Review1 seeking to set aside the CERTIFICATE OF ENTRY AND

November 26, 2010 Decision2 and ACCEPTANCE

March 10, 2011 Resolution3 of the Court by the Club of your proposal for
of Appeals in CA-GR. SP No. 106103. entering the ship(s) specified below, and
of
GR. No. 208603 is a Petition for the tonnage set out against each, in:
THIRD DIVISION Indirect Contempt4 filed by Sulpicio
Lines, Inc. (Sulpicio) against Steamship Class 1 PROTECTION AND
GR. No. 196072, September 20, Mutual Underwriting Association INDEMNITY
2017 (Bermuda) Limited (Steamship). It of the Club from
prays, among others, that Steamship be Noon 20th February 2005 to Noon
STEAMSHIP MUTUAL (a) declared guilty of indirect contempt; 20th February 2006
UNDERWRITING ASSOCIATION (b) imposed a fine of P30,000.00; and
(BERMUDA) (c) ordered to restitute to Sulpicio the
LIMITED, Petitioner, v. SULPICIO amount of US$69,570.99 or its
LINES, INC., Respondent. equivalent in Philippine currency plus or until sold, lost, withdrawn or the
interest, computed from December 3, entry is terminated in accordance with
G.R. NO. 208603 2012 until fully restituted.5 the rules, to the extent specified and in
accordance with the Act, By(e)-Laws
SULPICIO LINES, INC., Petitioner, Steamship was a Bermuda-based and the Rules from time to time in force
v. STEAMSHIP MUTUAL Protection and Indemnity Club, and the special terms specified overleaf.
UNDERWRITING ASSOCIATION managed outside London, England.6 It
(BERMUDA) LIMITED, Respondent. insures its members-shipowners against Your name has been entered in the
"third party risks and liabilities" for Register of Members of the Club as a
DECISION claims arising from (a) death or injury Member.
to passengers; (b) loss or damage to
LEONEN, J.: cargoes; and (c) loss or damage from
collisions.7 FOR CERTI
An insured member may be compelled ACCOU FICAT
to arbitration pursuant to the Rules of Sulpicio insured its fleet of inter-island NT OF E
the Protection and Indemnity Club, vessels with Steamship for Protection & NUMB
which were incorporated in the Indemnity risks through local insurance Sulpicio ER
insurance policy by reference. Where agents, Pioneer Insurance and Surety Lines
there are multiple parties, the court Corporation (Pioneer Insurance) or
Inc., 155,534
must refer to arbitration the parties Seaboard-Eastern Insurance Co., Inc.
covered by the agreement while (Seaboard-Eastern).8 One (1) of these
vessels was the M/V Princess of the 1st Floor,
proceeding with the civil action against Reclama
those who were not bound by the World, evidenced by a Certificate of
Entry and Acceptance issued by tion
arbitration agreement.
Steamship, which provided: Area,
G.R. No. 196072 is a Petition for
P.O.
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 one (1) of its directors, Gary Rynsard;
L A
and its local insurance agents Pioneer
L L Insurance and Seaboard-Eastern for
O L specific performance and damages. This
W Complaint was docketed as Civil Case
I M No. 07-577, was amended on August
N E 10, 2007,13 and further amended on
G M September 11, 2007.14
B
A E Steamship filed its Motion to Dismiss
R and/or to Refer Case to
G S Arbitration15 pursuant to Republic Act
E .[ No. 9285, or the Alternative Dispute
9 Resolution Act of 2004 (ADR Law), and
N
to Rule 4716 of the 2005/2006 Club
E Rules, which supposedly provided for
R arbitration in London of disputes
A between Steamship and its
L On July 7, 2005, M/V Princess of the members. The other defendants filed
17

World was gutted by fire while on separate motions to dismiss.18

M voyage from Iloilo to Zamboanga City,
E resulting in total loss of its cargoes. The Branch 149, Regional Trial Court, Makati
E fire incident was found by the City denied the motions to dismiss. In
T Department of Interior and Local its July 11, 2008 Order,19 denying
I Government to be "accidental" in Steamship's motion and supplemental
N nature.10 motion to dismiss and citing20European
Resources and Technologies, Inc. v.
G
Sulpicio claimed indemnity from Ingenieuburo Birkhann + Nolte,
Steamship under the Protection & Ingeniurgesellschaft Gmbh21 the
N Regional Trial Court held that
Indemnity insurance policy. Steamship
O denied the claim and subsequently "arbitration [did] not appear to be the
T rescinded the insurance coverage of most prudent action, . . . considering
I Sulpicio's other vessels on the ground that the other defendants . . . ha[d]
F that "Sulpicio was grossly negligent in already filed their [respective]
I conducting its business regarding [a]nswers." Steamship filed its Motion
22

E safety, maintaining the seaworthiness of for Reconsideration,23 but it was likewise

D its vessels as well as proper training of denied in the Order24 dated September
its crew."11 24, 2008.
T
O On June 28, 2007, Sulpicio filed a Steamship assailed trial court orders
Complaint12 with the Regional Trial before the Court of Appeals through a
Court of Makati City against Steamship; Rule 65 Petition, docketed as CA-G.R.
SP No. 106103.25 The Court of Appeals London of the dispute in Civil Case No. Court, Steamship initiated and
dismissed the petition in its November 07-577.36 "concluded" said London "arbitration"
26, 2010 Decision.26 It found no grave during the pendency of this G.R. No.
abuse of discretion on the part of the Sulpicio accuses Steamship of indirect 196072 and before this Honorable
trial court in denying Steamship's contempt for its "improper conduct Court could render its ruling or
Motion to Dismiss and/or to Refer Case tending directly, or indirectly, to decision.38 (Emphasis in the original)
to Arbitration27 or any convincing impede, obstruct, or degrade the
evidence to show that a valid arbitration administration of justice"37 consisting of Steamship filed its
agreement existed between the the following acts: Comment/Opposition on January 30,
39

parties.28 Steamship's Motion for 2014, to which Sulpicio filed its

Reconsideration of this Decision was (a) Without Sulpicio's knowledge or Reply40 on July 2, 2014.
likewise denied in the Resolution29 dated consent, Steamship initiated and
March 10, 2011. "concluded" during the pendency of this In its Resolution41 dated January 15,
case an alleged "arbitration proceeding" 2014, this Court resolved to consolidate
On April 29, 2011, Steamship filed in London for the "Arbitrator" there to G.R. Nos. 208603 and 196072.
before this Court this Petition for "resolve" the very dispute involved in
Review, docketed as G.R. No. this case; The issues for this Court's resolution
196072. In compliance with this Court's are:
June 13, 2011 Resolution,30 Sulpicio (b) Without Sulpicio's knowledge or
filed its Comment31 on August 31, 2011 consent, Steamship proclaimed itself the First, whether or not the petition in G.R.
and Steamship filed its Reply32 on "victor" entitled to arbitration costs from No. 196072 is proper under the Rules of
October 20, 2011. Sulpicio; Court;

On September 6, 2013, Sulpicio filed (c) Without Sulpicio's knowledge or Second, whether or not there is a valid
with this Court a Petition for Indirect consent, Steamship unceremoniously and binding arbitration agreement
Contempt33 under Rule 71 of the Rules deducted from the refund due to between Steamship Mutual Underwriting
of Court against Steamship. This Sulpicio in the separate "Unabia Case" (Bermuda) Limited and Sulpicio Lines,
Petition was docketed as GR. No. the huge amount Inc.;
208603. of U.S.$69,570.99 despite the fact
that: (a) Said "Unabia Case" is Third, whether or not the Court of
Sulpicio alleges that sometime in unrelated to the instant case; (b) The Appeals gravely erred in affirming the
September 2012, it settled its judgment propriety of a London arbitration is still Regional Trial Court Order denying
liability of P4,121,600.00 in Civil Case to be resolved in this case by this referral of Sulpicio Lines, Inc.'s
No. CEB-24783, entitled Verna Unabia Honorable Court; (c) Steamship complaint to arbitration in London in
v. Sulpicio Lines, Inc.34 However, the "enforced" by itself said "arbitration accordance with the 2005/2006 Club
actual amount reimbursed by Steamship costs" against Sulpicio without the Rules; and
was not P4,121,600.00, equivalent to courtesy of even informing this
US$96,958.47, but only Honorable Court about it[; and] Finally, whether or not Steamship
US$27,387.48.35 Steamship deducted Mutual Underwriting (Bermuda) Limited
US$69,570.99, which allegedly (d) Without Sulpicio's knowledge or is guilty of indirect contempt.
represented Sulpicio's share in the consent, and more importantly, without
arbitration costs for the arbitration in the prior approval of this Honorable
This Court addresses first the procedural 2007 Board of Directors' resolution whenever authorized by law, may file
issue raised by Sulpicio. authorizing Scott Davis (Davis) or his with the Supreme Court a verified
Assistant Secretaries to sign a Power of petition for review on certiorari. The
I.A Attorney on behalf of Steamship. It also petition shall raise only questions of law
appended a Secretary's Certificate48 to which must be distinctly set forth.
the Jvly 26, 2011 Board of Directors'
Sulpicio contends that Steamship's resolution re appointing Davis and John
Petition for Review should be dismissed Charles Ross Collis49 to their current A Rule 45 petition is the proper remedy
outright on procedural grounds.42 positions as Secretary and Assistant to reverse a decision or resolution of the
Secretary, respectively. Court of Appeals even if the error
First, this Petition, couched as a Rule 45 assigned is grave abuse of discretion in
Petition, is actually a Rule 65 Petition Steamship further contends that the the findings of fact or of law. "The
because it contained arguments dealing basic issues raised in the petition are existence and availability of the right of
with "grave abuse of discretion" questions of law that are cognizable by appeal prohibits the resort
allegedly committed by the Court of this Court.50 It adds that a reversal of to certiorari because one of the
Appeals.43 some factual findings is warranted requirements for the latter remedy is
because the Court of Appeals committed that there should be no appeal."54
Second, the Petition's Verification and a grave abuse of discretion in
Certification Against Forum Shopping is concluding that Sulpicio was ignorant of Allegations in the petition of grave
defective because it was signed and the 2005/2006 Club Rules and its abuse of discretion on the part of the
executed by Steamship's lawyer. arbitration clause, when Steamship had Court of Appeals do not ipso
Additionally, the Power of Attorney presented ample evidence to establish facto render the intended remedy that
appended to the Petition did not indicate otherwise.51 Steamship submits that this of certiorari under Rule 65 of the Rules
its signatory's name and authority.44 Court may exercise its power of review of Court. In Microsoft Corporation v.
to reverse errors committed by the Best Deal Computer Center
Third, the issue of whether or not lower courts including grave abuse of Corporation,55 this Court discussed the
Sulpicio has been furnished with the discretion of the Court of Appeals.52 distinction between a Petition for
Club's Rulebook, which contained the Certiorari under Rule 65 and a Petition
arbitration clause, is factual and beyond This Court finds for Steamship. for Review on Certiorari under Rule 45:
the realm of a Rule 45 petition.45
The appeal from a final disposition of Significantly, even assuming that the
In its Reply, Steamship avers that its the Court of Appeals is a petition for orders were erroneous, such error would
counsel's law firm was duly authorized review under Rule 45 and not a special merely be deemed as an error of
to sign its Verification and Certification civil action under Rule 65.53 Rule 45, judgment that cannot be remedied by
against Forum Shopping. Moreover, Section 1 is clear that: certiorari. As long as the respondent
Sulpicio never assailed this law firm's acted with jurisdiction, any error
authority to represent Steamship before Section 1. Filing of petition with committed by him or it in the exercise
the Regional Trial Court, and therefore, Supreme Court. A patty desiring to thereof will amount to nothing more
is estopped to deny its authority before appeal by certiorari from a judgment or than an error of judgment which may be
this Court.46 Together with its Reply, final order or resolution of the Court of reviewed or corrected only by appeal.
Steamship submitted a copy of the Appeals, the Sandiganbayan, the The distinction is clear: A petition for
Secretary's Certificate47 to the July 24, Regional Trial Court or other courts certiorari seeks to correct errors of
jurisdiction while a petition for review agreement[.]"57 These are questions of controversy thereafter arising between
seeks to correct errors of judgment law properly cognizable in a Rule 45 the parties, as well as a submission to
committed by the court. Errors of petition. arbitrate an existing controversy shall
judgment include errors of procedure or be in writing and subscribed by the
mistakes in the court's findings. Where In BCDA v. DMCI Project Developers, party sought to be charged, or by his
a court has jurisdiction over the person Inc..58 citing Villamor v. Balmores59: lawful agent."
and subject matter, the decision on all
other questions arising in the case an [T]here is a question of law "when there As correctly pointed out by Sulpicio,
exercise of that jurisdiction. is doubt or controversy as to what the there is no proof that it was served a
Consequently, all errors committed in law is on a certain [set] of facts." The copy of the Club Rules in question and
the exercise of such jurisdiction are test is "whether the appellate court can that it signed therein.61 (Emphasis
merely errors of judgment. Certiorari determine the issue raised without supplied)
under Rule 65 is a remedy designed for reviewing or evaluating the evidence."
the correction of errors of jurisdiction Meanwhile, there is a question of fact
and not errors of judgment.56 (Citations when there is "doubt . . . as to the truth A factual question on whether or not
omitted) or falsehood of facts." The question Sulpicio was given a copy of the Club
must involve the examination of Rulebook must be resolved because it
probative value of the evidence has a bearing on the legal issue of
In this case, what Steamship seeks to presented.60 whether or not a binding arbitration
rectify may be construed as errors of agreement existed between the parties.
judgment of the Court of Appeals. These Factual review, nonetheless, may be
errors pertain to Steamship's allegations Sulpicio denies being bound by the justified: (1) when there is a grave
of the Court of Appeals' failure to rule arbitration clause in the Club Rules since abuse of discretion in the appreciation
that a valid arbitration agreement neither the Certificate of Entry and of facts;62 (2) when the judgment of the
existed between the parties and to refer Acceptance, which covers M/V Princess Court of Appeals is premised on a
the case to arbitration. It does not of the World, mentioned this arbitration misapprehension of facts;63 and (3)
impute any error with respect to the agreement, nor was it given a copy of when the Court of Appeals' findings of
Court of Appeals' exercise of the Club Rulebook. fact are premised on the absence of
jurisdiction, As such, the Petition is evidence but such findings are
simply a continuation of the appellate In sustaining the denial of Steamship's contradicted by the evidence on
process where a case is elevated from Motion to Dismiss and/or to Refer Case record.64
the trial court of origin, to the Court of to Arbitration, the Court of Appeals
Appeals, and to this Court via Rule 45. ruled: Here, this Court finds grave abuse of
discretion by the Court of Appeals in its
The basic issues raised in the Petition Unfortunately, the Court is not appreciation of facts. As will be
for Review are: (1) whether or not an convinced that a valid and binding discussed later, the evidence on record
arbitration agreement may be validly arbitration agreement exists between shows that Sulpicio was furnished a
incorporated by reference to a contract; the Steamship and Sulpicio. And even copy of the Club Rulebook and was
and (2) how the trial court should assuming that there is such an aware of its provisions. Other pieces of
proceed to trial upon its finding "that agreement, it does not comply with evidence were Sulpicio's letters65 to
only some and not all of the defendants Section 4 of the Arbitration Law which Steamship and the affidavits of Director
are bound by an arbitration provides that "a contract to arbitrate a and Head of Underwriting of the Club
and In-Charge of Far East membership days from learning of any similar action or members acting in their stead, are
including the Philippines, Jonathan or proceeding.73 subject to the same rules, liabilities and
Andrews;66 Vice-President of Pioneer incapacities as are agents of individuals
Insurance who was in charge of Failure to comply with the foregoing and private persons."
Sulpicio's account, Roderick Gil mandates constitutes a sufficient ground . . . .
Narvacan;67 and Manager of Seaboard- for the denial of the petition.74 For who else knows of the
Eastern's Marine Department who was circumstances required in the Certificate
in charge of Sulpicio's account, Elmer In case the petitioner is a private but its own retained counsel. Its regular
Felipe.68 corporation, the verification and officers, like its board chairman and
certification may be signed, for and on president may not even know the details
I.B behalf of this corporation, by a required therein.76
specifically authorized person, including
its retained counsel, who has personal
The Verification and Certification against knowledge of the facts required to be In this case, Steamship's Petition's
Forum Shopping signed by Steamship's established by the documents.75 The Verification and Certification against
counsel substantially complied with the reason is that: forum shopping was signed by its
requirements of the Rules of Court. counsel. A Power of Attorney77 dated
A corporation, such as the petitioner, August 1, 2007 was appended to the
Under Rule 45 of the Rules of Court, a has no powers except those expressly Petition, which purportedly authorized
petition for review must be conferred on it by the Corporation Code "Atty. Charles Jay D. Dela Cruz or any of
verified69 and must contain a sworn and those that are implied by or are the partners of Del Rosario & Del
certification against forum shopping.70 incidental to its existence. In turn, a Rosario . . . to sign the verification or
corporation exercises said powers certification"78 against forum shopping
"A pleading is verified by an affidavit through its board of directors and/or its of petitions and appeals in appellate
that the affiant has read the pleading duly authorized officers and agents. courts necessary in representing and
and that the allegations therein are true Physical acts, like the signing of defending Steamship. It was notarized,
and correct of his [or her] personal documents, can be performed only by apostilled in accordance with the law of
knowledge or based on authentic natural persons duly authorized for the Bermuda and authenticated by the
records."71 purpose by corporate bylaws or by a Philippine consulate in London, United
specific act of the board of directors. "All Kingdom. However, a closer look into
On the other hand, a certification acts within the powers of a corporation the Power of Attorney reveals that the
against forum shopping is a petitioner's, may be performed by agents of its signatory of the document was not
statement "under oath that he [or she] selection; and, except so far as identified. This was pointed out by
has not . . . commenced any other limitations or restrictions which may be Sulpicio in its Comment.79
action involving the same issues in the imposed by special charter, by-law, or
Supreme Court, the Court of Appeals or statutory provisions, the same general Nonetheless, Steamship subsequent
different divisions, or any other tribunal principles of law which govern the filed its Reply,80 to which it attached two
or agency[.]72 In this certification, the relation of agency for a natural person (2) Secretary's Certificates81 signed by
petitioner must state the status of any govern the officer or agent of a Davis containing excerpts of the July 24,
other action or proceeding, if there is corporation, of whatever status or rank, 2007 and July 26, 2011 board
any, and undertakes to report to the in respect to his power to act for the resolutions showing Davis' authority to
courts and other tribunal within five (5) corporation; and agents once appointed, execute the Power of Attorney on its
behalf, and Davis' reappointment as petition was given due course.88 12, 2008 before the Regional Trial Court
Corporate Secretary, respectively. The and in its Petition for Certiorari before
signature in the Power of Attorney was In Shipside Incorporated v. Court of the Court of Appeals on November 12,
similar in form and appearance to Davis' Appeals,89 this Court held: 2008. Significantly, Sulpicio never
signature in the Secretary's Certificates, questioned the authority of Del Rosario
which lends credence to Steamship's Moreover, in Loyola, & Del Rosario to represent Steamship in
submission that the Power of Attorney Roadway, and Uy, the Court excused the proceedings before the lower
was executed and signed by Davis.82 non-compliance with the requirement as courts.92
to the certificate of non-forum shopping.
The rule on verification of a pleading is With more, reason should we allow the The rules on forum-shopping are
a formal, not jurisdictional, instant petition since petitioner herein "designed . . . to promote and facilitate
requirement.83 This Court has held that: did submit a certification on non-forum the orderly administration of justice."
shopping, failing only to show proof that They are not to be interpreted with
Non compliance with the verification the signatory was authorized to do so. "absolute literalness" as to subvert the
requirement does not necessarily render That petitioner subsequently submitted procedural rules' ultimate objective of
the pleading fatally defective, and is a secretary's certificate attesting that achieving substantial justice as
substantially complied with when signed Balbin was authorized to file an action expeditiously as possible.93 These goals
by one who has ample knowledge of the on behalf of petitioner likewise mitigates would not be circumvented by this
truth of the allegations in the complaint this oversight.90 Court's recognition of the authorized
or petition, and when matters alleged in counsel's signature in the verification
the petition have been made in good and certification of non-forum shopping.
faith or are true and correct.84 (Citation Likewise, this Court ho1ds that there is
omitted) substantial compliance with the rules on This Court now proceeds to the
verification and certification against substantive issues of whether or not
forum shopping. Steamship's there was a valid arbitration agreement
On the other hand, a certification not subsequent submission of the between the parties and whether or not
signed by a duly authorized person Secretary's Certificates showing Davis' referral to arbitration was imperative.
renders the petition subject to authority to execute the Power of
dismissal.85 Moreover, the lack of or Attorney in favor of Del Rosario & Del II
defect in the certification is not Rosario cured the defect in the
generally curable by its subsequent verification and certification appended
submission or correction.86 However, to the petition. Under the circumstances Steamship contends that the arbitration
there are cases where this Court of this case, Steamship's counsel would agreement set forth in its Club Rules,
exercised leniency due to the presence be in the best position to determine the which in turn is incorporated by
of special circumstances or compelling truthfulness of the allegations in the reference in the Certificate of Entry and
reasons, such as the prima facie merits petition and certify on non-forum Acceptance of M/V Princess of the
of the petition.87 In some cases, the shopping considering that "it has World,94 is valid and binding upon
subsequent submission of proof of handled the case for . . . Steamship Sulpicio,95 pursuant to this Court's ruling
authority of the party signing the since its inception."91 This Court also in BF Corporation v. Court of Appeals.96
certification on behalf of the corporation considers Steamship's allegations that
was considered as substantial the same Power of Attorney was used in Steamship further avers that the Court
compliance with the rules and the its Answer Ad Cautelam filed on August of Appeals' finding that there was no
proof that Sulpicio was given a copy of those parties who are bound by the requires that an arbitration agreement
the Club Rules was incorrect and arbitration agreement although the civil be in writing and subscribed by the
contradicted by the evidence on action may continue as to those who are parties or their lawful agent.115 Sulpicio
record.97 Steamship adds that by not bound by such arbitration adds that "[i]n White Gold Marine
Sulpicio's own declarations in its letter- agreement."107 Even from a procedural Services, Inc. vs. Pioneer Insurance and
application98 for membership of its standpoint, Steamship contends that the Surety Corporation, . . . Steamship did
vessels, Sulpicio acknowledged that it claim against it may be separated from not invoke arbitration but filed suit
had received a copy of the Club Rules Pioneer Insurance and Seaboard- before a Philippine court, which . . .
and that its membership in Steamship is Eastern as these local insurance proves that [the 2005/2006 Club Rules'
subject to them. 99 It contends that companies were impleaded as solidary arbitration clause] is neither mandatory
Sulpicio was "provided with copies of obligors/debtors.108 nor binding" upon the parties.116
the Club's Rule books on an annual
basis by Pioneer Insurance and Steamship further submits that "a Sulpicio further contends that the
Seaboard-Eastern who acted as brokers Philippine court is an inconvenient forum Certificate of Entry and Acceptance did
[for Sulpicio's] entry."100 Moreover, to thresh out the issues involved in not provide for arbitration as a mode of
throughout Sulpicio's almost 20 years of Sulpicio's claim."109 First, Sulpicio's dispute resolution, that the rules
membership,101 it has been aware of, claim is governed by the English Law, as referred to was not particularly
and relied upon, the terms of the Club expressly stated in the 2005/2006 Club identified or described, and that it never
Rules, as revealed in its various Rules.110 Second, a Philippine court received a copy of the Club Rules.117
correspondences through its brokers would be "an ineffective venue" to
with Steamship.102 Thus, Sulpicio is enforce any judgment that may be Assuming there was valid arbitration
estopped to deny that it was aware of, obtained against Steamship, a foreign agreement between them, Sulpicio
and agreed to be bound by, the Club corporation.111 Thus, on the basis of the submits that the trial court correctly
Rules and their provisions.103 doctrine of forum non conveniens alone, relied on the ruling in European
Steamship contends that the claim Resources in denying the referral of the
Steamship argues that a referral of the against it should be referred to case to arbitration.118 Arbitration in
case to arbitration is imperative arbitration in London.112 London would not be the "most prudent
pursuant to the mandates of Republic action" because the arbitral decision will
Act No. 9285 or the ADR Law.104 It adds Finally, Steamship holds that "Sulpicio not be binding on Pioneer Insurance and
that the trial court's reliance on the should participate in the London Seaboard-Eastern and it would result in
ruling in European Resources and Arbitration as [it] is already progressing a "split jurisdiction."119 Sulpicio further
Technologies, Inc. v. Ingenieuburo . . . [i]nstead of wasting its time on contends that the exception laid down
Birkhann + Nolte, Ingeniurgesellschaft prosecuting its claim before a Philippine in European Resources still applies
Gmbh105 was misplaced. That case was court that is devoid of jurisdiction[.]113 because the ADR Law was already in
decided on the basis of Republic Act 876 effect when the case was decided by
or the Old Arbitration Law, which did not Sulpicio counters that the Court of this Court.120
provide for instances where some of the Appeals was correct in ruling that there
multiple impleaded parties were not was no arbitration agreement between In its Reply, Steamship maintains that
covered by an arbitration the parties.114 The arbitration clause in there is a valid arbitration clause
agreement. 106
It adds that now, Section the 2005/2006 Club Rules is not valid between them and that Sulpicio was
25 of the ADR Law specifically provides and binding for failure to comply with well aware of its Club Rules. It adds that
that "the court shall refer to arbitration Section 4 of the ADR Law, which Sulpicio is merely feigning ignorance of
the Club Rules to escape the obligatory over court action. Republic Act No. Philippines' adherence to the United
nature of the arbitration agreement. 9285128 expresses this policy: Nations Convention on the Recognition
Steamship further reiterates that and Enforcement of Foreign Arbitral
Section 25 of the ADR Law is plain and Section 2. Declaration of Policy. — It is Awards of 1958, otherwise known as the
clear that when there are multiple hereby declared the policy of the State New York Convention.130 Republic Act
parties in an action, the court must to actively promote party autonomy in No. 9285 sets the basic principles in the
"refer to arbitration those parties bound the resolution of disputes or the enforcement of foreign arbitral awards
by the arbitration agreement and let the freedom of the parties to make their in the Philippines.131
action remain as to those who are not own arrangements to resolve their
bound."121 "Moreover, as the disputes. Towards this end, the State Consistent with State policy, "arbitration
relationship between . . . Steamship and shall encourage and actively promote agreements are liberally construed in
. . . Sulpicio are governed by English the use of Alternative Dispute favor of proceeding to
Law[,] it may be more prudent to refer Resolution (ADR) as an important arbitration."132 Every reasonable
the disgute to arbitration in London means to achieve speedy and impartial interpretation is indulged to give effect
under the doctrine of forum non justice and declog court dockets. As to arbitration agreements. Thus, courts
conveniens."122 such, the State shall provide means for must give effect to the arbitration clause
the use of ADR as an efficient tool and as much as the terms of the agreement
Finally, Steamship avers that under Rule an alternative procedure for the would allow.133 "Any doubt should be
47 of the 2005/2006 Club Rules, it has resolution of appropriate cases. resolved in favor of arbitration."134
"the right to pursue legal action against Likewise, the State shall enlist active
a [m]ember before any jurisdiction at its private sector participation in the II.B
sole discretion."123 Even if there is no settlement of disputes through ADR.
such provision, Steamship contends that This Act shall be without prejudice to
it may waive its rights to compel the adoption by the Supreme Court of Sulpicio contends that there was no
arbitration in individual cases.124 It adds any ADR system, such as mediation, valid arbitration agreement between
that the waiver of such right in White conciliation, arbitration, or any them, and if there were, it was not
Gold has no effect to this case because combination thereof as a means of aware of it.
Sulpicio is not a party in that case.125 achieving speedy and efficient means of
resolving cases pending before all courts This Court rules against Sulpicio's
II.A in the Philippines which shall be submission.
governed by such rules as the Supreme
Court may approve from time to time. The contract between Sulpicio and
It is the State's policy to promote party (Emphasis supplied) Steamship is more than a contract of
autonomy in the mode of resolving insurance between a marine insurer and
disputes.126 Under the freedom of a shipowner. By entering its vessels in
contract principle, parties to a contract Arbitration, as a mode of settling Steamship, Sulpicio not only obtains
may stipulate on a particular method of disputes, was already recognized in the insurance coverage for its vessels but
settling any conflict between them.127 Civil Code.129 In 1953, Republic Act No. also becomes a member of Steamship.
Arbitration and other alternative dispute 876 was passed, which reinforced
resolution methods like mediation, domestic arbitration as a process of A protection and indemnity club, like
negotiation, and conciliation are favored dispute resolution. Foreign arbitration Steamship, is an association composed
was likewise recognized through the of shipowners generally formed for the
specific purpose of providing insurance Certificate of Entry and Acceptance for
cover against third-party liabilities of its M/V Princess of the World states: P.O.
members.135 A protection and indemnity Box No.
club is a mutual insurance association, CERTIFICATE OF ENTRY AND 137
described in White Gold Marine ACCEPTANCE Cebu
Services, Inc. v. Pioneer Insurance and City,
Surety Corp.136 as follows: by the Club of your proposal for Philippi
entering the ship(s) specified below, and nes.
[A] mutual insurance company is a of the tonnage set out against each, in:
cooperative enterprise where the
members are both the insurer and Class 1 PROTECTION AND INDEMNITY NAM BUI E C PO
insured. In it, the members all of the Club from E OF LT N L RT
contribute, by a system of premiums or Noon 20th February 2005 to Noon SHIP TE A OF
assessments, to the creation of a fund 20th February 2006 RE S RE
from which all losses and liabilities are 1975 D S GI
paid, and where the profits are divided "PRI G ST
among themselves, in proportion to NCE R R
1983
their interest. Additionally, mutual or until sold, lost, withdrawn or the SS OS B Y
insurance associations, or clubs, provide entry is terminated in accordance with OF S .
three types of coverage, namely, the rules, to the extent specified and in THE 1979 V
T
protection and indemnity, war risks, and accordance with the Act, By(e)-Laws OCE . 6,1
O
defense costs.137 and the Rules from time to time in force AN" 50
and the special terms specified overleaf. N
1972
N B
A shipowner wishing to enter its fleet of Your name has been entered in the "PRI A . 13,
vessels to Steamship must fill in an Register of Members of the Club as a NCE 1984 G V 52
application for entry form, which states: Member. SS (Reb E . 6
OF uilt
PLEASE ENTER IN THE ASSOCIATION, 1990
FOR CERTI THE
SUBJECT TO THE RULES, RECEIPT OF )
Ce B 3,7
ACCOU FICAT UNI
WHICH WE ACKNOWLEDGE, THE bu . 68
UNDERMENTIONED VESSEL(S). 138 NT OF E VER Cit
SE" V
NUMB y .
Sulpicio ER 9,6
The application form is signed by the Lines 27
"PRI
shipowner or its authorized Inc., 155,534 Ce B
representative. NCE bu
SS .
1st Floor, Cit V 19,
Steamship then issues a Certificate of OF y 32
Reclama .
Entry and Acceptance of the vessels, THE 9
tion
showing its acceptance of the entry. The CARI
Area,
 BBE Ce X Q E R
AN" bu . U P S A
Cit X E R O T
y . S I F I
"PRI T N E N
NCE E T N G
SS Ce D E T
OF bu D R A
THE Cit T Y L
WOR y O A L
LD" N B
T N E P
Ce H U I R
"PRI bu E A N E
NCE Cit R L G V
SS y U L I
OF L Y C O
THE E A U
STA S I N S
RS" A N C
S E A
.... T B L L
O O L T
NOTES O E E
T K D R
1. R 2. T H A
E H E F A T
F E C O N I
E I R D O
R R R M N
E U C , A S
N L U I S
C E M N T A
E S S C O N
I T O D
S A A R T
R R N P H A
E E C O E
C C E S O
I O S L
R P O C L
C Y R A O
U N W
M I B I
S S Y B N
T ( E G
A S E
N E ) M A
C N - A
E T L D G
S A E E
O T W N
F O S B E
A . Y R
N E A
A O L
A C R
L H D M
T I E
E M N E
R E A T
A M R I
T B Y N
I E G
O R R
N . E N
A S O
I L O T
N T L I
E U F
T R T I
H A I E
E T O D
R I N
U O T
L N F O
 bottom portion of the Certificate states
that these Rules "are printed annually in
A Title VI, Section 49 of Presidential book form" and disseminated to all
L Decree No. 612141 or the Insurance members. M/V Princess of the World
L Code defines an insurance policy as "the was insured from February 20, 2005 to
written instrument in which a contract of February 20, 2006. Hence, the
M insurance is set forth." Section 50 of 2005/2006 Club Rules apply.
E this Code provides that the policy, which
M is required to be in printed form, "may Moreover, attached to the Certificate of
B contain blank spaces; and any word, Entry and Acceptance is a War Risk
E phrase, clause, mark, sign, symbol, Extension clause and Bio-Chem clause
R signature, number, or word necessary which refer to Rule 21 of the 2005/2006
S to complete the contract of insurance Club Rules relating to war risk
shall be written on the blank spaces." insurance.
.[
1 Any rider, clause, warranty, or
3 endorsement attached and referred to in WAR RISK EXTENSION
9
the policy by its descriptive title or
name is considered part of this policy or
contract of insurance and binds the Cover excluded under Rule 21 is hereby
insured. reinstated subject to the terms set out
in this Certificate of Entry and any
Section 51 of the Insurance Code Endorsement thereto, and to the
Thus, a contract of insurance is
prescribes the information that must be following conditions.
perfected between the parties upon
stated in the policy, namely: the parties . . . .
Steamship's issuance of the Certificate
of Entry and Acceptance. in the insurance contract, amount
insured, premium, property or life At any time or times before, or at the
[A] contract of insurance, like other insured, risks insured against, and commencement of, or during the
contracts, must be assented to by both period of insurance. However, there is currency of any Policy Year of the Club,
parties either in person or by their nothing in the law that prohibits the the Directors may in their discretion
agents. So long as an application for parties from agreeing to other terms determine that any ports, places,
insurance has not been either accepted and conditions that would govern their countries, zones or areas (whether of
or rejected, it is merely an offer or relationship, in which case the general land or sea) be excluded from the
proposal to make a contract. The rules of the Civil Code regulating insurance provided by this [Protection
contract, to be binding from the date of contracts will apply.142 and Indemnity] war risks cover. Save as
application, must have been a otherwise provided by the Directors, this
completed contract, one that leaves The Certificate of Entry and Acceptance [Protection and Indemnity] war risks
nothing to be done, nothing to be plainly provides that the Class 1 cover shall cease in respect of such
completed, nothing to be passed upon, protection and indemnity coverage ports, places, countries, zones or areas
or determined, before it shall take would be to the extent specified and in at midnight on the seventh day
effect. There can be no contract of accordance with the Act, the By-Laws, following the issue to the Members of
insurance unless the minds of the and the Rules of the Club in force at the notice of such detem1ination in
parties have met in agreement.140 time of the coverage. The "Notes" in the accordance with the terms of the cover
provided pursuant to Rule 21 of the Sulpicio's acceptance of the Certificate in the Rules and any Certificate of
Club's Rules of Entry and Acceptance manifests its Entry for that Member.
. . . . acquiescence to all its provisions. There
is no showing in the records or in ii. The risks against which a Member
Notwithstanding any other term or Sulpicio's contentions that it objected to is insured by entry in the Club
condition of this insurance, the Directors any of the terms in this Certificate. Its are set out in Rule 25 and are
may in their discretion cancel this acceptance, likewise, operated as an always subject to the conditions,
special cover giving 7 days' notice to the acceptance of the entire provisions of exceptions, limitations and other
Members (such cancellation becoming the Club Rules. terms set out in the remainder of
effective on the expiry of 7 days from these Rules and any Certificate of
midnight of the day on which notice of When a contract is embodied in two (2) Entry for that Member.
cancellation is issued by the Club and or more writings, the writings of the
the Directors may at any time after the parties should be read and interpreted . . . .
issue of notice of such cancellation together in such a way as to render
resolve to reinstate special cover their intention effective.144 6 Entry
pursuant to the proviso to the terms of ....
the cover issued pursuant to Rule 21 on With the exception of the War Risk
such terms and conditions and subject Extension clause, the Bio-chem clause, iv. The provisions of this Rule apply
to such limit as the Directors in their and a succinct statement of the limits of throughout the period of entry of
discretion may determine. liability, warranties, exclusion, and the Ship in the Club . . .
deductibles, the Certificate of Entry and
When either a Demise, Time, Voyage, Acceptance does not contain the details . . . .
Space or Slot Charterer and/or the of the insurance coverage. A person
Owner of the Entered Ship are would have to refer to the Club Rules to 8 Members
separately insured for losses, liabilities, have a complete understanding of the
or the costs and expenses incidental contract between the parties. i. Every Owner who enters any ship
thereto covered under Rule 21 of the in the Club shall (if not already a
Club and/or the equivalent Rule of any The Club Rules contain the terms and Member) be and become a
other Association which participates in conditions of the relationship between Member of the Club as from the
the Pooling Agreement and General the Steamship and its members date of the commencement of
Excess Loss Reinsurance Contract, the including the scope, nature, and extent such entry. Each Member is
aggregate of claims in respect of such of insurance coverage of its members' bound by the Act and By(e)-Laws
losses, liabilities, or the costs and vessels. The 2005/2006 Club Rules145 of of the Club and by these Rules.
expenses incidental thereto covered Class 1, which cover protection and
under Rule 21 of the Club and/or the indemnity risks provide, insofar as
....
equivalent Rule of such other relevant:
Association(s), shall be limited to the
3 Scope of Cover iv. All contracts of insurance with
amount set out in the Certificate of
the Club shall be deemed to be
Entry in respect of any one ship, any
subject to and incorporate all the
one incident or occurrence.143 i. The terms upon which a Member
provisions of these Rules except
is entered in the Club are set out
to the extent otherwise expressly
 agreed in writing with the conditions for recovery of claims. The referred to the arbitration of
Managers. 2005/2006 Club Rules also contain three arbitrators, one to be
provisions on double insurance (Rule appointed by each of the parties
v. Each Member or other person 23), claims handling (Rules 30 and 31), and the third by the two
whose application for insurance cessation of membership (Rule 35), arbitrators so chosen, in London.
or reinsurance is accepted shall cessation of insurance of individual The submission to arbitration and
be deemed to have agreed both vessels (Rule 36) deduction and set-off all the proceedings therein shall
for itself and its successors and (Rule 40), and assignment and be subject to the provisions of
each of them that both it and subrogation (Rules 41 and 42). the English Arbitration Act, 1996
they and each and all of them will and the schedules thereto or any
be subject to and bound by and The arbitration clause is found in Rule statutory modifications or re-
will perform their obligations 47 of the 2005/2006 Club Rules: enactment thereof.
under the Rules, Act and By(e)-
Laws of the Club and any 47 dispute resolution, Adjudication iii. No Member shall be entitled to
contract of insurance with the maintain any action, suit or other
Club. i. in the event of any difference or legal proceedings against the
dispute whatsoever, between or Club upon any such difference or
. . . . affecting a Member and the Club dispute unless and until the same
and concerning the insurance has been submitted to the
45 Amendments to Rules afforded by the Club under these Directors and they shall have
rules or any amounts due from given their decision thereon, or
the Club to the Member or the shall have made default for three
The Rules of this Class may be altered
Member to the Club, such months in so doing; and, if such
or added to by Ordinary Resolution
difference or dispute shall in the decision be not accepted by the
passed at a separate meeting of the
first instance be referred to Member or such default be made,
Members of this Class provided that no
adjudication by the Directors. unless and until the difference or
such alterations shall be effective unless
That adjudication shall be on the dispute shall have been referred
and until the same shall be sanctioned
basis of documents and written to arbitration in the manner
by the Directors.146
submissions alone. provided in this Rule, and the
Notwithstanding the terms of this Award shall have been published;
Rule 47i, the Managers shall be and then only for such sum as
The 2005/2006 Club Rules also provide
entitled to refer any difference or the Award may direct to be paid
the nature of Steamship's Protection
dispute to arbitration in by the Club. And the sole
and Indemnity cover and the terms on
accordance with sub- obligation of the Club to the
which it is provided. In particular, Rule
paragraph ii below without prior Member under these Rules or
25(i) to (xxi) identify a member's
adjudication by the Directors. otherwise howsoever in respect
liabilities, costs, and expenses covered
of any disputed claim made by
by the insurance, Rules 18 to 24 set out
ii. If the Member does not accept the Member shall be to pay such
the general exclusions and limitations,
the decision of the Directors, or if sum as may be directed by such
Rule 26 provides the requirements for
the Managers, in their absolute an Award.
classification and condition surveys, and
discretion, so decide, the
Rule 28 addresses general terms and
difference or dispute shall be
iv. In any event no request for English law.147 (Emphasis in the all of its parts, must be read together
adjudication by the Member shall original) and given effect, with all its clauses and
be made to the Directors in provisions harmomonized with one
respect of any difference or another.150
dispute between, or matter
affecting, the Member and the Under Rule 47, any dispute concerning II.C
Club more than two years from the insurance afforded by Steamship
the date when that dispute, must first be brought by a claiming
difference or matter arose unless, member to the Directors for The Court of Appeals ruled that the
prior to the expiry of this adjudication. If this member disagrees arbitration agreement in the 2005/2006
limitation period, the Managers with the decision of the Director, the Club Rules is not valid because it was
have agreed in writing to extend dispute must be referred to arbitration not signed by the parties.
the same. in London. Despite the member's
disagreement, the Managers of In domestic arbitration, the formal
v. Nothing in this Rule 47 including Steamship may refer the dispute to requirements of an arbitration
paragraph i, or in any other Rule arbitration without adjudication of the agreement are that it must "be in
or otherwise shall preclude the Directors. This procedure must be writing and subscribed by the party
Club from taking any legal action complied with before the member can sought to be charged, or by his lawful
of whatsoever nature in any pursue legal proceedings against agent."151 In international commercial
jurisdiction at its absolute Steamship. arbitration,152 it is likewise required that
discretion in order to pursue or the arbitration agreement must be in
enforce any of its rights There is no ambiguity in the terms and writing.
whatsoever and howsoever clauses of the Certificate of Entry
arising including but not limited Acceptance. Contrary to the ruling of An arbitration agreement is in writing if
to: - the Court of Appeals, the Certificate it is contained (1) in a document signed
clearly incorporates the entire Club by the parties, (2) in an exchange of
a. Recovering sums it Rules—not only those provisions relating letters, telex, telegrams or other means
considers to be due from to cancellation and alteration of the of telecommunication which provide a
the Member to the Club; policy.148 record of the agreement, or (3) in an
b. Obtaining security for such exchange of statements of claim and
sums; and/or "[W]hen the text of a contract is explicit defense in which the existence of an
c. Enforcement of its right of and leaves no doubt as to its intention, agreement is alleged by a party and not
lien whether arising by law the court may not read into it any other denied by another. The reference in a
or under these rules. intention that would contradict its plain contract to a document containing an
import."149 arbitration clause constitutes an
arbitration agreement provided that the
The incorporation of the Club Rules in contract is in writing and the reference
vi. These rules and any contract of the insurance policy is without any is such as to make that clause part of
insurance between the Club and qualification. This includes the the contract.153
the Member shall be governed by arbitration clause even if not particularly
and construed in accordance with stipulated. A basic rule in construction is In BF Corp. v. Court of Appeals,154 one
that the entire contract, and each and (1) of the parties denied the existence
of the arbitration cause on the ground but set forth in another document is application for entry of its vessels to
that it did not sign the Conditions of binding upon the parties, where the Steamship "subject to the Rules, receipt
Contract that contained the clause. This document was incorporated by of which we acknowledge."158
Court held that the arbitration clause reference to the main agreement. The
was nonetheless binding because the arbitration agreement contained in the The ruling of this Court in Associated
Conditions of Contract were expressly Club Rules, which in turn was referred Bank v. Court of Appeals159 is applicable
made an integral part of the principal to in the Certificate of Entry and by analogy to this case.
contract between the parties. The Acceptance, is binding upon Sulpicio
formal requirements of the law were even though there was no specific In that case, plaintiffs sought to recover
deemed complied with because "the stipulation on dispute resolution in this the amount of 16 checks that were
subscription of the principal agreement Certificate. honored by Associated Bank despite the
effectively covered the other documents apparent alterations in the name of the
incorporated by reference [to Furthermore, as stated earlier, Sulpicio payee. Associated Bank filed a Third-
them]." 155 In, arriving at this ruling, this became a member of Steamship by the Party Complaint against Philippine
Court explained: very act of making a contract of Commercial International Bank, Far East
insurance with it. The Certificate of Bank & Trust Company, Security Bank
A contract need not be contained in a Entry and Acceptance issued by and Trust Company, and Citytrust
single writing. It may be collected from Steamship states that "[its] name has Banking Corporation for reimbursement,
several different writings which do not been entered in the Register of contribution, and indemnity. This
conflict with each other and which, Members of the Club as a Complaint was based on their being the
when connected, show the parties, Member."157 Sulpicio admits its collecting banks and by virtue of their
subject matter, terms and membership and the entry of its vessels bank guarantee for all checks sent for
consideration, as in contracts entered to Steamship. clearing to the Philippine Clearing House
into by correspondence. A contract Corporation (PCHC). The trial court
may be encompassed in several Rule 8(v) of the 2005/2006 Club Rules dismissed the Third-Party Complaint for
instruments even though every provides that: lack of jurisdiction, citing Section 36 of
instrument is not signed by the the Clearing House Rules and
parties, since it is sufficient if the Each Member or other person whose Regulations of the PCHC, which provides
unsigned instruments are clearly application for insurance or reinsurance for arbitration. This Court, in affirming
identified or referred to and made is accepted shall be deemed to have the dismissal, held:
part of the signed instrument or agreed both for itself and its successors
instruments. Similarly, a written and each of them that both it and they Under the rules and regulations of the
agreement of which there are two and each and all of them will be subject Philippine Clearing House Corporation
copies, one signed by each of the to and bound by and will perform their (PCHC), the mere act of participation of
parties, is binding on both to the same obligations under the Rules, Act and the parties concerned in its operations
extent as though there had been only By(e)-Laws of the Club and any contract in effect amounts to a manifestation of
one copy of the agreement and both of insurance with the Club. agreement by the parties to abide by its
had signed it.156 (Emphasis supplied) rules and regulations. As a consequence
Sulpicio's agreement to abide by of such participation, a party cannot
Steamship's Club Rules, including its invoke the jurisdiction of the courts over
Thus, an arbitration agreement that was arbitration clause, can be reasonably disputes and controversies which fall
not embodied in the main agreement inferred from its submission of an under the PCHC Rules and Regulations
without first going through the Regulations of the PCHC may go on In its Comment, Sulpicio contends that
arbitration processes laid out by appeal to any of the Regional Trial it "was never given or sent a copy" of
the body. Since claims relating to the Courts in the National Capital Region the Rulebook as stated in the affidavits
regularity of checks cleared by banking where the head office of any of the of its Executive Vice President, Atty.
institutions are among those claims parties is located only after a decision or Eusebio S. Go and its Safety and Quality
which should first be submitted for award has been rendered by the Assurance Manager, Engr. Ernelson P.
resolution by the PCHC's Arbitration arbitration committee or arbitrator on Morales.161 It also quoted a portion of
Committee, petitioner Associated Bank, questions of law.160 (Emphasis supplied, the Affidavit of its Executive Vice
having voluntarily bound itself to abide citation omitted) President and Chief Executive Officer,
by such rules and regulations, is Carlos S. Go, who declared that
estopped from seeking relief from the "[Sulpicio] and Steamship have not
Regional Trial Court on the coattails of a This Court held that mere participation signed any arbitration agreement" and
private claim and in the guise of a third by the banks in the clearing operations "[n]o such agreement exists."162
party complaint without first having of the PCHC manifest their consent to
obtained a decision adverse to its claim the PCHC Rules, including the binding Sulpicio cannot feign ignorance of the
from the said body. lt cannot bypass the effect of the arbitration agreements arbitration clause since it was already
arbitration process on the basis of its under these Rules. charged with notice of the Club Rules
averment that its third party complaint due to an appropriate reference to it in
is inextricably linked to the original In this case, by its act of entering its the Certificate of Entry and Acceptance.
complaint in the Regional Trial Court. fleet of vessels to Steamship and Assuming its contentions were true that
accepting without objection the it was not furnished a copy of the
.... Certificate of Entry and Acceptance 2005/2006 Club Rules, by the exercise
covering its vessels, Sulpicio manifests of ordinary diligence, it could have
Section 36.6 is even more emphatic: its consent to be bound by the Club easily obtained a copy of them from
Rules. The contract between Sulpicio Pioneer Insurance or Seaboard-Eastern.
36.6 The fact that a bank participates in and Steamship gives rise to reciprocal
the clearing operations of PCHC shall be rights and obligations. Steamship In any case, Sulpicio's bare denials
deemed its written and subscribed undertakes to provide protection and cannot succeed in light of the
consent to the binding effect of this indemnity cover to Sulpicio's fleet. On preponderance of evidence submitted by
arbitration agreement as if it had done the other hand, Sulpicio, as a member, Steamship.
so in accordance with Section 4 of the agrees to observe Steamship's rules and
Republic Act No. 876 otherwise known regulations, including its provisions on The Affidavit163 dated August 29, 2007
as the Arbitration Law. arbitration. of Jonathan Andrews, Director and Head
of Underwriting of the Eastern Syndicate
Thus, not only do the parties manifest III.A of the Managers of Steamship and in
by mere participation their consent to charge of Steamship's Far East
these rules, but such participation is membership, including the Philippines,
deemed (their) written and subscribed The Court of Appeals' finding that there stated:
consent to the binding effect of was no proof that Sulpicio was given a
arbitration agreements under the PCHC copy of the 2005/2006 Club Rules is 4. The contract of insurance
rules. Moreover, a participant subject to contradicted by the evidence on record. between the Club and a Member
the Clearing House Rules and
 is contained in, and evidenced seeking a refund of premium for will note from that
by: the "SURIGAO PRINCESS" on the correspondence, it contains
grounds that the vessel was laid numerous and frequent
up. That letter's enclosures references to various of the
a) The Rules of the Club for consist of: Club's Rules, e.g.:
whichever Class or Classes the
vessel is entered, for the time • Rule 22, dealing with
being in force; and (a) The Club's printed form for
double insurance
returns of premium when a • Rule 25 xix, dealing with
b) A Certificate of Entry. vessel is laid-up . . . signed by towage
Mr. Carlos S. Go on behalf of • Rule 23 i, dealing with
the Plaintiffs; classification
5.
• Rule 23 v b and c, dealing
(b) A photocopy of the relevant with defect warranties
.... provision in the Club's Rules • Rule 23 iv, dealing with
dealing with laid-up returns, safety audits.
5. The Club's policy year runs from Rule 29; and
noon on 20th February of each
12. The fact that Plaintiffs possessed
year until noon on 20th February (c) A Certificate from the and were fully conversant with
of the year following . . . The
Philippines Port Authority . . . the Club's Rules is most clearly
Rule book is published on an
demonstrated by the
annual basis prior to the
correspondence provided and
commencement of the Policy year 11. shown to me, marked "JHDA 6".
to which it applies. Although the
After the grounding of the
Rules can be amended pursuant The fact that Sulpicio's "PRINCESS OF THE PACIFIC",
to Rule 45, the dispute resolution application for a laid up return due to the concerns arising out of
provisions of the Rules have attached a photocopy of the this casualty, the Club initially
provided for arbitration in London Club's Rule book demonstrates reserved cover pending further
since well before the Plaintiff's both that this was physically in investigation and required an
entry in the Club. their possession and that they independent audit of the Plaintiffs
were familiar with its contents. Safety Management System.
.... When this decision was conveyed
11. Throughout the lengthy period of to the Plaintiffs via their brokers,
10. In addition, it is quite clear that this entry, as might be Seaboard-Eastern, they replied:
throughout their lengthy anticipated, there was a
membership of the Club, the considerable volume of As expected, Carlos Go was so upset
Plaintiffs were aware of, and correspondence between the and expressed disappointment when the
relied upon, the terms of the Plaintiffs and the Club via the undersigned spoke to him about the
Club's Rules. Produced and former's brokers. Examples of report of Noble Denton and the club's
shown to me, marked "JHDA 4", that correspondence are decision to suspend any action on the
is a copy of a letter164 from the produced and shown to me, claim especially so since owners believe
Plaintiffs, dated 4th June, 1993, marked "JHDA 5". As the Court the findings of the surveyors to the club
are inaccurate and after relating such Company's Hull Department and in both • Letter-request174 for refund of
findings to the club rules owners find no written communications, she reminded lay-up premiums for the vessel
basis for club's decision to suspend Sulpicio through its Executive Vice- M/V Nasipit Princess dated 16
action on the claim.165 President and CFO Mr. Carlos S. Go of August 2002 as Annex "9";
certain Club Rules such as the
prescriptive period to claim for lay-up
Roderick Gil Narvacan, Vice-President of premium refund. In each of the above letters, Sulpicio
the Hull Unit of Pioneer Insurance which declared to both the Company and the
handled Sulpicio's account, also 10. In reply to the 27 August 2002 Club that "(w)e shall therefore be glad
narrated in his Affidavit[166 dated email, Mr. Carlos S. Go, by a 28 August to receive a credit note for the return of
September 4, 2007: 2002 email169 to Ms. Valles, explained premium under the Rules of the
his understanding of the provision on Association."175 (Emphasis in the
7. I know for a fact that Sulpicio the prescriptive period to claim for lay- original)
received a copy of the Club's Rule Book up premium refund under the Club's
and had full knowledge of the Club's Rules, thereby clearly showing that
Rules during the length of time that it Sulpicio was aware of the Club's Rules. Finally, Elmer Felipe, Manager of Marine
was a member of the Club. A copy of the 28 August 2002 email of Department of Seaboard-Eastern in
Mr. Go is hereto attached as Annex "4." charge of Sulpicio's account, also
8. [I]n all Entry Forms signed and narrated:
submitted by Sulpicio to the Club 11. To further prove Sulpicio's
throughout its years of membership in knowledge of Club's Rules, I hereto 11. As insurers for the Hull & Machinery
the Club, Sulpicio always acknowledged attach the following copies of letters of Sulpicio's Fleet, the Company,
that it received a copy of Club's Rule from Sulpicio addressed to the Company through my department, assisted
Book. A sample of Sulpicio's duly signed with attached letter by Sulpicio to the Sulpicio in regard to its [Protection and
Entry Form submitted to the Club on 6 Club: Indemnity] cover by sending copy of the
February 1997 is hereto attached as Club's Rulebook while it was an active
Annex "1." • Letter-request170 for refund of Member of the Club.
lay-up premiums for the vessel
9. The Company, through my M/V Surigao Princess dated 4 12. By way of example, in the year
department, also makes it a point to June 1993 as Annex "5"; 2002, the Company sent five (5) copies
remind all the Club's Members including • Letter-request171 for refund of of the Club's Rulebook to Mr. Carlos S.
Sulpicio to familiarize themselves with lay-up premiums for the vessel Go, Executive Vice-President and CEO of
the Club's Rulebook as the rules therein M/V Manila Princess dated 10 Sulpicio as evidenced by a transmittal
provided are applied to all Club related June 1998 as Annex '"6"; letter dated 11 April 2002 duly signed
matters including claims procedures. A • Letter request172 for refund of by the Company's First Vice-President
copy of Ms. May Valles' email167 to lay-up premiums for the vessel Joli Co-Wu. A copy of said transmittal
Sulpicio dated 27 August 2002 is hereto M/V Filipina Princess dated 21 letter176 dated 11 April 2002 is hereto
attached as Annex "2" and her June 1999 as Annex "7"; attached as Annex "1."
letter168 to Sulpicio dated 17 October • Letter-request173 for refund of
2002 is hereto attached as Annex "3." lay-up premiums for the vessel 13. The other transmittal letters proving
Ms. Valles was a former member of the M/V Manila Princess dated 17 distribution of the Club's Rulebook to
May 2001 as Annex "8"; and Sulpicio in its other years of
membership with the Club were among documents are attached as Annex The principal stockholders and officers
those discarded by the Company when "4."180 of NAMERCO, particularly the Sycips
it moved . . . to a smaller office . . . who co-signed the promissory notes in
These foregoing affidavits and the question, were, as the lower court
14. [Sulpicio is presumed to] know the attached supporting documents found, businessmen of experience and
Club's Rules as it was provided with consistently declared that Sulpicio was intelligence . . . We might say —
copies of the Rulebook on an annual given copies of the Rulebook on an paraphrasing Tin Tua Sia vs. Yu Biao
basis. annual basis and had even invoked its Sontua, 56 Phil. 707 — that they being
provisions in making a claim from of age and businessmen of experience,
15. In fact, in a 8 May 2004 letter Steamship. Sulpicio's previous letters to it must be presumed that they had
addressed to the Company, Sulpicio Steamship referring to provisions of the acted with due care and to have signed
claimed for refund of lay-up premiums Club Rules show its knowledge. Sulpicio the documents in question with full
from the Club in connection with the was also reminded of the arbitration knowledge of their import and the
vessel M/V Princess of the World and in clause during the negotiations preceding obligations they were assuming
Sulpicio's letter to the Club attached to the institution of the present case. thereby; that this presumption of law
the said 8 May 2004 letter, Sulpicio may not be overcome by the mere
declared that "(w)e shall therefore be "[A] party is not relieved of the duty to testimony of the obligor or obligors;
glad to receive a credit note for the exercise the ordinary care and prudence that, to permit a party, when, sued
return of premium under the Rules of that would be exacted in relation to upon a contract, to admit that he signed
the Association." This was followed by other contracts. The conformity of the it but to deny that it expresses the
December 2004 letter for refund of lay- insured to the terms of the policy is agreement he had made, or to allow
up returns for the vessel M/V Princess of implied from [its] failure to express any him to admit that he signed it solely on
the World where Sulpicio also invoked disagreement with what is provided the verbal assurance given by one
the Club Rules. A copy of the 8 May for."181 The agreement to submit all party, however high his station may be,
2004 letter177 with attachment is hereto disputes to arbitration is a long standing that he would not be held liable thereon,
attached as Annex "2" and a copy of the provision in the Club Rules. It was would destroy the value of all contracts.
8 December 2004 letter178 is hereto incumbent upon Sulpicio to familiarize Indeed, it would be disastrous to give
attached as Annex "3." itself with the Club Rules, under the more weight and reliability to the self-
. . . . presumption that a person takes due serving testimony of a party bound by
care of its concerns. Being a member of the contract than to the contents
18. More importantly, after the Club Steamship for 20 years,182 it has been thereof. Verba volant, scripta
denied cover for the vessel M/V Princess bound by its Rules and has been manent.184
of the World and prior to the date when expected to abide by them in good faith.
the termination of Sulpicio's entry in the
Club took effect, our EVP, Mr. Jose G. In Development Bank of the Philippines Sulpicio is estopped from denying
Banzon, Jr. sent an emai1179 dated 30 v. National Merchandising Corp.,183 the knowledge of the Rulebook by its own
November 2005 to Mr. Carlos Go parties, who were acute businessmen of acts and representations, as evidenced
reminding Sulpicio of the remedy of experience, were presumed to have by its various letters to Steamship,
voluntary arbitration under Rule 47 of assented to the assailed documents with showing its familiarity with the Rulebook
the Club's Rulebook and attaching a full knowledge: and its provisions.
copy of Rule 47. Copies of these
"In estoppel, a person, who by his [or
her] deed or conduct has induced 9285 and the subsequent 2009 Special
another to act in a particular manner, is ADR Rules, this Court's ruling
barred from adopting an inconsistent Rule 4.7 of the Special Rules on in European Resources and
position, attitude or course of conduct Alternative Dispute Resolution187 (2009 Technologies, Inc. v. Ingenieuburo
that thereby causes loss or injury to Special ADR Rules) further expresses: Birkhann + Nolte, Ingeniurgesellschaft
another."185 It further bars a party from Gmbh188 is deemed abrogated.
denying or disproving a fact, which has The court shall not decline to refer some
become settled by its acts.186 or all of the parties to arbitration for any Notably, the Regional Trial Court did not
of the following reasons: rule on whether or not a valid and
Hence, this Court finds a preponderance existing arbitration .agreement existed
of evidence showing that Sulpicio was a. Not all of the disputes subject of between the parties. It merely stated in
given a copy and had knowledge of the the civil action may be referred to its Order. citing European
2005/2006 Club Rules. Moreover, the arbitration; Resources, that:
2005/2006 Club Rules' provision on
arbitration is valid and binding upon b. Not all of the parties to the civil ["]Even if there is an arbitration clause,
Sulpicio. action are bound by the there are instances when referral to
arbitration agreement and arbitration does not appear to be the
III.B referral to arbitration would most prudent action. The object of
result in multiplicity of suits; arbitration is to allow the expeditious
The Regional Trial Court should suspend determination of a dispute. Clearly, the
proceedings to give way to arbitration. c. The issues raised in the civil issue before us could not be speedily
Even if there are other defendants who action could be speedily and and efficiently resolved in its entirety if
are not parties to the arbitration efficiently resolved in its entirety we allow simultaneous arbitration
agreement, arbitration is still proper. by the court rather than in proceedings and trial, or suspension of
arbitration; trial pending arbitration."
Republic Act No. 9285 was approved on
April 2, 2004 and was the controlling d. Referral to arbitration does not Moreover, it is noted that defendants
law at the time the original and appear to be the most prudent Seaboard-Eastern Insurance Co. Inc.
amended complaints were filed. action; or and Pioneer Insurance and Surety
Corporation already filed their
Section 25 of Republic Act No. 9285 is e. The stay of the action would respective Answers to the second
explicit that: prejudice the rights of the parties amended complaint.189
to the civil action who are not
[W]here action is commenced by or bound by the arbitration
against multiple parties, one or more of agreement. On this basis, the Regional Trial Court
whom are parties to an arbitration denied Steamship's Motion to Dismiss
agreement, the court shall refer to and/or to Refer Case to Arbitration and
arbitration those parties who are bound directed it to file an answer.
by the arbitration agreement although The present rule on multiple parties
the civil action may continue as to those manifests due regard to the policy of the This Court finds that the Regional Trial
who are not bound by such arbitration law in favor of arbitration. In light of the Court acted in excess of its jurisdiction.
agreement. express mandate of Republic Act No.
Where a motion is filed in court for the this Court.190 It adds that the Injunction. Sulpicio refused "service of
referral of a dispute to arbitration, "arbitration – anti-suit injuction" cost all orders, notices, pleadings and
Section 24 of Republic Act No. 9285 was not a debt of Sulpicio but a documents related to the London
ordains that the dispute shall be unilateral charge arising from an arbitration and the Commercial Court
referred "to arbitration unless it finds arbitration that it had not participated proceedings."202
that the arbitration agreement is null in, or was enforceable in the
and void, inoperative or incapable of Philippines.191 Steamship adds that in 2012, Sulpicio
being performed." filed a claim for reimbursement of
In its Comment/Opposition192 to the US$96,958.47 representing passenger
Thus, the Regional Trial Court went Petition for Indirect Contempt, liabilities arising from the capsizing of
beyond its authority of determining only Steamship contends that it "exercised one (1) of Sulpicio's fleet in
the issue of whether or not there was a its right to set-off in good faith"193 and 1998.203 Pursuant to Rule 32 of the Club
valid arbitration agreement between the that the amount set-off represents costs Rules for the 1998 policy, which gave
parties when it denied Steamship's of obtaining the Anti-Suit Injunction Steamship "the right to make deduction
Motion to Dismiss and/or to Refer Case awarded to it by the English Commercial 'from any claims . . . due to a Member'
to Arbitration solely on the ground that Court and are not arbitration costs as of 'any liabilities of such Member to
it would not be the most prudent action contended by Sulpicio.194 It also holds the Club,'"204 Steamship set-off the
under the circumstances of the case. that Sulpicio's prayer for restitution of costs awarded by the English
The Regional Trial Court went against the offset amount was improper in a Commercial Court from the amount
the express mandate of Republic Act No. petition for indirect contempt.195 reimbursed to Sulpicio. Sulpicio's
9285. Consequently, the Court of brokers and lawyers were informed of
Appeals erred in finding no grave abuse Steamship emphasizes that even before the set-off through an email dated
of discretion on the part of the trial the denial of its Motion to Dismiss in December 3, 2012.205
court in denying referral to arbitration. Civil Case No. 07-577 on July 11, 2008,
it already commenced arbitration in Steamship contends that there was no
IV London196 on July 31, 2007.197 It had legal impediment when it initiated
also "obtained a permanent Anti-Suit arbitration proceedings in
Injunction [with interim award for London.206 The action was taken in good
In G.R. No. 208603, Sulpicio contends costs]198 from the English Commercial faith to preserve its rights while
that Steamship's acts were Court on 4th April 2008[.]"199 The April defending its position that Sulpicio's
contumacious because they were 4, 2008 Order enjoined Sulpicio from filing of Civil Case No. 07-577
intended to defeat Civil Case No. 07-577 proceeding with Civil Case No. 07-577 constituted a breach of the Club
and oust the Regional Trial Court of its and to refer the dispute to arbitration in Rules.207 On the other hand, Sulpicio's
jurisdiction, without the approval of this London.200 acts were far from desirable for it did
Court. not only fail to participate in the London
Steamship further avers that "Sulpicio arbitration proceedings but also evaded
Sulpicio further contends that there was was served a copy of an Order to file service of all notices so that it could
no valid off-setting of the amount of Claims Submissions in the London feign ignorance of the existence of
US$69,570.99 from the refund payable arbitration and a copy of the Anti-Suit arbitration proceedings."208
to it in the Unabia case because the Injunction but it refused to participate in
issue on the propriety of the referral to the London Arbitration."201 It also did This Court finds Sulpicio's arguments to
arbitration had yet to be resolved by not pay the costs of the Anti-Suit be untenable.
 remiss in actually providing for the
Steamship's commencement of needs of his children." It was also taken
arbitration even before the Regional The court's contempt power should be into account that he "believed in good
Trial Court had ruled on its motion to exercised with restraint and for a faith that the trial and appellate courts,
dismiss and suspend proceedings does preservative, and not a vindictive, upon equitable grounds, would allow
not constitute an "improper conduct" purpose. "Only in cases of clear and him to offset the substantial amounts he
that "impede[s], obstruct[s] or contumacious refusal to obey should the had spent or paid directly to his
degrade[s] the administration of power be exercised."212 children." This Court explained:
justice." 209

In Lorenzo Shipping Corporation v. Contempt of court is defined as a

In Heirs of Trinidad de Leon vda. de Distribution Management Association of disobedience to the court by acting in
Roxas v. Court of Appeals,210 this Court the Philippines,213 this Court held that: opposition to its authority, justice, and
explained the concept of contempt of dignity. It signifies not only a willful
court: disregard or disobedience of the court's
There is no question that in contempt order, but such conduct which tends to
Contempt of court is a defiance of the the intent goes to the gravamen of the bring the authority of the court and the
authority, justice or dignity of the court; offense. Thus, the good faith, or lack of administration of law into disrepute or,
such conduct as tends to bring the it, of the alleged contemnor should be in some manner, to impede the due
authority and administration of the law considered. Where the act complained administration of justice. To constitute
into disrespect or to interfere with or of is ambiguous or does not clearly contempt, the act must be done willfully
prejudice parties litigant or their show on its face that it is contempt, and and for an illegitimate or improper
witnesses during litigation . . . is one which, if the party is acting in purpose. The good faith, or lack of it, of
good faith, is within his rights, the the alleged contemnor should be
Contempt of court is defined as a presence or absence of a contumacious considered.216
disobedience to the Court by acting in intent is, in some instances, held to be
opposition to its authority, justice and determinative of its character. A person
dignity. It signifies not only a willful should not be condemned for contempt This Court finds no dear and
disregard or disobedience of the court's where he contends for what he believes contumacious conduct on the part of
orders, but such conduct as tends to to be right and in good faith institutes Steamship. It does not appear that
bring the authority of the court and the proceedings for the purpose, however Steamship was motivated by bad faith
administration of law into disrepute or in erroneous may be his conclusion as to in initiating the arbitration proceedings.
some manner to impede the due his rights. To constitute contempt, the Rather, its act of commencing
administration of justice . . . act must be done willfully and for an arbitration in London is but a bona fide
illegitimate or improper attempt to preserve and enforce its
This Court has thus repeatedly declared purpose.214 (Citations omitted) rights under the Club Rules.
that the power to punish for contempt is
inherent in all courts and is essential to There was no legal impediment at the
the preservation of order in judicial In Lim Lua v. Lua,215 the father's time Steamship initiated London
proceedings and to the enforcement of deferral in giving monthly arbitration proceedings. Steamship
judgments, orders, and mandates of the support pendente lite granted by the commenced arbitration on July 31, 2007
court, and consequently, to the due trial court was held not contumacious, even before the Regional Trial Court
administration of justice . . .211 considering that "he had not been denied its Motion to Dismiss and/or
Refer Case to Arbitration on July 11, is not the proper action to determine
2008. There was no order from the the validity of the set-off and to make a
Regional Trial Court enjoining factual determination relating to the
Steamship from initiating arbitration propriety of ordering restitution.
proceedings in London. Besides, the
2009 Special ADR Rules specifically WHEREFORE, the Petition for Review
provided that arbitration proceedings in G.R. No. 196072 is GRANTED. The
may be commenced or continued and Decision dated November 26, 2010 of
an award may be made, while the the Court of Appeals in CA-G.R. SP No.
motion for the stay of civil action and 106103 and the Order dated July 11,
for referral to arbitration is pending 2008 of the Regional Trial Court, Branch
resolution by the court.217 149, Makati City in Civil Case No. 07-
577 are SET ASIDE. The dispute
This Court notes that while the between Sulpicio Lines, Inc. and
arbitration proceeding was commenced Steamship Mutual Underwriting
as early as July 31, 2007, it is only six (Bermuda) Limited is referred to
(6) years later that Sulpicio filed its arbitration in London in accordance with
Petition218 to cite Steamship for indirect Rule 47 of the 2005/2006 Club Rules.
contempt. Sulpicio cannot invoke lack of
knowledge of the London arbitration The Petition for Indirect Contempt
proceedings due to several reasons. in G.R. No. 208603 is DISMISSED for
First, it received and replied219 to the lack of merit.
notice of commencement of arbitration
proceedings220 dated July 31, 2007. SO ORDERED
Second, Steamship presented evidence
showing Sulpicio's refusal to receive any
notices, orders, or communications
related to the arbitration proceedings.
Lastly, the pendency of the London
arbitration was made known to the
Court of Appeals and this Court through
Steamship's petitions. Sulpicio's belated
filing of its Petition, only after
Steamship has deducted from the
refund due it the alleged "arbitration
costs," indicates its lack of sincerity and
good faith.

Finally, this Court finds Sulpicio's claim

for damages to be improperly raised. It
should be addressed in an ordinary civil
action. Its petition for indirect contempt