance therewith, would be in
conflict with the recognized intention of the law and rules to automatically vest CIAC with
jurisdiction over a dispute should the construction contract contain an arbitration clause.

If the CIAC’s jurisdiction can neither be enlarged nor diminished by the parties, it
also cannot be subjected to a condition precedent. To reiterate, all that is required for the

40
CIAC to acquire jurisdiction is for the parties to agree to submit their dispute to voluntary
arbitration.

Under the parties’ Terms of Reference, executed before the CIAC, the costs of
arbitration shall be equally divided between them, subject to the CIAC’s determination of
which of the parties shall eventually shoulder the amount.

The CIAC eventually ruled that since LICOMCEN was the party at fault, it should bear
the costs. As the CA did, we agree with this finding. Ultimately, it was LICOMCEN’s
imprudent declaration of indefinitely suspending the works that caused the dispute
between it and FSI. LICOMCEN should bear the costs of arbitration.

41
 Hutama-rsea Joint Operations, Inc. v. Citra Metro Manila Tollways Corp.
G.R. No. 180640, 24 April 2009

Doctrine:

Parties may continue to stipulate as regards their preferred forum in case of voluntary
arbitration, but in so doing, they may not divest the CIAC of jurisdiction as provided by law.

Under the elementary principle on the law on contracts that laws obtaining in a
jurisdiction form part of all agreements, when the law provides that the Board acquires
jurisdiction when the parties to the contract agree to submit the same to voluntary
arbitration, the law in effect, automatically gives the parties an alternative forum before
whom they may submit their disputes.

That alternative forum is the CIAC. This, to the mind of the Court, is the real spirit of
E.O. No. 1008, as implemented by Section 1, Article III of the CIAC Rules.

Facts:

Petitioner HUTAMA-RSEA Joint Operations Incorporation and respondent Citra

Metro Manila Tollways Corporation are corporations organized and existing under
Philippine laws. Petitioner is a sub-contractor engaged in engineering and construction
works. Respondent, on the other hand, is the general contractor and operator of the South
Metro Manila Skyway Project (Skyway Project).

On 25 September 1996, petitioner and respondent entered into an Engineering

Procurement Construction Contract (EPCC) whereby petitioner would undertake the
construction of Stage 1 of the Skyway Project, which stretched from the junction of Buendia
Avenue, Makati City, up to Bicutan Interchange, Taguig City. As consideration for
petitioner’s undertaking, respondent obliged itself under the EPCC to pay the former a total
amount of US$369,510,304.00.

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.

The Skyway Project was opened on 15 December 1999 for public use, and toll fees
were accordingly collected. After informing respondent that the construction of the Skyway

42
Project was already complete, petitioner reiterated its demand that respondent pay the
outstanding balance on the interim billings, as well as the "Early Completion Bonus" agreed
upon in the EPCC. Respondent refused to comply with petitioner’s demands.

Petitioner finally filed with the Construction Industry Arbitration Commission

(CIAC) a Request for Arbitration, seeking to enforce its money claims against respondent.

The CIAC issued on 30 August 2005, an Order in CIAC Case No. 17-2005, favoring
petitioner. The CIAC ruled that it had jurisdiction, and that the determination of whether
petitioner had complied with Clause 20.4 of the EPCC was a factual issue that may be
resolved during the trial. It then ordered respondent to file an Answer to petitioner’s
Request for Arbitration.

Issue:

Was it proper for the CIAC to assume jurisdiction despite petitioner’s non-referral of
the dispute with respondent to the DAB, as directed by Clause 20.4 of the EPCC?

Ruling:

It is true that Clause 20.4 of the EPCC states that a dispute between petitioner and
respondent as regards the EPCC shall be initially referred to the DAB for decision, and only
when the parties are dissatisfied with the decision of the DAB should arbitration
commence. This does not mean, however, that the CIAC is barred from assuming
jurisdiction over the dispute if such clause was not complied with.

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.

The arbitration clause in the construction contract ipso facto vested the CIAC with
jurisdiction. This rule applies, regardless of whether the parties specifically choose another
forum or make reference to another arbitral body.

Since the jurisdiction of CIAC is conferred by law, it cannot be subjected to any

condition; nor can it be waived or diminished by the stipulation, act or omission of the
parties, as long as the parties agreed to submit their construction contract dispute to
arbitration, or if there is an arbitration clause in the construction contract.

43
 The parties will not be precluded from electing to submit their dispute to CIAC,
because this right has been vested in each party by law.

It is plain and clear that as long as the parties agree to submit to voluntary
arbitration, regardless of what forum they may choose, their agreement will fall within the
jurisdiction of the CIAC, such that, even if they specifically choose another forum, the
parties will not be precluded from electing to submit their dispute before the CIAC because
this right has been vested upon each party by law, i.e., E.O. No. 1008.

We note that this is not a case wherein the arbitration clause in the construction
contract named another forum, not the CIAC, which shall have jurisdiction over the dispute
between the parties; rather, the said clause requires prior referral of the dispute to the
DAB. Nonetheless, we still hold that this condition precedent, or more appropriately, non-
compliance therewith, should not deprive CIAC of its jurisdiction over the dispute between
the parties.

It bears to emphasize that the mere existence of an arbitration clause in the

construction contract is considered by law as an agreement by the parties to submit
existing or future controversies between them to CIAC jurisdiction, without any
qualification or condition precedent.

To affirm a condition precedent in the construction contract, which would

effectively suspend the jurisdiction of the CIAC until compliance therewith, would be in
conflict with the recognized intention of the law and rules to automatically vest CIAC with
jurisdiction over a dispute should the construction contract contain an arbitration clause.

44
 Maria Luisa Park v. Almendras
G.R. no. 171763 5 june 2009

Doctrine:

Under the doctrine of primary administrative jurisdiction, courts cannot or will not
determine a controversy where the issues for resolution demand the exercise of sound
administrative discretion requiring the special knowledge, experience, and services of the
administrative tribunal to determine technical and intricate matters of fact.

Facts:

On February 6, 2002, respondents Samantha Marie T. Almendras and Pia Angela T.

Almendras purchased from MRO Development Corporation a residential lot located in
Maria Luisa Estate Park, Banilad, Cebu City. After some time, respondents filed with
petitioner Maria Luisa Park Association, Incorporated (MLPAI) an application to construct
a residential house, which was approved in February 10, 2002. Thus, respondents
commenced the construction of their house.

Upon ocular inspection of the house, MLPAI found out that respondents violated the
prohibition against multi-dwelling stated in MLPAI's Deed of Restriction. Consequently, on
April 28, 2003, MLPAI sent a letter to the respondents, demanding that they rectify the
structure; otherwise, it will be constrained to forfeit respondents' construction bond and
impose stiffer penalties.

In a Letter dated April 29, 2003, respondents, as represented by their father Ruben
D. Almendras denied having violated MLPAI's Deed of Restriction.

In view of these, respondents filed with the Regional Trial Court a Complaint on June
2, 2003 for Injunction, Declaratory Relief, Annulment of Provisions of Articles and By-Laws
with Prayer for Issuance of a Temporary Restraining Order (TRO)/Preliminary Injunction.

MLPAI moved for the dismissal of the complaint on the ground of lack of jurisdiction
and failure to comply with the arbitration clause provided for in MLPAI's by-laws.

In an Order dated July 31, 2003, the trial court dismissed the complaint for lack of
jurisdiction, holding that it was the Housing and Land Use Regulatory Board (HLURB) that
has original and exclusive jurisdiction over the case. Respondents moved for
reconsideration but their motion was denied.

45
 Aggrieved, the respondents questioned the dismissal of their complaint in a petition
for certiorari and prohibition before the Court of Appeals.

The Court of Appeals granted the petition.

Issue:

Is it the trial court and not the HLURB that has jurisdiction over the case?

Ruling:

We agree with the trial court that the instant controversy falls squarely within the
exclusive and original jurisdiction of the Home Insurance and Guaranty Corporation
(HIGC), now HLURB.

Originally, administrative supervision over homeowners' associations was vested by

law with the Securities and Exchange Commission (SEC). However, pursuant to Executive
Order No. 535, the HIGC assumed the regulatory and adjudicative functions of the SEC over
homeowners' associations.

Later on, the above-mentioned powers and responsibilities, which had been vested
in the HIGC with respect to homeowners' associations, were transferred to the HLURB
pursuant to Republic Act No. 8763, entitled "Home Guaranty Corporation Act of 2000."

In the present case, there is no question that respondents are members of MLPAI as
they have even admitted it. Therefore, as correctly ruled by the trial court, the case involves
a controversy between the homeowners' association and some of its members. Thus, the
exclusive and original jurisdiction lies with the HLURB.

The extent to which the HLURB has been vested with quasi-judicial authority must
also be determined by referring to Section 3 of P.D. No. 957.

The provisions of P.D. No. 957 were intended to encompass all questions regarding
subdivisions and condominiums. The intention was aimed at providing for an appropriate
government agency, the HLURB, to which all parties aggrieved in the implementation of
provisions and the enforcement of contractual rights with respect to said category of real
estate may take recourse.

46
 The business of developing subdivisions and corporations being imbued with public
interest and welfare, any question arising from the exercise of that prerogative should be
brought to the HLURB which has the technical know-how on the matter.

In the Solid Homes case for example, the Court affirmed the competence of the
Housing and Land Use Regulatory Board to award damages although this is an essentially
judicial power exercisable ordinarily only by the courts of justice. This departure from the
traditional allocation of governmental powers is justified by expediency, or the need of the
government to respond swiftly and competently to the pressing problems of the modern
world.

We also note that the parties failed to abide by the arbitration agreement in the
MLPAI by-laws. Article XII of the MLPAI by-laws entered into by the parties.

Under the said provision of the by-laws, any dispute or claim against the Association
or any of its officers and governors shall first be settled amicably. If amicable settlement
fails, such dispute shall be brought by the member to an arbitration panel for final
settlement. The arbitral award shall be valid and binding between the parties unless
repudiated on grounds that the same was procured through fraud or violence, or that there
are patent or gross errors in the tribunal's findings of facts upon which the decision was
based.

The terms of Article XII of the MLPAI by-laws clearly express the intention of the
parties to bring first to the arbitration process all disputes between them before a party
can file the appropriate action. The agreement to submit all disputes to arbitration is a
contract. As such, the arbitration agreement binds the parties thereto, as well as their
assigns and heirs. Respondents, being members of MLPAI, are bound by its by-laws, and are
expected to abide by it in good faith.

47
 Republic of the Philippines v. Far East Enterprises
G.R. No. 176487, 25 August 2009

Facts:

Petition for Review on Certiorari which seeks to reverse and set aside the Decision
of the Court of Appeals which dismissed petitioner Republic of the Philippines’ Petition for
Certiorari, and its Resolution denying petitioner’s motion for reconsideration. The Court of
Appeals held that the Regional Trial Court of Nasugbu, Batangas, did not act with grave
abuse of discretion amounting to lack or excess of jurisdiction in ordering petitioner to
make an additional payment of P425.00 per square meter for the subject properties of
respondents Far East and the Bernasconis before the issuance of an Order to take
possession of the subject properties, and a writ of possession.

The Republic of the Philippines, represented by the Secretary of the Department of

Public Works and Highways (DPWH), filed a Complaint for Eminent Domain before the
Regional Trial Court of Nasugbu, Batangas against Far East Enterprises, Inc. (Far East)

Issue:

Whether or not the court is the proper venue in which to resolve any dispute
involving the classification of lands?

Ruling:

The court agrees with the petitioner that the courts have judicial discretion to
determine the classification of lands, because such classification is one of the relevant
standards for the assessment of the value of lands, subject of expropriation proceedings. It
is one factor that the courts consider in determining just compensation. The determination
of just compensation is a function addressed by the courts of justice and may not be
usurped by any other branch or official of the government. However, we would like to make
it clear that Section 5 of Republic Act No. 8974 lists the relevant standards that are to be
considered in determining just compensation for and not classification of lands, as
petitioner would like us to believe.

The Court recognizes the power of a local government to reclassify and convert lands
through local ordinance, especially if said ordinance is approved by the HLURB.
Discretion is vested in the appropriate government agencies to determine the suitability of
a land for residential, commercial, industrial or other purposes. It is also a settled rule that
an ordinance enjoys the presumption of validity. Having the power to classify lands, the
local government unit may consider factors that are just, reasonable and legal, for it is
within the local government unit’s power to determine these. However, if they abuse their
authority in the performance of this duty, the courts, if prompted, can step in.

48
 In the case at bar, the lands in question had long been (almost 20 years) reclassified
as residential before the instant case was filed. All those years, no one questioned the
ordinance reclassifying the lands. If petitioner would like to have the reclassification of the
lands involved changed to agricultural, the just and reasonable way of doing it is to go to
the municipal council -- not the courts – that enacted the ordinance and to ask that the
lands be reclassified again as agricultural. Technical matters such as zoning classifications
and building certifications should be primarily resolved first by the administrative agency
whose expertise relates therein. The jurisprudential trend is for courts to refrain from
resolving a controversy involving matters that demand the special competence of
administrative agencies, “even if the questions involved are also judicial in character.” In
this manner, the court give the respect due to these agencies (the municipal council and the
Human Settlement Regulatory Commission [now HLURB]), which unquestionably have
primary jurisdiction to rule on matters of classification of lands.

49
 First Leapanto Ceramics v. CA
G.R. No. 110571, 10 March 1994

Facts:

Petitioner First Lepanto Ceramics, Inc., was registered as a “non-pioneer enterprise”

with public respondent BOI having been so issued a Certificate of Registration under
Executive Order NO. 226, also known as the Omnibus Investments Code of 1987, in the
manufacture of glazed floor tiles. Among the specific terms and conditions imposed on First
Lepanto’s registration were that: (1) The enterprise shall export at least 50% of its
production; and (2) The enterprise shall produce only glazed floor tile.

In a letter addressed to the BOI, First Lepanto requested for an amendment of its
registered product to “ceramic tiles” in order to likewise enable it to manufacture ceramic
wall tiles; however, before the BOI could act on First Lepanto’s request for amendment,
Mariwasa and Fil-Hispano Ceramics, Inc., already had on file their separate complaints with
the BOI against First Lepanto for violating the terms and conditions of its registration by
the use of its tax and duty-free equipment in the production of ceramic wall tiles.

The BOI rendered a decision finding First Lepanto guilty and imposing on the latter
a fine of P797,950.40 without prejudice, however, 1) to an imposition of additional penalty
should First Lepanto continue to commit the same violation; and 2) to the Board’s
authority to consider/ evaluate First Lepanto’s request for an amendment of its certificate
of registration, including, among other things, a change in its registered product from
“glazed floor tiles” to “ceramic tiles.”

After paying the imposed fine, First Lepanto formally filed its application with the
BOI to amend its registered product from “glazed floor tiles” to “ceramic tiles.”

On 06 August 1992, another verified complaint was filed by Mariwasa with the BOI
which asseverated that, despite BOI’s finding that First Lepanto had violated the terms and
conditions of its registration, the latter still continued with its unauthorized production and
sale of ceramic wall tiles. Respondent BOI dismissed the complaint for lack of merit. Its
motion for reconsideration having been denied, Mariwasa appealed the case to the Office of
the President.

In the meantime, First Lepanto caused the publicationin the Manila Bulletin of a
notice on the official filing with the BOI of the aforementioned application for amendment
of Certificate of Registration No. EP 89-452. Mariwasa opposed the application. On 10
December 1992, respondent BOI handed down its decision approving First Lepanto’s
application.

50
Issue:

Whether or not SC Circular 1-91 repealed Art. 82 of EO 226 insofar as appellate

jurisdiction over BOI decisions is concerned.

Ruling:

Yes. Contrary to petitioner’s contention, although a circular is not strictly a statute

or law, it has, however, the force and effect of law according to settled jurisprudence. The
right to appeal from decisions or final orders of quasi-judicial agencies like BOI as granted
by EO 226 remains. Circular 1-91 simply transferred the venue of appeals to respondent
Court of Appeals.

51
 Shinryo v. RRN, Inc. G.R. No. 172525
20 October 2010

Facts:

Petitioner Shinryo (Philippines) Company, Inc. (petitioner) and private respondent

RRN Incorporated (respondent) are domestic corporations organized under Philippine
laws. Respondent filed a claim for arbitration against petitioner before the Construction
Industry Arbitration Commission (CIAC) for recovery of unpaid account while petitioner
filed a counterclaim for overpayment.

It was shown that petitioner and respondent executed an Agreement and Conditions
of Sub-contract. Respondent signified its willingness to accept and perform for petitioner in
any of its projects described in Conditions of Sub-Contract and other Sub-contract
documents. The parties also agreed that respondent will perform variation orders for the
Phillip Morris Greenfield Project (Project). In connection with it, petitioner supplied
manpower chargeable against respondent.

Respondent was not able to finish the entire works with petitioner due to financial
difficulties. Petitioner partially paid respondent. Respondent, through its former counsel
sent a letter to petitioner demanding for the payment of its unpaid balance. Thereafter,
petitioner sent a letter to respondent denying any unpaid account and the failure in their
negotiations for amicable settlement.

Respondent, through its new counsel, advised petitioner of their intention to submit
the matter to arbitration. Thereafter, their dispute was submitted to arbitration

Issue:

Whether or not CA erred in affirming that the CIAC award for the values of
inventoried materials.

Ruling:

No. The court of appeals committed a grave reversible error in affirming that the
CIAC award for the values of inventoried materials considering that respondent RRN has no
basis to claim because Engr. Bonifacio admitted that respondent RRN failed to establish
whether the materials came from respondent or from petitioner and that it was petitioner
that actually installed the said materials as part of remaining works that the petitioner took
over from respondent RRN.

The claim for the value of inventoried materials is a doubled claim or a doubled
entry because in the computation of the final account, respondent RRN was credited the
full contract price and the cost of variations which included the inventoried materials.

52
 Despite petitioner's attempts to make it appear that it is advancing questions of law,
it is quite clear that what petitioner seeks is for this Court to recalibrate the evidence it has
presented before the CIAC. It insists that its evidence sufficiently proves that it is entitled to
payment for respondent's use of its manlift equipment, and even absent proof of the
supposed agreement on the charges petitioner may impose on respondent for the use of
said equipment, respondent should be made to pay based on the principle of unjust
enrichment. Petitioner also questions the amounts awarded by the CIAC for inventoried
materials, and costs incurred by petitioner for completing the work left unfinished by
respondent.

53
Set 2

Koppel, Inc. V. Makati Rotary Club

G.R. No. 198075, 4 September 2013

Facts:

Fedders Koppel, Incorporatied (FKI) is an air-conditioning manufacturer which

owned a parcel of land located in Paranaque City which housed buildings and
improvements dedicated to the business of FKI. In 1975 it gave the land to Makati Rotary
Club Foundation (MRCF) by way of a conditional donation and both executed a deed of
donation evidencing their consensus. The conditions were that, the respondent would lease
the land back to FKI under the terms of the donation in a period of 25 years or until May 25,
2000; renewable for another 25 years upon mutual agreement. The rent to be paid by FKI
for the first 25 years will P40,126 per annum and the rental for the second 25 years shall
be the subject of a mutual agreement; if they cannot agree, then it will be submitted to a
panel of 3 arbitrators in accordance to arbitration law in the Philippines. Other conditions
included that the fair market value should not exceed beyond 25% of the original value and
that the rental for the 2nd 25 years shall not exceed 3% of the fair market value of the land.
By 1976, FKI and MRCF executed an amended deed of donation that reiterated the
provisions of the deed of donation and by virtue of the lease agreement as stipulated in the
deed of donation and the amended one, FKI continued to possess and use the land.

Two days prior to the expiration of the deed of donation and the amended one, FKI
and MRCF executed another contract of lease called the 2000 Lease Contract, where the
parties stipulated another five-year contract where the annual rents ranged from
P4,000,000 (1st year) to P4,900,000 (5th year). The contract contained an arbitration clause
in case of disagreement about the interpretation, application and execution of the lease and
that such will be referred to the board of three arbitrators in accordance of the arbitration
laws of the Philippines and will be governed by laws of the Philippines. After the expiration
of the 2000 lease contract, the 2005 Lease Contract was created where its fixed rent was
P4,200,000 annually for five years. The conditions included that FKI must make an annual
donation of money to MRCF P3 million (1st year) to P3.9 million (5th year). It then again
contained an arbitration clause in case of a disagreement about the interpretation,
application and execution of the lease.

FKI faithfully complied and paid rentals and the donations for three years in the
2005 lease contract, but in June 2008 FKI sold its rights and properties to Koppel, Inc.
(Koppel). FKI and MRCF executed an assignment and assumption of lease and donation
where KFI formally assigned all of its interests and obligations in favor of Koppel. The
following year Koppel refused to pay the rent and donation under the 2005 lease contract
because it violated the material conditions of the donation of the land in the donation and
amended deed of donation where they said that the rents in 2000 & 2005 lease contract
were exorbitant and that the two 25 years were the only material conditions of the
donation of the subject land. Koppel also surged that while the lease for the second 25 year

54
was not fixed in the deed of donation and the amended one, both deeds nevertheless
prescribed rules and limitations which should be complied with sucha as the 3% max
increase.

In June 2009, MRCF sent the first demand letter notifying petitioner of its default
and the demand for its settlement of P8.394 million, that failure to comply would mean the
termination of the 2005 contract. In September 2009 Koppel sent a reply expressing
disagreement over the rental stipulations since there were excessive and against the
mandated deed of donation and the amended one and they offered to pay only P80,502.79.
In the same month, MRCF sent the second demand letter which reiterated the demand to
pay obligations and added that the failure to do so within seven days, Koppel is demanded
to vacate the premises less MRCF take legal steps. Koppel refused to comply with the
demand and instead filed a case before the RTC of Paranaque a complaint for the rescission
or cancellation of the deed of donation and amended deed of donation against the
respondent.

In October 2009, MRCF filed an unlawful detainer case against Koppel before the
MeTC of Paranaque where Koppel filed an answer with compulsory counterclaim and
reiterated its objection to the stipulations in the 2005 contract for being violative of
material conditions of the deed of donation and amended deed of donation where it used
the defense that MeTC had no jurisdiction because the first demand letter had no demand
to vacate the premises and therefore refusal to comply does not give rise to an action for
unlawful detainer. That even if the MeTC was able to acquire jurisdiction, it may not
exercise the same until the disagreement between the parties is first referred to arbitration
and that there can be no ejectment since the 2005 lease contract is null and void.

The MeTC ruled in favor of Koppel and refused to dismiss the action on the ground
that dispute was still subject to arbitration, that it found merit on the issues by Koppel of
insufficiency in demand, and the nullity of the 2005 lease contract. MRCF appealed to the
RTC where it reversed the decisions of the MeTC and ordered the eviction of Koppel from
the land and to pay P9,362,436 plus penalties and net of 5% withholding tax, attorney’s
fees and costs of suit. The CA affirmed the decision of the RTC while the Supreme Court
issued a TRO staying the immediate implementation of the decision of the CA.

Issue:

Whether or not the said lease contract is arbitrable.

Ruling:

Yes. The arbitration clause of the 2005 Lease Contract stipulates that any
disagreement as to the interpretation, application or execution of the 2005 Lease Contract
ought to be submitted to arbitration. The court ruled that such stipulation is clear and is
comprehensive enough so as to include virtually any kind of conflict or dispute that may
55
arise from the 2005 Lease Contract including the one that presently besets petitioner and
respondent.

Whilst the validity of the contract is still in question, 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. As a further
consequence of the doctrine of separability, even the very party who repudiates the main
contract may invoke its arbitration clause.

The salient wordings of Rule 4.1 [of A.M. No. 07-11-08-SC or the Special Rules of
Court on Alternative Dispute Resolution] reads: “[a] party to a pending action filed in
violation of the arbitration agreement x x x may request the court to refer the parties to
arbitration in accordance with such agreement.”

In using the word “may” to qualify the act of filing a “request” under Section 24 of
R.A. No. 9285, the Special ADR Rules clearly did not intend to limit the invocation of an
arbitration agreement in a pending suit solely via such “request.” After all, 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. In this case, it
is conceded that petitioner was not able to file a separate “request” of arbitration before
the MeTC. However, it is equally conceded that the petitioner, as early as in
its Answer with Counterclaim, had already apprised the MeTC of the existence of the
arbitration clause in the 2005 Lease Contract and, more significantly, of its desire to have
the same enforced in this case. This act of petitioner is enough valid invocation of his right
to arbitrate.

The JDR framework is based on the processes of mediation, conciliation or early

neutral evaluation which entails the submission of a dispute before the JDR judge who shall
merely facilitate a 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 who is
a neutral third person or a group of thereof and shall have the authority to render a
resolution binding upon the parties.

56
 J Plus Asia Development Corporation v. Utility Assurance Corporation
G.R. No. 199650, 26 June 2013

Facts:

The petitioner, J Plus Asia Development Corp. (J Plus Asia), represented by its
chairman Joo Han Lee and Martin Mabunay entered into a construction agreement where
Mabunay undertook to build the former’s building in Boracay. The project was to be
completed within one year from the signing of the notice of award and receipt of 20%
down payment equivalent to P8.4 million. The down payment was fully paid on January
2008, and upon the agreed work schedule, the target completion date of the project was
December 2008. Mabunay also submitted the required Performance Bond issued by the
Utility Assurance Corporation (UTASSCO) in the amount equivalent to the 20% down
payment or P8.4 million.

In January 2008, Mabunay started construction of the building, however, as

evidenced by the Joint Construction Evaluation Result and Status signed by both parties, as
of November 2008 the project was only 31.39 % complete. This prompted J Plus Asia to
terminate the contract and send 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 the surety be ordered to pay P8.9 million as liquidated
damages and P2.3 million to the unrecouped down payment or overpayment made to
Mabunay. Mabunay’s defense was that the delay was caused by retrofitting and other
revision works ordered by Joo Han Lee. The surety on the other hand filed a motion to
dismiss 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 J Plus Asia but the Court of Appeals 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 or not the Court of Appeals seriously erred in not holding that the
alternative dispute resolution act and the special rules on alternative dispute resolution
have stripped the court of appeals of jurisdiction to review arbitral awards.

Ruling:

No. Under Republic Act (R.A.) No. 9285, otherwise known as the Alternative Dispute
Resolution Act of 2004, the CA was divested of jurisdiction to review the decisions or
awards of the CIAC. Petitioner erroneously relied on the provision in said law 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.

57
The court held that R.A. No. 9285 did not confer on regional trial courts jurisdiction to
review awards or decisions of the CIAC in construction disputes. On the contrary, Section
40 thereof expressly declares that confirmation by the RTC is not required, thus:

SEC. 40. Confirmation of Award. – The confirmation of a domestic arbitral award

shall be governed by Section 23 of R.A. 876.
A domestic arbitral award when confirmed shall be enforced in the same manner
as final and executory decisions of the Regional Trial Court.

The confirmation of a domestic award shall be made by the regional trial court
in accordance with the Rules of Procedure to be promulgated by the Supreme
Court.

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

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

Petitioner misread the provisions of A.M. No. 07-11-08-SC (Special ADR Rules)
promulgated by this Court and which took effect on October 30, 2009. Since R.A. No. 9285
explicitly excluded CIAC awards from domestic arbitration awards that need to be
confirmed to be executory, said awards are therefore not covered by Rule 11 of the Special
ADR Rules, as they continue to be governed by EO No. 1008, as amended and the rules of
procedure of the CIAC. The CIAC Revised Rules of Procedure Governing Construction
Arbitration provide for the manner and mode of appeal from CIAC decisions or awards in
Section 18 thereof, which reads:

SECTION 18.2 Petition for review. – A petition for review from a final award
may be taken by any of the parties within fifteen (15) days from receipt thereof
in accordance with the provisions of Rule 43 of the Rules of Court.

Wherefore, the petition for review on certiorari is granted. The decision dated
January 27, 2011 and resolution dated December 8, 2011 of the Court of Appeals in CA-G.R.
SP No. 112808 were reversed and set aside. The award made in the decision dated
February 2, 2010 of the CIAC was reinstated with modifications.
58
 Puromines, Inc. v. CA
G.R. No. 91228, 22 March 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 an arbitration clause which states that any
disputes arising under such contract shall be settled by arbitration in London in accordance
with the Arbitration Act 1950 and any statutory amendment or modification thereof. It
further stated that 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. Moreover, the Arbitrators
and Umpire are all to be commercial men and resident in London, and 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.

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 with the trial court 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. Private respondent filed a motion to dismiss on the ground, among others,
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, in denying respondent's motion to dismiss, ruled
that the complaint arose from a breach of contract of carriage by the vessel chartered by
the defendant Philipp Brothers Oceanic, Inc., and thus, the arbitration clause cannot apply
to the dispute in the present action which concerns plaintiff's claim for cargo loss or
damage arising from breach of contract of carriage.

Elevating the matter to the Court of Appeals, petitioner's complaint was dismissed.
The appellate court found that the arbitration provision in the sales contract and/or the
bills of lading is applicable in the present case.

59
Issue

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

Ruling:

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. Even before the enactment of
Republic Act No. 876, the Supreme Court has countenanced the settlement of disputes
through arbitration. The rule now is that unless the agreement is such as absolutely to
close the doors of the courts against the parties, which agreement would be void, the courts
will look with favor upon such amicable arrangements and will only interfere with great
reluctance to anticipate or nullify the action of the arbitrator.

Thus, the duty of the court in this case is not to resolve the merits of the parties'
claims but only to determine if they should proceed to arbitration or not. The Supreme
Court held that the terms of the contract clearly express the intention of the parties that all
disputes between them should first be arbitrated before court action can be taken by the
aggrieved party.

Thus, the validity and applicability of the arbitration clause as stated in Sales
Contract No. S151.8.01018 to the present dispute shall be upheld.

60
 Chung Fu v. CA
G.R. No. 96283, 25 February1992

Facts:

On May 17, 1989, petitioner Chung Fu Industries and private respondent Roblecor
Philippines, Inc. forged a construction agreement whereby respondent contractor
committed to construct and finish on December 31, 1989, petitioner corporation's
industrial/factory complex in Tanawan, Tanza, Cavite for and in consideration of
P42,000,000.00. In the event of disputes arising from the performance of subject contract,
it was stipulated therein that the issues shall be submitted for resolution before a single
arbitrator chosen by both parties.

Respondent Roblecor failed to complete the work despite the extension of time
allowed it by Chung Fu. Subsequently, the latter had to take over the construction when it
had become evident that Roblecor was not in a position to fulfill its obligation.

Claiming an unsatisfied account of P10,500,000.00 and unpaid progress billings of

P2,370,179.23, Roblecor on May 18, 1990, filed a petition for Compulsory Arbitration with
prayer for Temporary Restraining Order before respondent Regional Trial Court, pursuant
to the arbitration clause in the construction agreement. Chung Fu moved to dismiss the
petition and further prayed for the quashing of the restraining order.

Subsequent negotiations between the parties eventually led to the formulation of an

arbitration agreement which, among others, provides that they will abide by the decision of
the arbitrator including any amount that may be awarded to either party as compensation,
consequential damage and/or interest thereon; and that there shall be no further judicial
recourse if either party disagrees with the whole or any part of the arbitrator's award, with
an exception that the parties mutually agree that either party is entitled to seek judicial
assistance for purposes of enforcing the arbitrator's award. The Regional Trial Court
approved the arbitration agreement.

On June 30, 1990, Arbitrator Asuncion ordered petitioners to immediately pay

respondent contractor, the sum of P16,108,801.00. He further declared the award as final
and unappealable, pursuant to the Arbitration Agreement precluding judicial review of the
award.

Consequently, Roblecor moved for the confirmation of said award. On the other
hand, Chung Fu moved to remand the case for further hearing and asked for a
reconsideration of the judgment award.

Respondent lower court denied Chung Fu's Motion to Remand. The trial court
granted Roblecor's Motion for Confirmation of Award and accordingly, entered judgment in
conformity therewith. Moreover, it granted the motion for the issuance of a writ of
execution filed by respondent.

61
 Chung Fu elevated the case via a petition for certiorari to respondent Court of
Appeals, which concurred with the findings and conclusions of respondent trial court
resolving that Chung Fu and its officers, as signatories to the Arbitration Agreement are
bound to observe the stipulations thereof providing for the finality of the award and
precluding any appeal therefrom.

A motion for reconsideration of said resolution was filed by petitioner, but it was
similarly denied by respondent Court of Appeals thru its questioned resolution of
December 3, 1990.

Issue:

Whether the decision of the arbitrator shall be final and unappealable and that there shall
be no further judicial recourse if either party disagrees with the whole or any part of the
arbitrator's award.

Ruling:

Article 2044 of the Civil Code recognizes the validity of a stipulation that the
arbitrators' award shall be final, unappealable and executory:

Any stipulation that the arbitrators' award or decision shall be final is valid,
without prejudice to Articles 2038, 2039 and 2040.

Similarly, the Construction Industry Arbitration Law provides that the arbitral
award "shall be final and inappealable except on questions of law which shall be appealable
to the Supreme Court."

However, it is stated explicitly under Art. 2044 of the Civil Code that the finality of
the arbitrators' award is not absolute and without exceptions. Where the conditions
described in Articles 2038, 2039 and 2040 applicable to both compromises and
arbitrations are obtaining, the arbitrators' award may be annulled or rescinded.
Additionally, under Sections 24 and 25 of the Arbitration Law, there are grounds for
vacating, modifying or rescinding an arbitrator's award. Thus, if and when the factual
circumstances referred to in the above-cited provisions are present, judicial review of the
award is properly warranted.

It should be stressed, too, that voluntary arbitrators, by the nature of their functions,
act in a quasi-judicial capacity. It stands to reason, therefore, that their decisions should not
be beyond the scope of the power of judicial review of this Court. In the case at bar,
petitioners assailed the arbitral award on the following grounds, most of which allege error
on the part of the arbitrator in granting compensation for various items which apparently
are disputed by the petitioners.

After closely studying the list of errors, as well as petitioners' discussion of the same
in their Motion to Remand Case For Further Hearing and Reconsideration and Opposition

62
to Motion for Confirmation of Award, we find that petitioners have amply made out a case
where the voluntary arbitrator failed to apply the terms and provisions of the Construction
Agreement which forms part of the law applicable as between the parties, thus committing
a grave abuse of discretion. Furthermore, in granting unjustified extra compensation to
respondent for several items, he exceeded his powers — all of which would have
constituted ground for vacating the award under Section 24 (d) of the Arbitration Law.

But the respondent trial court's refusal to look into the merits of the case,
despite prima facie showing of the existence of grounds warranting judicial review,
effectively deprived petitioners of their opportunity to prove or substantiate their
allegations. In so doing, the trial court itself committed grave abuse of discretion. Likewise,
the appellate court, in not giving due course to the petition, committed grave abuse of
discretion. Respondent courts should not shirk from exercising their power to review,
where under the applicable laws and jurisprudence, such power may be rightfully
exercised; more so where the objections raised against an arbitration award may properly
constitute grounds for annulling, vacating or modifying said award under the laws on
arbitration.

Accordingly, this case was REMANDED to the court of origin for further hearing. All
incidents arising therefrom were reverted to the status quo ante until such time as the trial
court shall have passed upon the merits of this case.

63
 California and Hawaiian Sugar Company et. al. v. Pioneer Insurance and Surety Corp.
G.R. No. 139273, 28 November 2000

Facts:

On November 27, 1990, 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. Respondent, however, claims that
when the cargo was weighed on a licensed truck scale, a shortage of 255.051 metric tons
valued at P1,621,171.16 was discovered. The above-mentioned shipment was insured with
private respondent against all risk in the amount of P19,976,404.00. Due to the alleged
refusal of petitioners to settle their respective liabilities, respondent, as insurer, paid the
consignee Metro Manila Feed Miller’s Association. On March 26, 1992, 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,
pursuant to the arbitration clause of the charter party. Respondent countered that it is not
bound by the arbitration clause between the petitioners and the consignee.

Issue:

Whether or not insurer, as subrogee of the consignee, is bound by the charter party
which is incorporated and referred to in the bill of lading.

Ruling:

The arbitration clause is binding on respondent. Citing Pan Malayan Insurance

Corporation v. CA, the CA 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. Petition is GRANTED and the appealed CA Decision
is hereby REVERSED. The case is REMANDED to the trial court for preliminary hearing on
petitioners’ affirmative defense that the case is premature.

64
 Asset Privatization Trust v. CA
G.R. No. 121171, 29 December 1998

Facts:

On July 13, 1981, MMIC, PNB and DBP executed a Mortgage Trust Agreement
whereby MMIC, as mortgagor, agreed to constitute a mortgage in favor or PNB and DBP as
mortgagees, over all MMIC's assets; subject of real estate and chattel mortgage executed by
the mortgagor, and additional assets described and identified, including assets of whatever
kind, nature or description, which the mortgagor may acquire whether in substitution of, in
replenishment, or in addition thereto.

In August and September 1984, as the various loans and advances made by DBP and
PNB to MMIC had become overdue and since any restructuring program relative to the
loans was no longer feasible, and in compliance with the directive of Presidential Decree
No. 385, DBP and PNB as mortgagees of MMIC assets, decided to exercise their right to
extrajudicially foreclose the mortgages in accordance with the Mortgage Trust Agreement.

MMIC filed a derivative suit against DBP and PNB before the RTC of Makati, Branch
62, for Annulment of Foreclosures, Specific Performance and Damages. The suit, docketed
as Civil Case No. 9900, prayed that the court declares the foreclosure sale null and void,
among others.

In the course of the trial, private respondents and petitioner APT, as successor of the
DBP and the PNB's interest in MMIC, mutually agreed to submit the case to arbitration by
entering into a "Compromise and Arbitration Agreement". This agreement was presented
and was approved by the trial court. Thus, Civil Case No. 9900 was dismissed.

After conducting several hearings, the Arbitration Committee rendered a majority

decision in favor of MMIC. The Committee finds that there is no foreclosure at all as it was
not legally and validly done and ordered payment of damages in favor of MMIC. Motions for
reconsideration were filed by both parties, but the same were denied.

MMIC filed in the same Civil Case No. 9900 an "Application/Motion for Confirmation
of Arbitration Award." Petitioner countered with an "Opposition and Motion to Vacate
Judgment" on the ground that Civil Case No. 9900 categorically dismissed by the trial court.

Issues:

1. Whether or not the arbitration decision can be enforced by mere motion.

2. Whether or not the court can set aside the award of an arbitrator for mere errors of
judgment either as to the law or as to the facts.

65
 3. The foreclosure of mortgage was fully justified.

Ruling:

1. No. The RTC of Makati, Branch 62, did not have jurisdiction to confirm the arbitral
award. The said court unconditionally dismissed the original civil case. By its own
action, Branch 62 had lost jurisdiction over the case. It could not have validly
reacquired jurisdiction over the said case on mere motion of one of the parties. The
Rules of Court is specific on how a new case may be initiated and such is not done by
mere motion in a particular branch of the RTC. Consequently, as there was no
"pending action" to speak of, the petition to confirm the arbitral award should have
been filed as a new case and raffled accordingly to one of the branches of the
Regional Trial Court.

While the correct procedure was for the parties to go back to the court where
the case was pending to have the award confirmed by said court, Branch 62 made
the fatal mistake of issuing a final order dismissing the case. While Branch 62 should
have merely suspended the case and not dismissed it, neither of the parties
questioned said dismissal. Thus, both parties as well as said court are bound by such
error.

2. No. As a general rule, the award of an arbitrator cannot be set aside for mere errors
of judgment either as to the law or as to the facts. Courts are without power to
amend or overrule merely because of disagreement with matters of law or facts
determined by the arbitrators. They will not review the findings of law and fact
contained in an award, and will not undertake to substitute their judgment for that
of the arbitrators, since any other rule would make an award the commencement,
not the end, of litigation. Errors of law and fact, or an erroneous decision of matters
submitted to the judgment of the arbitrators, are insufficient to invalidate an award
fairly and honestly made. Judicial review of an arbitration is thus, more limited than
judicial review of a trial.

Exceptions: The arbitrators cannot resolve issues beyond the scope of the
submission agreement. The parties to such an agreement are bound by the
arbitrators' award only to the extent and in the manner prescribed by the contract
and only if the award is rendered in conformity thereto. Thus, Sections 24 and 25 of
the Arbitration Law provide grounds for vacating, rescinding or modifying an
arbitration award. Where the conditions described in Articles 2038, 2039, and
1040 of the Civil Code applicable to compromises and arbitration are attendant, the
arbitration award may also be annulled.

3. Yes. The foreclosure of mortgage was fully justified. PNB and DBP had to initiate
foreclosure proceedings as mandated by P.D. No. 385, which took effect on January
31, 1974. The decree requires government financial institutions to foreclose

66
collaterals for loans where the arrearages amount to 20% of the total outstanding
obligations. Such is the instance in the present case.

67
 Agan v. PIATCO
G.R. No. 155001, 5 May 2003

Facts:

In August 1989, the DOTC engaged the services of Aeroport de Paris (ADP) to
conduct a comprehensive study of the Ninoy Aquino International Airport (NAIA) and
determine whether the present airport can cope with the traffic development up to the
year 2010. Sometime in 1993, six business leaders consisting of John Gokongwei, Andrew
Gotianun, Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with then
President Fidel V. Ramos to explore the possibility of investing in the construction and
operation of a new international airport terminal. To signify their commitment to pursue
the project, they formed the Asia's Emerging Dragon Corporation (AEDC).

On October 5, 1994, AEDC submitted an unsolicited proposal to the Government

through the DOTC/MIAA for the development of NAIA International Passenger Terminal III
(NAIA IPT III) under a build-operate-and-transfer arrangement which was endorsed to and
approved by the ICC Cabinet Committee subject to certain conditions on January 19, 1996.

On February 13, 1996, the NEDA passed a board resolution which approved the
NAIA IPT III project. An invitation for competitive comparative proposals on AEDC’s
unsolicited proposal was published in two daily newspapers. For the implementation of the
said project, the DOTC constituted the Prequalification Bids and Awards Committee
(PBAC).

On September 20, 1996, the consortium composed of People's Air Cargo and
Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security
Bank Corp. (Security Bank) (collectively, Paircargo Consortium) submitted their
competitive proposal to the PBAC. Days after, the PBAC prequalified the Paircargo
Consortium. On February 27, 1997, Paircargo Consortium incorporated into Philippine
International Airport Terminals Co., Inc. (PIATCO).

On July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile,
and PIATCO, through its President, Henry T. Go, signed the "Concession Agreement for the
Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport
Passenger Terminal III” (1997 Concession Agreement). The Government granted PIATCO
the franchise to operate and maintain the said terminal during the concession period and
to collect the fees, rentals and other charges in accordance with the rates or schedules
stipulated in the 1997 Concession Agreement. The Agreement provided that the concession
period shall be for twenty-five (25) years commencing from the in-service date, and may be
renewed at the option of the Government for a period not exceeding twenty-five (25) years.
At the end of the concession period, PIATCO shall transfer the development facility to
MIAA.

68
 On November 26, 1998, the Government and PIATCO signed an Amended and
Restated Concession Agreement (ARCA). Among the provisions of the 1997 Concession
Agreement that were amended by the ARCA was Sec. 10.02 providing for the venue of the
arbitration proceedings in case a dispute or controversy arises between the parties to the
agreement.

Meanwhile, the MIAA which is charged with the maintenance and operation of the
NAIA Terminals I and II, had existing concession contracts with various service providers
to offer international airline airport services, such as in-flight catering, passenger handling,
ramp and ground support, aircraft maintenance and provisions, cargo handling and
warehousing, and other services, to several international airlines at the NAIA. Some of
these service providers are the Miascor Group, DNATA-Wings Aviation Systems Corp., and
the MacroAsia Group. Miascor, DNATA and MacroAsia, together with Philippine Airlines
(PAL), are the dominant players in the industry with an aggregate market share of 70%.

On September 17, 2002, the workers of the international airline service providers,
claiming that they stand to lose their employment upon the implementation of the
questioned agreements, filed before the Court a petition for prohibition to enjoin the
enforcement of said agreements. The service providers joined the cause of the petitioning
workers and filed a motion for intervention and a petition-in-intervention. Congressmen
Salacnib Baterina, Clavel Martinez and Constantino Jaraula and several employees of the
MIAA filed a similar petition assailing the legality of the various agreements. On one hand,
another group of Congressmen filed their Comment-In-Intervention defending the validity
of the assailed agreements and praying for the dismissal of the petitions.

During the pendency of the case before the Court, President Gloria Macapagal
Arroyo in her speech at the 2002 Golden Shell Export Awards stated that she will not honor
PIATCO contracts which the Executive Branch's legal offices have concluded (as) null and
void.

Respondent PIATCO filed its comments to the present petitions while the Office of
the Solicitor General and the Office of the Government Corporate Counsel filed their
respective Comments in behalf of the public respondents.

On December 10, 2002, the Court heard the case on oral argument. After the oral
argument, the Court then resolved in open court to require the parties to file
simultaneously their respective Memoranda in amplification of the issues heard in the oral
arguments within 30 days and to explore the possibility of arbitration or mediation as
provided in the challenged contracts.

On March 6, 2003, respondent PIATCO informed the Court that on March 4, 2003
PIATCO commenced arbitration proceedings before the International Chamber of
Commerce, International Court of Arbitration (ICC) by filing a Request for Arbitration with
the Secretariat of the ICC against the Government of the Republic of the Philippines acting
through the DOTC and MIAA.

69
Issue:

Would the commencement of the arbitration proceedings by PIATCO oust the Court
of its jurisdiction over the case.

Ruling:

No. The arbitration step taken by PIATCO will not oust the Court of its jurisdiction
over the case at bar. In a prevailing case, even after finding that the arbitration clause in the
Distributorship Agreement in question is valid and the dispute between the parties is
arbitrable, the 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, it
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. The 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, the Court 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.

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 the 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. It is unarguable that the arbitration process provided for
under Section 10.02 of the ARCA, to be undertaken by a panel of three (3) arbitrators
appointed in accordance with the Rules of Arbitration of the International Chamber of
Commerce, will not be able to address, determine and definitively resolve the
constitutional and legal questions that have been raised in the petitions before the
Supreme Court.

70
 Associated Bank v. CA
G.R. No. 107918, 14 June 1994

Facts:

In a complaint for Violation of the Negotiable Instrument Law and Damages,

plaintiffs seek the recovery of the amount of P900,913.60 which defendant bank charged
against their current account by virtue of the sixteen (16) checks drawn by them despite
the apparent alterations therein with respect to the name of the payee, that is, the name
Filipinas Shell was erased and substituted with Ever Trading and DBL Trading by their
supervisor Jeremias Cabrera, without their knowledge and consent.

Defendant bank filed a Third-Party Complaint against Philippine Commercial

International Bank, Far East Bank & Trust Company, Security Bank and Trust Company and
Citytrust Banking Corporation for reimbursement, contribution, indemnity from said third-
party defendants 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 Clearing House Rules and
Regulations.

Philippine Commercial International Bank alleged that the subject check was
complete and regular on its face and was paid by it only upon presentment to the drawee
bank for clearing who, upon examination thereof, found the same to be complete and
regular on its face; that it was only after said check was cleared by third-party plaintiff for
payment that it allowed the payee to withdraw the proceeds of the check from its account;
that the cause of action of the third- party plaintiff is barred by estoppel and/or laches for
its failure to return the check to it within the period provided for under Clearing House
Rules and Regulations; that this Court has no jurisdiction over the suit as it and third-party
plaintiff are members of the Philippine Clearing House and bound by the Rules and
Regulations thereof providing for arbitration.

A Motion To Dismiss was filed by Security Bank and Trust Company on the grounds
that third-party plaintiff failed to resort to arbitration as provided in the Clearing House
Rules and Regulations of the Philippine Clearing House Corporation, and that it was
released from any liability with the acceptance by third-party plaintiff of the subject check.

The trial court dismissed the third-party complaint 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.

71
Issue:

WoN the Petitioner Bank’s third party complaint against private respondent
collecting banks fall within the jurisdiction of the PCHC thus must first undergo arbitration
according to PCHC rules and regulations.

Ruling:

Yes. The Clearing House Rules and Regulations on Arbitration of the PCHC are
clearly applicable to petitioner and private respondents, third party plaintiff and
defendants, respectively, in the court below.

Petitioner Associated Bank’s third party complaint in the trial court was one for
reimbursement, contribution and indemnity against the Philippine Commercial and
Industrial Bank (PCIB), the Far East Bank and Trust, Co. (FEBTC),Security Bank and Trust
Co. (SBTC), and the CityTrust Banking Corporation (CTBC), in connection with petitioner’s
having honored sixteen checks which said respondent banks supposedly endorsed to the
former for collection in 1989.Under the rules and regulations of the Philippine Clearing
House Corporation, the mere act of participation of the parties concerned in its
operations in effect amounts to a manifestation of agreement by the parties to abide
by its rules and regulations. As a consequence of such participation, a party cannot
invoke the jurisdiction of the courts over disputes and controversies which fall under the
PCHC Rules and Regulations without first going through the arbitration processes laid out
by the body. Since claims relating to the regularity of checks cleared by banking institutions
are among those claims which should first be submitted for resolution by the PCHC’s
Arbitration Committee, petitioner Associated Bank, having voluntarily bound itself to abide
by such rules and regulations, is estopped from seeking relief from the Regional Trial Court
on the coattails of a private claim and in the guise of a third party complaint without first
having obtained a decision adverse to its claim from the said body. It cannot bypass the
arbitration process on the basis of its averment that its third party complaint is inextricably
linked to the original complaint in the Regional Trial Court.

Pursuant to its function involving the clearing of 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 not only ensures a uniformity of rulings relating to factual disputes involving
checks and other negotiable instruments but also provides a mechanism for settling minor
disputes among participating and 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.

The applicable PCHC provisions on the question of jurisdiction provide:

72
Sec. 3 — AGREEMENT TO THESE RULES
It is the general agreement and understanding, that any participant in the PCHC MICR
clearing operations, by the mere act of participation, thereby manifests its agreement to
these Rules and Regulations, and its subsequent amendments.

Sec. 36 — ARBITRATION
36.1 Any dispute or controversy between two or more clearing participants involving any
check/item cleared thru PCHC shall be submitted to the Arbitration Committee, upon
written complaint of any involved participant by filing the same with the PCHC serving the
same upon the other party or parties, who shall within fifteen (15) days after receipt
thereof, file with the Arbitration Committee its written answer to such written complaint
and also within the same period serve the same upon the complaining participant. This
period of fifteen (15) days may be extended by the Committee not more than once for
another period of fifteen (15) days, but upon agreement in writing of the
complaining party, said extension may be for such period as the latter may agree to.

Section 36.6 is even more emphatic:

36.6 The fact that a bank participates in the clearing operations of PCHC shall be deemed its
written and subscribed consent to the binding 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.

Thus, not only do the parties manifest by mere participation their consent to these
rules, but such participation is deemed (their) written and subscribed consent to the
binding effect of arbitration agreements under the PCHC rules. Moreover, a participant
subject to the Clearing House Rules and Regulations of the PCHC may go on appeal to any of
the Regional Trial Courts in the National Capital Region where the head office of any of the
parties is located only after a decision or award has been rendered by the arbitration
committee or arbitrator on questions of law. Clearly therefore, petitioner Associated Bank,
by its voluntary participation and its consent to the arbitration rules cannot go directly to
the Regional Trial Court when it finds it convenient to do so. The jurisdiction of the PCHC
under the rules and regulations is clear, undeniable and is particularly applicable to
all the parties in the third party complaint under their obligation to first seek redress
of their disputes and grievances with the PCHC before going to the trial court.

73
 Salas v. Laparel
G.R. No. 135362, 13 December 1999

Facts:

Petitioner Salas Jr. was the registered owner of a vast tract of land in Lipa City,
Batangas spanning 1,484,354 square meters. On May 15, 1987, he entered into an Owner-
Contractor Agreement with respondent Laperal Realty Corporation to render and provide
complete (horizontal) construction services on his land.

On September 23, 1988, 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, for cash or on installment basis. On June 10, 1989, Salas, Jr. left his home in
the morning for a business trip to Nueva Ecija. He never returned. After 7 years, Teresita
Diaz Salas filed with the Regional Trial Court of Makati City a verified petition for the
declaration of presumptive death of her husband, Salas, Jr., who had then been missing for
more than seven (7) years. It was granted on December 12, 1996.

Meantime, respondent Laperal Realty subdivided the land of Salas, Jr. and sold
subdivided portions thereof to respondents Rockway Real Estate Corporation and South
Ridge Village, Inc.; to respondent spouses Abrajano and Lava and Oscar Dacillo; and to
respondents Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capalan.

On February 3, 1998, petitioners as heirs of Salas, Jr. filed in the RTC of Lipa City a
Complaint for declaration of nullity of sale, reconveyance, cancellation of contract,
accounting and damages against herein respondents. On April 24, 1998, respondent
Laperal Realty filed a Motion to Dismiss on the ground that petitioners failed to submit
their grievance to arbitration as required under Article VI of the Agreement of their
arbitration clause.

Issues:

1. Whether or not the arbitration clause in the agreement between Salas Jr. and
Laparel Realty binds the heirs of Salas Jr.

2. Whether or not rescission falls under the exemption clause in Sec. 2 of RA no.
876 for mandatory submission to arbitration.

Ruling:

1. Yes. Submission to arbitration is a contract. As such, the agreement containing the

stipulations on arbitration, binds the parties thereto as well as their assigns and
heirs but only petitioners, as heirs of Salas, and respondent Laparal Realty
Corporation are bound by the agreement, the respondent lot buyers not being those

74
 contemplated as assignees of the rights of respondent Laparel Realty, are not bound
by the agreement. This court has recognized arbitration agreements as valid,
binding , enforceable and not contrary to public policy so much that when ther
obtains a written provision for arbitration which is not complied with, the trial court
should suspend the proceedings and order the parties to proceed to arbitration in
accordance with their agreement.

2. While rescission, as a general rule, is an arbitrable issue, petitioners impleaded in

the suit for rescission the respondent lot buyers who are neither parties to the
Agreement nor the latter's assigns or heirs. Consequently, the right to arbitrate as
provided in Article VI of the Agreement was never vested in respondent lot buyers.

Respondent Laperal Realty, as a contracting party to the Agreement, has the

right to compel petitioners to first arbitrate before seeking judicial relief. However,
to split the proceedings into arbitration for respondent Laperal Realty and trial for
the respondent lot buyers, or to hold trial in abeyance pending arbitration between
petitioners and respondent Laperal Realty, would in effect result in multiplicity of
suits, duplicitous procedure and unnecessary delay.

The instant petition is granted and the trial court is ordered to proceed with
the hearing of the civil case for declaration of the nullity of the sale.

75
 Coca-Cola Bottlers Philippines, Inc. v. Coca-Cola Bottlers, Philippines, Inc.,
GR No. 155651, 28 July 2005

Facts:

In January 1989, the Coca-Cola Bottlers Philippines, Inc. Sales Force Union-PTGWO
(UNION) filed a Notice of Strike with the National Conciliation and Mediation Board raising
certain issues for conciliation. As a result of said dispute, the UNION staged a strike.

Subsequently, the Board succeeded in making the parties agree to a voluntary

settlement of the case via a Memorandum of Agreement signed by them on February 9,
1989. Among others, the petitioner and the respondent agreed, as follows:

1. Christmas Bonus

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 hereby acknowledges that the granting of a Christmas bonus is purely a
Management prerogative and as such, in determining the amount thereof the same is solely
a discretion of Management. The parties however agree that henceforth whenever
Management exercises this prerogative, the same shall include the average commission for
the last six (6) months prior to the grant.

Since then, the management granted to each covered employee every December of
the year a certain percentage of his basic pay and an amount equivalent to fifty (50%)
percent of his average commission for the last six months prior to the grant. However, in
December 1999, the respondent granted a fixed amount of P4,000.00 only, eliminating
thereby the said 50% employee’s average commission for the last six months for members
of the union. Thus, claiming the same as violation of the MOA, the union submitted its
grievance to the respondent. No settlement was reached, hence, the case was then referred
to a 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. On the other hand, the respondent company countered that in 1999 it suffered
its worst financial performance in its history; that its sales volume was twenty percent
(20%) behind plan and ten percent (10%) below the sales in 1998, as a result, it suffered
an abnormal loss of Two Billion Five Hundred Million Pesos (P2,500,000,000.00); that
faced with tremendous losses, the management decided not to grant bonuses to its
employees in 1999; that through Memorandum 99010 dated December 14, 1999, its
President, Mr. Peter Baker explained to the employees the company’s financial situation
and the decision not to grant bonuses; that in the same memo however, the company

76
granted a special ex gratia payment of Four Thousand Pesos (P4,000.00) to all its
permanent employees.

After hearing and the submission of evidence and position papers, the Arbitration
Panel composed of Apron Mangabat and Noel Sanchez, as chairman and member,
respectively, denied petitioner’s claim and declared that the P4,000.00 given as ex gratia is
not a bonus, while Arnel Dolendo, another member dissented.

A copy of this Decision dated 21 January 2001 was received by petitioner’s counsel
on 20 February 2001. It was only signed by the Chairman of the Panel, Mr. Apron
Mangabat, and one of its members, Atty. Noel Sanchez and not by Atty. Arnel Dolendo.
Petitioners claim that because “the Panel’s decision without such dissenting and separate
opinion attached thereto makes the decision incomplete and prematurely issued.”

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. A
copy of the Order of denial was received by petitioner on 09 July 2001. By virtue thereof,
petitioner filed a Petition for Review before the Court of Appeals on 24 July 2001.

The Court of Appeals ruled that the the P4,000.00 “special ex gratia” payment is a
Christmas bonus, hence, petitioner’s members are entitled to the additional 50% average
commission but dismissed the petition on the ground that petitioner’s motion for
reconsideration dated 12 March 2001 of the Decision of the Panel that was originally
received on 20 February 2001 was filed out of time; hence, the said Decision already
became final and executory after ten (10) calendar days from receipt of the copy of the
Decision by the parties pursuant to Article 262-A of the Labor Code.

Issue:

Whether or not the Court of Appeals committed a reversible error when it dismissed
the petition on mere technicality contrary to settled jurisprudence, after favorably ruling
on the merits in favor of petitioner.

Ruling:

The resolution of the present controversy hinges for the most part on the correct
disposition of petitioner’s argument that the Panel’s Decision sans the dissenting opinion of
one of its members was irregularly issued; hence, did not toll the running of the
prescriptive period within which to file a motion for reconsideration. To sustain
petitioner’s argument would mean that the subject Decision could still be reviewed by the
Court of Appeals. A contrary resolution would stamp the subject decision with finality
rendering it impervious to review pursuant to the doctrine of finality of judgments.

Rule VII, Section 1 of the “Procedural Guidelines in the Conduct of Voluntary

Arbitration Proceedings” provides the key. Therein, what constitutes the voluntary
arbitrator’s decision is defined with precision, to wit:
77
 Section 1. Decision Award. -- The final arbitral disposition of issue/s submitted to
voluntary arbitration is the Decision. The disposition 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 latter case the decision is called an Award.

In herein case, the Decision of the Panel was in the form of a dismissal of petitioner’s
complaint. Naturally, this dismissal was contained in the main decision and not in the
dissenting opinion. 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. As correctly pointed out by the Court of
Appeals, a dissenting opinion is not binding on the parties as it is a mere expression of the
individual view of the dissenting member from the conclusion held by the majority of the
Court, following our ruling in Garcia v. Perez as reiterated in National Union of Workers in
Hotels, Restaurants and Allied Industries v. NLRC.

Prescinding from the foregoing, the Court of Appeals correctly dismissed the
petition before it as it no longer had any appellate jurisdiction to alter or nullify the
decision of the Panel. The Panel’s Decision had become final and executory, hence,
unchallengeable.

78
 National SteelCorp. V. RTC Branch 2, Iligan City
G.R. No. 127004, 11 March 1999

Facts:

In 1992, EWEI together with one Ramiro Construction and NSC executed a contract
whereby the former jointly undertook the Contract for Site Development for the latter's
Integrated Iron and Steel Mills Complex to be established at Iligan City.

In 1983, the services of Ramiro Construction was terminated and EWEI took over
Ramiro's contractual obligation. Extensions of time for the termination of the project were
granted by NSC.

Differences later arose, EWEI filed a civil case before the RTC praying essentially for
payments with interest from the time of delay; the price adjustment as provided by PD
1594; and exemplary damages and attorney's fees. NSC filed an answer with counterclaim.
Upon joint motion of both parties, the court had issued an order dismissing the said
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.

The herein parties then constituted an Arbitration Board which rendered the decision,
substantial portion of which directs NSC to pay EWEI, as follows:

a) P458,381.00 representing EWEI's last billing No. 16 with interest thereon at

the rate of 1-1/4% per month from January 1, 1985 to actual date of
payment;
b) P1,335,514.20 representing price escalation adjustment under PD No. 1594,
with interest thereon at the rate of 1-1/4% per month from January 1, 1985
to actual date of payment;
c) P50,000 as and for exemplary damages;
d) P350,000 as and for attorney's fees; and
e) P35,000.00 as and for cost of arbitration.

The RTC affirmed and confirmed en toto the award of the Board of Arbitrators and
ordered that an entry of judgment be entered therewith pursuant to Republic Act No. 876
(the Arbitration Law); and costs against NSC. NSC then filed its Motion for Reconsideration
which was denied, hence, the present petition.

Issue:

WON the lower court acted with grave abuse of discretion in not vacating the
arbitrator's award.

79
Ruling:

A stipulation to refer all future disputes or to submit an ongoing dispute to an

arbitrator is valid. Republic Act 876, otherwise known as the Arbitration Law, was enacted
by Congress since there was a growing need for a law regulating arbitration in general.

Under Paragraph 19 of subject contract, if a dispute should arise from the contract,
the Arbitration Board shall assume jurisdiction and conduct hearings. The decision of the
Board may be immediately implemented by the parties by treating it as an amicable
settlement. However, if one of the parties refuses to comply or is dissatisfied with the
decision, he may file a Petition to Vacate the Arbitrator's decision before the trial court. On
the other hand, the winning party may ask the trial court's confirmation to have such
decision enforced.

Voluntary arbitrators, by the nature of their functions, act in a quasi-judicial

capacity. As a rule, findings of facts by quasi-judicial bodies, which have acquired expertise
because their jurisdiction is confined to specific matters, are accorded not only respect but
even finality if they are supported by substantial evidence, even if not overwhelming or
preponderant. As NSC has availed of Rule 65, the Court will not review the facts found nor
even of the law as interpreted or applied by the arbitrator unless the supposed errors of
facts or of law are so patent and gross and prejudicial as to amount to a grave abuse of
discretion or an excess de pouvoir on the part of the arbitrators.

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

Sec. 24 GROUNDS FOR VACATING THE AWARD — In any one of the following cases,
the court must make an order vacating the award upon the petition of any party to
the controversy when such party proves affirmatively that in the arbitration
proceedings:

a) The award was procured by corruption, fraud or other undue means;

b) That there was evident partiality or corruption in the arbitrators of any of them;
or
c) That the arbitrators were guilty of misconduct in refusing to postpone the
hearing upon sufficient cause shown, or in refusing to hear evidence pertinent
and material to the controversy; that one or more of the arbitrators was
disqualified to act as such under section nine hereof, and wilfully refrained from
disclosing such disqualification or of any other misbehavior by which the rights
of any party have been materially prejudiced; or
d) That the arbitrators exceeded their powers, or so imperfectly executed them,
that a mutual, final and definite award upon the subject matter submitted to
them was not made.

80
 The grounds relied upon by NSC were: (a) That there was evident partiality in the
assailed decision of the Arbitrators in favor of the respondent; and (b) That there was
mistaken appreciation of the facts and application of the law by the Arbitrators.

The allegation of evident partiality was untenable for deficiency of evidentiary support.
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. NSC merely averred evident partiality without any proof to back it up.
NSC 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.

Anent the issue of mistaken appreciation of facts and law of the case, NSC theorizes that
the awards made by the Board were unsubstantiated and the same were a plain
misapplication of the law and even contrary to jurisprudence. The Supreme Court
discussed individually the awards made by the Board, and determined if there was grave
abuse of discretion on the part of the RTC when it adopted such awards in toto.

I. P458,381.00 representing EWEI's last billing No. 16 with interest thereon at the rate of 1-
1/4% per month from January 1, 1985 to actual date of payment

NSC seeks to bar payment to EWEI. Since EWEI failed to complete the works as agreed
upon, NSC had the right to withhold such amount and be used to cover the cost differential
paid to another contractor who finished the work allegedly left uncompleted by EWEI. The
query here therefore is whether there was failure on the part of EWEI to complete the work
agreed upon. This will determine whether Final Billing No. 16 can be made chargeable to
the cost differential paid by NSC to another contractor.

After a series of hearings, the Board of Arbitrators concluded that the work was
completed by EWEI. Under the contract sued upon, it is clear that should the Owner feel
that the work agreed upon was not completed by the contractor, it is incumbent upon the
OWNER to send to CONTRACTOR a letter within seven (7) days after completion of the
inspection to specify the objections thereto. NSC failed to comply with such requirement,
and therefore it would be unfair to refuse payment to EWEI, considering that the latter had
faithfully submitted Final Billing No. 16 believing that its work had been completed
because NSC did not call its attention to any objectionable aspect of their project.

But the Board's imposition of a 1-1/4% interest per month from January 1, 1985 to
actual date of payment cannot be upheld for there is nothing in the said contract to justify
or authorize such an award. Hence, it should have been disregarded and instead, applied
the legal rate of 6% per annum, from Jan. 1, 1985 until this decision becomes final and
executory, the legal rate of interest on monetary obligations not arising from loans or
forebearance of credits or goods.

II. Price escalation with the interest rate of 1-1/4% per month from 1 January 1985 to actual
date of payment

81
 NSC contends that EWEI is not entitled to price escalation absent any stipulation to
that effect in the contract under which, the contract price is fixed, citing Paragraph 2
thereof. The phrase "prices above fixed" contained therein means that the contract price of
the work shall be that agreed upon by the parties at the time of the execution of the
contract, which is the law between them provided it is not contrary to law, morals, good
customs, public order, or public policy. (Article 1306, New Civil Code). It cannot be inferred
therefrom, however, that the parties are prohibited from imposing future increases or price
escalation. It is a cardinal rule in the interpretation of contracts that "if the terms of a
contract are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control.

But price escalation is expressly allowed under PD 1594, which law allows price
escalation in all contracts involving government projects including contracts entered into
by government entities and instrumentalities and GOCCs. It is a basic rule in contracts that
law is deemed written into the contract between the parties. And when there is no
prohibitory clause on price escalation, the Court will allow payment therefor.

NSC’s contention that it is an acquired asset corporation and not a GOCC, hence, not
within the coverage of PD 1594 is untenable for it is not determinative of the pivot of
inquiry. Likewise, during the hearings conducted by the Board, there was presented
documentary evidence to show that NSC, despite its being allegedly an asset acquired
corporation, allowed price escalation to another contractor, Geo Transport and
Construction, Inc. If NSC seeks to refute such evidence, it should have done so before the
Board, during the hearings. To raise the issue now is futile. However, the same line of
reasoning with respect to the first award should be used in disregarding the interest rate of
1-1/4%. The legal rate of 6% per annum should be similarly applied to the price escalation
to be computed from Jan. 1, 1985 until this decision becomes final and executory.

III. The award of P50,000 as exemplary damages and P350,000 as attorney's fees

The exemplary damages and attorney’s fees awarded by the Board of Arbitrators
should be deleted in light of the circumstances surrounding the case.

The requirements for an award of exemplary damages, are: (1) they may be
imposed by way of example in addition to compensatory damages, and only after the
claimants right to them has been established; (2) that they cannot be recovered as a matter
of right, their determination depending upon the amount of compensatory damages that
may be awarded to the claimant; (3) the act must be accompanied by bad faith or done in a
wanton, fraudulent, oppressive or malevolent manner.

EWEI cannot claim that NSC acted in bad faith or in a wanton manner when it
refused payment of the Final Billing No. 16. The belief that the work was never completed
by EWEI and that NSC had the right to make it chargeable to the cost differential paid by
the latter to another contractor was neither wanton nor done in evident bad faith. The
payment of legal rate of interest will suffice to compensate EWEI of whatever prejudice it
suffered by reason of the delay caused by NSC.

82
 The award for attorney's fees was without justification, hence, RTC acted with grave
abuse of discretion when it adopted the same in toto.

83
 Del Monte v. CA
G.R. No. 136154, 7 February 2001

Facts:

Del Monte Corporation-USA (DMC-USA) entered into a Distributorship Agreement

with Montebueno Marketing, Inc. (MMI) as the sole and exclusive distributor of its Del
Monte Products in the Philippines for a period of five years. The Agreement provided for an
arbitration clause which states:

12. GOVERNING LAW AND ARBITRATION

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 the
other two members and shall have relevant experience in the industry x x x x

MMi appointed Sabrosa Foods, Inc. (SFI), with the approval of DMC-USA, as MMI’s
marketing arm. SFI and MMI’s Managing Director Sy filed a Complaint against DMC-USA
alleging that the latter’s products were being brought in the country by other importers
despite its agreement that MMI will be the sole and exclusive distributor of its products.
DMC-USA filed a motion to suspend proceedings invoking the arbitration clause in their
Agreement with MMI.

Issue:

Whether or not the dispute between the parties may be a subject of arbitration.

Ruling:

There is no doubt that arbitration is valid and constitutional in our jurisdiction.

Even before the enactment of RA 876, this Court has countenanced the settlement of
disputes through arbitration. 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 arrangement and will only interfere with great reluctance to
anticipate or nullify the action of the arbitrator. Moreover, as RA 876 expressly authorizes
arbitration of domestic disputes, foreign arbitration as a system of settling commercial
disputes was likewise recognized when the Philippines adhered to the United
Nations "Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of
1958" under the 10 May 1965 Resolution No. 71 of the Philippine Senate, giving reciprocal

84
recognition and allowing enforcement of international arbitration agreements between
parties of different nationalities within a contracting state.

A careful examination of the instant case shows that the arbitration clause in the
Distributorship Agreement between petitioner DMC-USA and private respondent MMI is
valid and the dispute between the parties is arbitrable. However, this Court must deny the
petition.

The Agreement between petitioner DMC-USA and private respondent MMI is a

contract. The provision to submit to arbitration any dispute arising therefrom and the
relationship of the parties is part of that contract and is itself a contract. As a rule, contracts
are respected as the law between the contracting parties and produce effect as between
them, their assigns and heirs. Clearly, only parties to the Agreement, i.e., petitioners DMC-
USA and its Managing Director for Export Sales Paul E. Derby, Jr., and private respondents
MMI and its Managing Director LILY SY are bound by the Agreement and its arbitration
clause as they are the only signatories thereto. Petitioners Daniel Collins and Luis Hidalgo,
and private respondent SFI, not parties to the Agreement and cannot even be considered
assigns or heirs of the parties, are not bound by the Agreement and the arbitration clause
therein. Consequently, referral to arbitration in the State of California pursuant to the
arbitration clause and the suspension of the proceedings in the civil case pending the
return of the arbitral award could be called for but only as to petitioners DMC-USA and Paul
E. Derby, Jr., and private respondents MMI and LILY SY, and not as to the other parties in
this case.

The object of arbitration is to allow the expeditious determination of a dispute.

Clearly, the issue before us could not be speedily and efficiently resolved in its entirety if
we allow simultaneous arbitration proceedings and trial, or suspension of trial pending
arbitration. Accordingly, the interest of justice would only be served if the trial court hears
and adjudicates the case in a single and complete proceeding.

85
Set 3

Oil and Natural Gas Commission v. CA,

G.R. No. 114323, 23 July 1998

Facts:
A contract was entered into by and between Oil and Natural Gas Commission and
Pacific Cement Company, Inc., whereby the latter undertook to supply the former 4,300
metric tons of oil well cement for $477,300.00. 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 ship owner and Pacific Cement,
the cargo was held up in Bangkok and did not reach its point destination. Thus, Pacific
Cement failed to deliver the oil well cement. Thereafter, negotiations ensued between the
parties and they agreed that Pacific Cement will replace the entire 4,300 metric tons of oil
well cement with Class "G" cement cost free at Oil and Natural Gas’ designated port.

However, upon inspection, the Class "G" cement did not conform to Oil and Natural
Gas’ specifications. Consequently, Oil and Natural Gas informed Pacific Cement that it was
referring its claim to an arbitrator pursuant to Clause 16 of their contract which stipulates:

“Except where otherwise provided in the supply order/contract all

questions and disputes, relating to the meaning of the specification designs,
drawings and instructions herein before mentioned and as to quality of
workmanship of the items ordered or as to any other question, claim, right or
thing whatsoever, in any way arising out of or relating to the supply
order/contract design, drawing, specification, instruction or these conditions
or otherwise concerning the materials or the execution or failure to execute
the same during stipulated/extended period or after the
completion/abandonment thereof shall be referred to the sole arbitration of
the persons appointed by Member of the Commission at the time of dispute.
It will be no objection to any such appointment that the arbitrator so
appointed is a Commission employer that he had to deal with the matter to
which the supply or contract relates and that in the course of his duties as
Commission's employee he had expressed views on all or any of the matter in
dispute or difference.”

The chosen arbitrator, Shri N.N. Malhotra, resolved the dispute in favor of Oil and
Natural Gas and granted an arbitral award to the same. To enable Oil and Natural Gas to
execute the award in its favor, it filed a Petition before the Court of the Civil Judge in Dehra

86
Dun, India (foreign court), praying that the decision of the arbitrator be made "the Rule of
Court" in India. Pacific Cement then sent its objections to the petition. However, the foreign
court refused to admit Oil and Natural Gas’ objections for failure to pay the required filing
fees, and thereafter issued the Order granting that the award be made Rule of the Court.

Pacific Cement refused to pay the amount adjudged by the foreign court in the
arbitral award as owing to Oil and Natural Gas. This prompted Oil and Natural Gas to file a
complaint with the Regional Trial Court of Surigao City for the enforcement of the judgment
of the foreign court. On the other hand, Pacific Cement moved to dismiss the complaint
grounding the same, among others, on lack of cause of action.
The RTC found the referral of the dispute between the parties to the arbitrator
under Clause 16 of their contract erroneous. It held that the breach, consisting of the non-
delivery of the purchased materials, should have been properly litigated before a court of
law, pursuant to Clause No. 15 of the Contract/Supply Order, which provided that:

All questions, disputes and differences, arising under out of or in connection with
this supply order, shall be subject to the exclusive jurisdiction of the court, within the local
limits of whose jurisdiction and the place from which this supply order is situated."

Upon appeal, the Court of Appeals affirmed the dismissal of the complaint. The CA
agreed with the RTC that the arbitrator did not have jurisdiction over the dispute between
the parties. It also pointed out that the arbitration proceeding was defective because the
arbitrator was appointed solely by Oil and Natural Gas, and because of the fact that the
arbitrator was a former employee of Oil and Natural Gas there was a presumed bias on his
part in favor of Oil and Natural Gas.
Further, the CA held that the arbitral award rendered by Shri N.N. Malhotra could not be
enforced by any Philippine court as it would violate the constitutional provision that no
decision shall be rendered by any court without expressing therein clearly and distinctly
the facts and the law on which it is based.

Hence, this petition before the Supreme Court, with Oil and Natural Gas contending
that the matter was within the purview of Clause 16 of the subject contract, particularly the
phrase, ". . . or as to any other questions, claim, right or thing whatsoever, in any way
arising or relating to the supply order/contract, design, drawing, specification, instruction .
. ." It argued that the foregoing phrase allowed considerable latitude so as to include non-
delivery of the cargo which was a "claim, right or thing relating to the supply
order/contract".

Issues:

87
 1. Was the non-delivery of the cargo a proper subject for arbitration under Clause 16
of the subject contract between Oil and Natural Gas and Pacific Cement?
2. Was the judgment of arbitral award by the foreign court enforceable in the
Philippine courts in view of the Pacific Cement's allegation that it was bereft of any
statement of facts and law upon which the award in favor of Oil and Natural Gas was
based?

3. Should the claim that there was presumed bias on the part of the arbitrator who was
a former employee of Oil and Natural Gas be given scant consideration?

Ruling:

1. No, the non-delivery of the cargo was not a proper subject for arbitration under
Clause 16 of the subject contract between Oil and Natural Gas and Pacific Cement.

First, Natural Gas misquoted the said phrase, inserting a comma between the
words "supply order/contract" and "design" where none actually existed. The
absence of a comma between the words "supply order/contract" and "design"
indicated that the former could not be taken separately but should be viewed in
conjunction with the words "design, drawing, specification, instruction or these
conditions". To fall within the purview of the phrase, the "claim, right or thing
whatsoever" must arise out of or relate to the design, drawing, specification, or
instruction of the supply order/contract.

Oil and Natural Gas also insisted that the non-delivery of the cargo was not
only covered by the foregoing phrase but also by the phrase, ". . . or otherwise
concerning the materials or the execution or failure to execute the same during the
stipulated/extended period or after completion/abandonment thereof . . ."

Second, the Doctrine of noscitur a sociis, which states that where a particular
word or phrase is ambiguous in itself or is equally susceptible of various meanings,
its correct construction may be made clear and specific by considering the company
of the words in which it is found. A close examination of Clause 16 revealed that it
covered three matters which may be submitted to arbitration namely; (1) all
questions and disputes, relating to the meaning of the specification designs,
drawings and instructions herein before mentioned and as to quality of
workmanship of the items ordered; (2) any other question, claim, right or thing
whatsoever, in any way arising out of or relating to the supply order/contract
design, drawing, specification, instruction or these conditions; or (3) otherwise

88
 concerning the materials or the execution or failure to execute the same during
stipulated/extended period or after the completion/abandonment thereof.

In accordance with the Doctrine of noscitur a sociis, this reference to the

supply order/contract must be construed in the light of the preceding words with
which it is associated, meaning to say, as being limited only to the design, drawing,
instructions, specifications or quality of the materials of the supply order/contract.
The non-delivery of the oil well cement was definitely not in the nature of a dispute
arising from the failure to execute the supply order/contract design, drawing,
instructions, specifications or quality of the materials.

Finally, a perusal of Clause 16 showed that the parties did not intend
arbitration to be the sole means of settling disputes. This was manifest from the
phrase, "Except where otherwise provided in the supply order/contract . . .", thus
indicating that the jurisdiction of the arbitrator was not all encompassing, and
admitted of exceptions as may be provided elsewhere in the supply order/contract.

2. Yes, the judgment of arbitral award by the foreign court was enforceable in the
Philippine courts in view of the Pacific Cement's allegation that it was bereft of any
statement of facts and law upon which the award in favor of Oil and Natural Gas was
based.

First, the constitutional mandate that no decision shall be rendered by any

court without expressing therein dearly and distinctly the facts and the law on
which it is based does not preclude the validity of "memorandum decisions" which
adopt by reference the findings of fact and conclusions of law contained in the
decisions of inferior tribunals.

Second, 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. 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.

89
 Finally, a foreign judgment is presumed to be valid and binding in the
country from which it comes, until the contrary is shown. Consequently, the party
attacking a foreign judgment, which was Pacific Cement in this case, had the burden
of overcoming the presumption of its validity which it failed to do.

3. Yes, the claim that there was presumed bias on the part of the arbitrator who was a
former employee of Oil and Natural Gas should be given scant consideration. This is
in view of the following stipulation in the contract:

“. . . . It will be no objection any such appointment that the arbitrator so

appointed is a Commission employer (sic) that he had to deal with the matter to
which the supply or contract relates and that in the course of his duties as
Commission's employee he had expressed views on all or any of the matter in
dispute or difference.”

90
 DFA v. Falcon
G.R. No. 176657, 1 September 2010

Facts:

The Department of Foreign Affairs and BCA International Corporation entered into a
Build-Operate-and-Transfer (BOT) Agreement in connection with the government’s
Machine Readable Passport and Visa Project (MRP/V). Citing BCA’s supposed breach of its
warranties under the BOT Agreement, such as the submission of deficient documents
resulting to delays in the completion of the phases as well as BCA/PPC’s supposed financial
incapacity to fully implement the project, the DFA terminated the agreement. Pursuant to
the arbitration clause in the BOT Agreement, BCA filed a Request for Arbitration with the
Philippine Dispute Resolution Center, Inc. However, pending the constitution of the arbitral
tribunal, BCA filed a Petition for Interim Relief with the Regional Trial Court of Pasig City,
presided by Judge Franco Falcon.

The DFA filed an Opposition to the Application for Temporary Restraining Order
and/or Writ of Preliminary Injunction; anchored such opposition on Republic Act No. 8975,
which prohibits trial courts from issuing a TRO, preliminary injunction or mandatory
injunction against the bidding or awarding of a contract or project of the national
government. However, the RTC issued an Order granting BCA’s application for preliminary
injunction.

Hence, this petition before the Supreme Court, with a prayer to set aside the writ of
preliminary injunction issued by Judge Falcon in favor of BCA, pursuant to Section 28 of the
Alternative Dispute Resolution Act.

Issue:

Do the Regional Trial Courts have the power to grant interim measures of protection
prior to the constitution of an arbitral tribunal?

Ruling:

Yes, the Regional Trial Courts have the power to grant interim measures of
protection prior to the constitution of an arbitral tribunal. However, such authority is
subject to limitations that may be imposed by special laws and may only be exercised in
conjunction with a pending arbitration case.

91
 Under Section 28, Republic Act No. 9285 or the Alternative Dispute Resolution Act
of 2004, the grant of an interim measure of protection by the proper court before the
constitution of an arbitral tribunal is allowed. Also, Section 3(h) of the same statute
provides that the "Court" as referred to in Article 6 of the Model Law shall mean a Regional
Trial Court.

Republic Act No. 9285 is a general law applicable to all matters and controversies to
be resolved through alternative dispute resolution methods. This law allows a Regional
Trial Court to grant interim or provisional relief, including preliminary injunction, to
parties in an arbitration case prior to the constitution of the arbitral tribunal. This general
statute, however, must give way to a special law governing national government projects,
Republic Act No. 8975 which prohibits courts, except the Supreme Court, from issuing
TROs and writs of preliminary injunction in cases involving national government projects.

Further, a writ of preliminary injunction is an ancillary or preventive remedy that

may only be resorted to by a litigant to protect or preserve his rights or interests and for no
other purpose during the pendency of the principal action. The dismissal of the principal
action thus results in the denial of the prayer for the issuance of the writ.

In view of intervening circumstances, BCA could no longer be granted injunctive

relief and the civil case before the trial court should be accordingly dismissed. However,
this was without prejudice to the parties litigating the main controversy in arbitration
proceedings, in accordance with the provisions of the Amended BOT Agreement, which
should proceed with dispatch.

92
 MCC Industrial SALES Corporation vs. Ssangyong Corporation
G.R. No. 170633, 17 October 2007

Facts:

Petitioner is engaged in the business of importing and wholesaling stainless steel

products. One of its suppliers is the respondent, 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. Respondent would send the pro forma invoices containing the details of the
steel product order to petitioner; if the latter conforms thereto, its representative affixes
his signature on the faxed copy and sends it back to the respondent, again by fax.
Respondent filed a civil action for damages due to breach of contract against petitioner
alleging that the latter breached their contract when they refused to open the letter of credit
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.

The RTC rendered its Decision in favor of Ssangyong. The CA affirmed the Decision
of the trial court. Aggrieved, MCC filed a petition for review on certiorari56 before this
Court, imputing that:

THE COURT OF APPEALS DECIDED A LEGAL QUESTION NOT IN ACCORDANCE

WITH JURISPRUDENCE AND SANCTIONED A DEPARTURE FROM THE USUAL AND
ACCEPTED COURSE OF JUDICIAL PROCEEDINGS BY REVERSING THE COURT A
QUO'S DISMISSAL OF THE COMPLAINT IN CIVIL CASE NO. 02-124.

Ssangyong, in its Comment, sought the dismissal of the petition, raising the
following arguments: that the CA decision dated 15 August 2005 is already final and
executory, because MCC's motion for reconsideration was filed beyond the reglementary
period of 15 days from receipt of a copy thereof.

Issue:

Whether or not the CA decision dated 15 August 2005 is already final and executory.

Ruling:

No. In this case, when Atty. Samson received a copy of the CA decision on September
14, 2005, MCC had only fifteen (15) days within which to file a motion for reconsideration

93
conformably with Section 1, Rule 52 of the Rules of Court, or to file a petition for review on
certiorari in accordance with Section 2, Rule 45. The period should not be reckoned from
September 29, 2005 (when Castillo Zamora & Poblador received their copy of the decision)
because notice to Atty. Samson is deemed notice to collaborating counsel. From the records
of the CA, that it was Castillo Zamora & Poblador, not Atty. Samson, which filed both MCC's
and Chan's Brief and Reply Brief. Apparently, the arrangement between the two counsels
was for the collaborating, not the principal, counsel to file the appeal brief and subsequent
pleadings in the CA. This explains why it was Castillo Zamora & Poblador which filed the
motion for the reconsideration of the CA decision, and they did so on October 5, 2005, well
within the 15-day period from September 29, 2005, when they received their copy of the
CA decision.

It should be remembered that the Rules were promulgated to set guidelines in the
orderly administration of justice, not to shackle the hand that dispenses it. Otherwise, the
courts would be consigned to being mere slaves to technical rules, deprived of their judicial
discretion. Technicalities must take a backseat to substantive rights. After all, it is
circumspect leniency in this respect that will give the parties the fullest opportunity to
ventilate the merits of their respective causes, rather than have them lose life, liberty,
honor or property on sheer technicalities.

94
 Magellan Capital Management Corp. (MCMC) vs. Zosa
GR No. 129916, 26 March 2001

Facts:

Zosa, MCHC and MCMC entered into an "EMPLOYMENT AGREEMENT"

where Zosa was designated as President and CEO of MCMC, and which provided that his
term is co-terminous with the management agreement (until March 1996) unless sooner
terminated. The dispute arose when Zosa was not re-elected by MCHC's Board of Directors
on May 1995 for account of loss of trust and confidence arising from alleged violation of the
resolution issued by MCHC's board of directors and of the non-competition clause of the
Employment Agreement.

Nevertheless, respondent Zosa was elected to a new position as MCHC's

Vice- Chairman/Chairman for New Ventures Development. Pursuant thereto, Zosa,
MCHC and MCMC entered into an "EMPLOYMENT AGREEMENT" where Zosa was
designated as President and CEO of MCMC, and which provided that his term is
coterminous w/ the management agreement (until March 1996) unless sooner terminated.
The dispute arose when Zosa was not re-elected by MCHC's Board of Directors on May
1995 for account of loss of trust and confidence arising from alleged violation of the
resolution issued by MCHC's board of directors and of the non-competition clause of the
Employment Agreement. Nevertheless, respondent Zosa was elected to a new
position as MCHC's Vice-Chairman/Chairman for New Ventures Development. Zosa
communicated his resignation for good reason from the position of Vice-Chairman under
paragraph 7 of the Employment Agreement on the ground that said position had less
responsibility and scope than President and Chief Executive Officer. He demanded that he
be given termination benefits. MCHC communicated its non-acceptance of respondent
Zosa's resignation for good reason, but instead terminated him for cause.
Disagreeing with the position taken by petitioners, respondent Zosa invoked the
Arbitration Clause of the Employment Agreement. Zosa, MCMC and MCHC each designated
their nominees for the arbitration panel but Zosa abandoned resort to arbitration and filed
an action for Damages to enforce benefits under the employment agreement before RTC
Cebu.

Zosa, MCMC and MCHC each designated their nominees for the arbitration panel
BUT Zosa abandoned resort to Arbitration and filed an Action for Damages to enforce
benefits under the employment agreement before RTC Cebu.

95
Issues:

1. Whether or not the case should fall under the SEC jurisdiction.

2. Whether or not the arbitration clause, as it would work injustice to Zosa, is void?

Ruling:

1. No. Republic Act No. 876, otherwise known as the "Arbitration Law," provides that it
is the regional trial court which exercises jurisdiction over questions relating to
arbitration. It is error for the petitioners to claim that the case should fall under the
jurisdiction of the Securities and Exchange Commission (SEC). The controversy does
not involve the election/appointment of officers of petitioner MCHC, as claimed by
petitioners in their assignment of errors. Respondent Zosa's amended complaint
focuses heavily on the illegality of the Employment Agreement's "Arbitration Clause"
initially invoked by him in seeking his termination benefits under Section 8 of the
employment contract.

2. Yes. The Court ruled against the petitioners. Article 2045 of the Civil Code provides
that: "Any clause giving one of the parties’ power to choose more arbitrators than
the other is void and of no effect. MCMC and MCHC represent the same interest.
Though they are 2 corporations with distinct personalities, they represent the same
interest. Thus, it would be expected that they would protect and preserve their
own interest and neither would favor Zosa's interest during arbitration. If the
arbitration clause would be followed, MCMC would have one(1) arbitrator, MCHC
would have another arbitrator, and Zosa would have one(1). But MCMC is the
manager of MCHC; MCHC would naturally favor its employer. Thus, their two(2)
votes would win vs. Zosa's lone vote.

The Court ruled that the dispute or controversy between the petitioners and
defendant should be settled in the arbitration proceeding in accordance with the
Employment Agreement, but under the panel of three (3) arbitrators, one (1)
arbitrator to represent the plaintiff, one (1) arbitrator to represent both petitioners
(MCMC and MCHC), and the third arbitrator to be chosen by the plaintiff and
defendants.

96
 Transfield Philippines vs Luzon Hydro Electric Corp.
GR No 146717, 22 November 2004

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. LHC claims that Transfield Philippines, Inc. (TPI) is guilty of forum-
shopping when it filed the following suits:

A civil case for confirmation, recognition and enforcement of the Third Partial
Award in case 11264 TE/MW, ICC International Court of Arbitration; ICC Case No.
11264/TE/MW, Transfield Philippines, Inc. v. Luzon Hydro Corporation filed before the
International Court of Arbitration, International Chamber of Commerce (ICC) a request for
arbitration dated 3 November 2000 pursuant to the Turnkey Contract between LHC and
TPI; An appeal by certiorari with prayer for TRO/preliminary prohibitory and mandatory
injunction, of the Court of Appeals Decision dated 31 January 2001 in CA-G.R. SP No. 61901;
a Petition for Review of the Decision in Civil Case No. 00-1312, wherein TPI claimed that
LHC's call on the securities was premature considering that the issue of default has not yet
been resolved with finality; the petition was however denied by the Court of Appeals; a
complaint for injunction with prayer for temporary restraining order and/or writ of
preliminary injunction dated 5 November 2000, which sought to restrain LHC from calling
on the securities and respondent banks from transferring or paying of the securities; the
complaint was denied by the RTC.

On the other hand, TPI claims that it is LHC which is guilty of forum-shopping when
it raised the issue of forum-shopping not only in this case, but also in Civil Case No. 04-332,
and even asked for the dismissal of the other case based on this ground. Moreover, TPI
argues that LHC is relitigating in Civil Case No. 04-332 the very same causes of action in ICC
Case No. 11264/TE/MW, and even manifesting therein that it will present evidence earlier
presented before the arbitral tribunal.

97
Issue:

Whether or not there was forum shopping in the institution of the civil cases and the
arbitral request.

Ruling:

There is no identity of causes of action between and among the arbitration case, the
instant petition, and Civil Case No. 04-332.

For forum-shopping to exist, there must be (a) identity of parties, or at least such
parties as represent the same interests in both actions; (b) identity of rights asserted and
relief prayed for, the relief being founded on the same facts; and (c) the identity of the two
preceding particulars is such that any judgment rendered in the other action will,
regardless of which party is successful, amount to res judicata in the action under
consideration.

There is no identity of causes of action between and among the arbitration case, the
instant petition, and Civil Case No. 04-332.

The arbitration case, ICC Case No. 11264 TE/MW, is an arbitral proceeding
commenced pursuant to the Turnkey Contract between TPI and LHC, to determine the
primary issue of whether the delays in the construction of the project were excused delays,
which would consequently render valid TPI's claims for extension of time to finish the
project. Together with the primary issue to be settled in the arbitration case is the equally
important question of monetary awards to the aggrieved party.

On the other hand, Civil Case No. 00-1312, the precursor of the instant petition, was
filed to enjoin LHC from calling on the securities and respondent banks from transferring
or paying the securities in case LHC calls on them. However, in view of the fact that LHC
collected the proceeds, TPI, in its appeal and Petition for Review asked that the same be
returned and placed in escrow pending the resolution of the disputes before the ICC
arbitral tribunal.

98
 Hi- Precision v. Lim Kim Steel
G.R. No. 110434, 13 December 1993

Facts:

Petitioner entered into a contract with private respondent Steel Builders under
which the latter as Contractor was to complete a P21 Million construction project owned
by the former within a period of 153 days, i.e. from 8 May 1990 to 8 October 1990. The
project completion date was first moved to 4 November 1990. On that date, however, only
75.8674% of the project was actually completed. Petitioner attributed this non-completion
to Steel Builders which allegedly had frequently incurred delays during the original
contract period and the extension period. Upon the other hand, Steel Builders insisted that
the delays in the project were either excusable or due to Hi-Precision's own fault and
issuance of change orders. The project was taken over on 7 November 1990, and eventually
completed on February 1991, by petitioner.

Steel Builders filed a "Request for Adjudication" with public respondent CIAC where
the former sought payment of its unpaid progress buildings, alleged unearned profits and
other receivables while petitioner claimed actual and liquidated damages, reimbursement
of alleged additional costs it had incurred in order to complete the project and attorney's
fees.

The CIAC formed an Arbitral Tribunal with three members, two being appointed
upon nomination of petitioner and Steel Builders, respectively; the third member (the
Chairman) was appointed by the CIAC as a common nominee of the two parties. The
Tribunal decided in favor of Steel Builders finding that (a) both parties were at fault,
though the Tribunal could not point out which of the parties was the first infractor; and (b)
the breaches by one party affected the discharge of the reciprocal obligations of the other
party using Articles 1169, 1192 and 2215 of the Civil Code. Petitioner filed a petition for
review with a prayer for restraining order to stay the execution of the judgment contending
basically that it was the contractor Steel Builders who had defaulted on its contractual
undertakings and so could not be the injured party and should not be allowed to recover
any losses it may have incurred in the project so that the Tribunal acted with grave abuse
of discretion in its misapprehension of facts.

Issue:

Should the Supreme Court grant the petition and review the award made by the
Tribunal?

99
Ruling:

No. Executive Order No. 1008, as amended, provides, in its Section 19, as follows:

Sec. 19. Finality of Awards. — The arbitral award shall be binding upon the parties. It
shall be final and unappealable except on questions of law which shall be appealable to the
Supreme Court.
Voluntary arbitration involves the reference of a dispute to an impartial body, the members
of which are chosen by the parties themselves, which parties freely consent in advance to
abide by the arbitral award issued after proceedings where both parties had the
opportunity to be heard. The basic objective is to provide a speedy and inexpensive method
of settling disputes by allowing the parties to avoid the formalities, delay, expense and
aggravation which commonly accompany ordinary litigation, especially litigation which
goes through the entire hierarchy of courts.

Aware of the objective of voluntary arbitration in the labor field, in the construction
industry, and in any other area for that matter, the Court will not assist one or the other or
even both parties in any effort to subvert or defeat that objective for their private purposes.
The Court will not review the factual findings of an arbitral tribunal upon the artful
allegation that such body had "misapprehended the facts" and will not pass upon issues
which are, at bottom, issues of fact, no matter how cleverly disguised they might be as
"legal questions." The parties here had recourse to arbitration and chose the arbitrators
themselves; they must have had confidence in such arbitrators. 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 very clear showing is made that,
in reaching its factual conclusions, the Arbitral Tribunal committed an error so egregious
and hurtful to one party as to constitute a grave abuse of discretion resulting in lack or loss
of jurisdiction.

Examination of the petition at bar reveals that it is essentially an attempt to re-

assert and re-litigate before this Court the detailed or itemized factual claims made before
the Arbitral Tribunal under a general averment that the Arbitral Tribunal had
"misapprehended the facts" submitted to it. In the present Petition, too, petitioner claims
that the Arbitral Tribunal had committed grave abuse of discretion amounting to lack of
jurisdiction in reaching its factual and legal conclusions.

First, petitioner’s claim that it is the injured party and is entitled to damages is a
question of fact despite it being categorized as a legal issue as it was guised as question
whether the Tribunal misapplied Article 1191.

Second, petitioner claims that the Tribunal failed to apply the doctrines of estoppel
and waiver against Steel Builders after finding mutual breach. The same again is a question
of fact already resolved by the Tribunal.

100
 Third, petitioner claims that the Tribunal did not upheld the supremacy of the
contract as the law between the parties. The Tribunal had already decided that Steel
Builders had complied substantially with the Technical Specifications in the contract.

Hence, clearly, petitioner raises claims which are either clearly and directly factual
in nature or require previous determination of factual issues serious errors of law
amounting to grave abuse of discretion resulting in lack of jurisdiction on the part of the
Arbitral Tribunal, in either the methods employed or the results reached by the Arbitral
Tribunal, in disposing of the detailed claims of the respective parties. Therefore, the
petition was dismissed.

101
 Barrameda v. Atienza
G.R. No. 129175, November 19, 2001

Facts:

CANORECO is an electric cooperative organized under the provisions of P. D. No.

269, otherwise known as the National Electrification Administration Decree, as amended
by P. D. No. 1645. On July 10, 1996, the Cooperative Development Authority (CDA) certified
that CANORECO is registered as a full-fledged cooperative under R. A. No. 6938.
On March 1, 1988, the National Electrification Administration (NEA) and CANORECO
entered into a Contract of Loan and First Mortgage of CANORECO properties for the
improvement of the cooperatives electrification program.

The issuance of Memorandum Order No. 409 by President Fidel V. Ramos stemmed
from a struggle between two groups vying for control of the management of CANORECO.
One faction was led by the group of Norberto Ochoa, while the other was petitioners group
whose members were, at that time, the incumbent directors and officers. It was the action
of Ochoa and his cohorts in holding a special meeting on 28 May 1995 and then declaring
vacant the positions of cooperative officers and thereafter electing themselves to the
positions of president, vice-president, treasurer, and secretary of CANORECO which
compelled the petitioners to file a petition with the CDA. The CDA thereafter came out with
a decision favorable to the petitioners.

Issue:

How should the dispute be resolved?

Ruling:

This was a clear case of intra-cooperative dispute. Article 121 of the Cooperative
Code is explicit on how the dispute should be resolved; thus:

ART. 121. Settlement of Disputes. -- Disputes among members, officers, directors,

and committee members, and intra-cooperative disputes shall, as far as practicable, be
settled amicably in accordance with the conciliation or mediation mechanisms embodied in
the by-laws of the cooperative, and in applicable laws.
Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court
of competent jurisdiction.

Complementing this Article is Section 8 of R. A. No. 6939, which provides:

SEC. 8. Mediation and Conciliation. Upon request of either or both or both parties,
the [CDA] shall mediate and conciliate disputes with the cooperative or between
cooperatives: Provided, That if no mediation or conciliation succeeds within three (3)

102
months from request thereof, a certificate of non-resolution shall be issued by the
commission prior to the filing of appropriate action before the proper courts.

103
 Mariño v. Gamilla
G.R. No. 132400, 31 January 2005

FACTS:

Sometime in May 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 its Health Center Building. The
officers and directors of USTFU scheduled a general membership meeting on October 5,
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 Department of Labor and
Employment (DOLE) seeking to stop the holding of the USTFU election.

Meanwhile, on October 2, 1996, the Secretary General of the UST, issued a

Memorandum to the heads regarding the holding of a faculty assembly on October 4, 1996.
On October 4, 1996, the Med-Arbiter issued a temporary restraining order (TRO), enjoining
the holding of the election of the USTFU officers and directors. However, denying the TRO
they themselves sought, Gamilla and some of the faculty members present in the October 4,
1996 faculty assembly 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 temporary restraining order, seeking to invalidate the election
held on October 4, 1996. In another front, the Med-Arbiter issued a TRO dated December
11, 1996, enjoining Gamilla and his fellow officers to "cease and desist from performing any
and all acts pertaining to the duties and functions of the officers and directors" of USTFU.
On January 27, 1997, the respondents served a letter to petitioners Mariño and Alamis,
demanding that the latter vacate the premises provided as 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. On February 5, 1997, petitioners filed with RTC of Manila a Complaint for injunction
and damages with a prayer for preliminary injunction and temporary restraining order
over the use of the USTFU office. On the same date, Med-Arbiter rendered a
decision, declaring the October 4, 1996 election and its results null and void ab initio.

RTC rendered its decision granting the writ of preliminary injunction upon posting
the required bond. On appeal, CA reversed the order, for RTC has no jurisdiction over the
case, as such, the RTC’s grant of the writ of preliminary injunction was pronounced as null
and void. Hence, this petition.

Issue:

Whether or not RTC has jurisdiction over the issue on injunction and claim for
damages.

104
Ruling:

Jurisdiction over a subject matter is conferred by law and determined by the

allegations in the complaint and the character of the relief sought, irrespective of whether
the plaintiff is entitled to all or some of the claims asserted therein.

Fundamentally, the civil case a quo seeks two reliefs one is for the removal of the
padlocks on the office door and restraining respondents from blocking petitioners’ access
to the premises, while the other is for the recovery of moral and exemplary damages. Prior
to the institution of the civil case, petitioners filed before the Med-Arbitration Unit of the
DOLE-NCR a petition for prohibition, injunction with a prayer for preliminary injunction
and temporary restraining order against herein respondents for the latter’s assumption of
office as elected USTFU officers.

The propriety of padlocking the union’s office, the relief sought by the petitioner in
the civil case, is interwoven with the issue of legitimacy of the assumption of office by the
respondents in light of the violation of the union’s constitution and by-laws, which was
then pending before the Med-Arbiter. Necessarily, therefore, the trial court has no
jurisdiction over the case insofar as the prayer for the removal of the padlocks and the
issuance of an injunctive writ is concerned.

It is a settled rule that jurisdiction, once acquired, continues until the case is finally
terminated. The petition with the Med-Arbiter was filed ahead of the complaint in the civil
case before the RTC. In observance of the principle of adherence of jurisdiction, it is clear
that the RTC should not have exercised jurisdiction over the provisional reliefs prayed for
in the complaint. A review of the complaint shows that petitioners disclosed the existence
of the petition pending before the Med-Arbiter and even attached a copy thereof. The trial
court was also aware of the decision of the Med-Arbiter but still, it continued the hearing
on the application for injunction and eventually issued the assailed orders. In this case, BLR
is not specifically empowered to adjudicate claims of damages arising from intra-union or
inter-union disputes. In fact, Art. 241 of the Labor Code ordains the separate institution
before the regular courts of criminal and civil liabilities arising from violations of the rights
and conditions of union membership. The Court has consistently held that where no
employer-employee exists between the parties and no issue is involved which may be
resolved by reference to the Labor Code, other labor statutes, or any collective bargaining
agreement, it is the regional trial court that has jurisdiction.

Administrative agencies are tribunals of limited jurisdiction and as such, can

exercise only those powers which are specifically granted to them by their enabling
statutes. While the trend is towards vesting administrative bodies with the power to
adjudicate matters coming under their particular specialization, to ensure a more
knowledgeable solution of the problems submitted to them, this should not deprive the
courts of justice their power to decide ordinary cases in accordance with the general laws
that do not require any particular expertise or training to interpret and apply. In their
complaint in the civil case, petitioners do not seek any relief under the Labor Code but the
payment of a sum of money as damages on account of respondents alleged tortuous
105
conduct. The action is within the realm of civil law and, hence, jurisdiction over the case
belongs to the regular courts.

Therefore, the Petition is hereby GRANTED IN PART. The decision of the Court of
Appeals setting aside the Order dated 3 March 1997 and the writ of preliminary mandatory
injunction dated 5 March 1997 is affirmed. However, the case is remanded to the trial court
for further proceedings in accordance with this decision.

106
 A.D. Gothong Manufacturing Corporation Employees Union-ALU v. Confesor, et. al.
G.R. No. 113638, 16 November 1999

Facts:
A.D. Gothong Manufacturing Corporation Employees Union-ALU (Union) filed before
the Med-Arbiter a petition for certification election in its bid to represent the unorganised
regular rank-and-file employees of A.D. Gothong Manufacturing Corporation (Company)
excluding its office staff and personnel. In the inclusion-exclusion proceedings, the parties
agreed to the inclusion of Romulo Plaza and Paul Michael Yap in the list of eligible voters on
condition that their votes are considered challenged on the ground that they were
supervisory employees. The certification election was conducted as scheduled and yielded
the following results: YES 20; NO 19; Spoiled 0; Challenged 2; Total votes cast 41.

Plaza and Yap argued that the are rank-and-file employees, while the Union argued
that both of them are supervisory employees who are disqualified to join the proposed
bargaining unit for rank-and-file employees. The Union submitted affidavits of other
employees and photocopies of documents that would prove that Plaza and Yap are
supervisory employees. One of which is a photocopy of a memorandum wherein the name
“ROMY PLAZA” is mentioned as the acting OIC of GT Marketing in Davao. Nevertheless, the
Davao Branch failed to materialize.

The Med-Arbiter declared that the challenged voters, Yap and Plaza, are rank-and-
file employees. The Union appealed to the SOLE which affirmed the decision of the Med-
Arbiter. Hence, this petition to the Supreme Court.

Issue:
Are the challenged voters, Plaza and Yap, supervisory employees or rank-and-file
employees?

Ruling:

The challenged voters, Plaza and Yap, are rank-and-file employees.

The Article 212 (m) of the Labor Code recognizes two (2) principal groups of
employees, namely, the managerial and the rank and file groups:
Managerial employee’ is one who is vested with powers or prerogatives to lay down
and execute management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees. Supervisory employees are those who, in the
interest of the employer, effectively recommend such managerial actions if the exercise of
such authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above definitions are
considered rank-and-file employees for purposes of this Book.
 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.

The petition has failed to show irreversible error in the findings of the Med-Arbiter
and the SOLE. Further, the Union failed to present concrete and substantial evidence to
establish the fact that the challenged voters are either managerial or supervisory
employees.

The issue raised is one of fact: whether in the light of the evidence submitted by
both parties, Plaza and Yap are supervisory or rank-and-file employees. The SC is not a
trier of facts.
 Capitol Medical Center v. NLRC
G.R. No. 147080, 26 April 2005

Facts:

Capitol Medical Center Employees Association-Alliance of Filipino Workers, the

Union, filed a Notice of Strike with the NCMB following the refusal of petitioner to bargain
after the DOLE secretary issued a resolution declaring the union as the main bargaining
representative. The petitioner sought the dismissal of the Notice of Strike claiming that the
Union failed to furnish the Regional Branch of the NCMB with a copy of the notice of the
meeting where the strike vote was conducted. Moreover, they also filed a Petition for the
Cancellation of the Union’s Certificate of Registration with the DOLE.

The Union staged a strike. Thereafter, the petitioner filed a Petition to Declare the
Strike Illegal alleging therein that no formal voting was held by the members. In the
meantime the Regional Director of the DOLE denied the Petition for the Cancellation of the
Union’s Certificate of Registration. In a parallel development, the Labor Arbiter rendered a
decision declaring the strike to be illegal. The Labor Arbiter ruled 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.
According to the Labor Arbiter, the affidavits of the petitioner’s 17 employees who alleged
that no strike vote was taken, and supported by the affidavit of the overseer of the parking
lot and the security guards, must prevail as against the minutes of the strike vote presented
by the respondents. The case was appealed to the NLRC which reversed the decision of the
Labor Arbiter. Upon appeal to the Court of Appeals, the decision of the NLRC was reversed.

Issues:

1. In cases of strikes and lockouts, what is required of the parties?

2. Did respondents comply with the legal requirements for staging the subject strike?

Rulings:

1. The following are the requirements for a valid strike or lockout: (a) a notice of
strike; (b) a cooling off period between the filing of the notice and the actual
execution; (c) a strike vote by secret balloting with a 24-hour prior notice to the
NCMB. Moreover, no strike or lockout shall be declared after assumption of
jurisdiction by the President or the Department or after certification or submission
of the dispute to compulsory or voluntary arbitration or during the pendency of
cases involving the same grounds for the strike or lockout.

2. No. In this case the respondent Union failed to comply with the 24-hour prior notice
requirement to the NCMB before it conducted the alleged strike vote meeting.
Additionally, the Supreme Court agreed with the finding of the Labor Arbiter that no
secret balloting to strike was conducted by the respondent Union at the parking lot
in front of the hospital. This can be gleaned from the affidavit of the security guards
who testified that no strike vote meeting took place. The same is supported by the
fact that 17 of those who purportedly voted in a secret voting executed their
separate affidavits that no secret balloting took place and that even if they were not
members of the Union, were asked to sign attendance papers.